Section 1202 widens the QSBS ceiling to $15 million; financial services is carved out

Section 1202 has sat in the tax code since 1993; what changed is the size of the exclusion, which the One Big Beautiful Bill Act of July 2025 made, in WealthManagement.com's phrasing, considerably more generous. Stock that meets the definition of qualified small business stock can be sold free of federal capital gains tax up to a ceiling set at the greater of two numbers: $15 million, indexed for inflation beginning in 2027, or 10 times what the shareholder paid. For stock issued on or before July 4, 2025, the fixed amount on that greater-of test is $10 million, which is why later issuance is measured against the larger figure.

Two features of the ceiling do most of the planning work. It belongs to each shareholder, and it starts fresh for each company, so a founder holding qualifying stock in three businesses holds three ceilings; gift shares away, done properly, and the recipient arrives with a ceiling of their own. The article puts the gap between founders who plan and founders who do not in the millions, and the two techniques practitioners call stacking and packing have to be arranged before a buyer is at the table, which makes this calendar work rather than deal work.

The gatekeeping conditions are where promising situations fail. The issuer has to be a C corporation, and LLCs, partnerships and S corporations cannot issue qualifying stock at all. Gross assets, measured mostly by tax basis rather than market value, must be $75 million or less immediately before and after issuance, a figure that falls to $50 million for stock issued on or before July 4, 2025. At least 80% of assets must also be working in a qualified trade or business.

Congress wrote a long list of exceptions to that last requirement, and it reads like a directory of the businesses that populate an advisory client base: most professional services, financial services and brokerage among them, plus banking, insurance, leasing and investing, farming, mining, and hotels and restaurants. A catch-all then excludes any business whose principal asset is the reputation or skill of its people. The carve-outs, in other words, point away from the professional practices on this readership's own balance sheets and toward operating companies in sectors Congress did not list. An advisor who spent a career building an independent firm holds an asset Section 1202 does not reach; the benefit is most useful to her clients.

Two dates carry the near-term planning load. July 4, 2025 fixes the $10 million amount for stock issued by then and $15 million for what comes after, while 2027 begins the indexing that lifts the larger figure over time. An owner weighing an entity conversion or an early gifting program is working against that calendar, and the statute sets it, not the buyer.