I am always surprised that many sophisticated investors do not know about QSBS. Since 2009, there has been a 100% exclusion of all capital gains on the first $10 million of gain or 10 times the investment up to $50 million dollars, whatever is larger. This was put in to stimulate investments in early stage/small businesses. However, the government failed to tell anyone about it. My tax advisor, Ray Thornson, at Anderson Tax first told me and it has had a great influence on my early stage investments. The exclusion of federal tax is like doubling the return. This makes high-risk investment much more attractive.
If you are an angel investor, you have some great news. Not only was QSBS extended for 2015 but it is now permanent. Remember that the clock for the 100% exclusion of Federal Tax starts when you invest in the stock. This means the date in which a convertible note converts for instance. The holding period for capital gains starts when you make an investment in the note. For normal capital gains treatment, the holding period starts when ou invest in the stock or in a convertible note that ultimately converts.
Read this to learn more.