Extract to table

Five Statutory Requirements For stock to qualify as QSBS under Section 1202, five principal requirements must be satisfied

The stock must be stock of a "qualified small business," which is defined under Section 1202(d)(1) as a domestic C-corporation

The corporation must satisfy the "gross assets test" set forth in Section 1202(d)(1) — that is, the aggregate gross assets of the corporation must not have exceeded $50 million at all times after August 10, 1993, and both before and immediately after the issuance of the stock in question

The corporation must satisfy the "active business requirement" of Section 1202(e) during substantially all of the taxpayer's holding period

This requirement has two components: (a) at least 80% (by value) of the corporation's assets must be used in the active conduct of one or more "qualified trades or businesses," and (b) the corporation's trade or business must not be one of the enumerated excluded service businesses

The taxpayer must hold the QSBS for more than five years from the date of original issuance