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#Finterms: Qualified Small Business Stock (QSBS) Exclusion

The Qualified Small Business Stock (QSBS) exclusion is a tax incentive under Section 1202 of the Internal Revenue Code that allows investors to exclude up to 100% of capital gains from the sale of eligible small business stock.

To qualify, the stock must be issued by a C corporation with gross assets of $50 million or less at issuance, and it must be held for more than five years. Additional requirements apply, such as the corporation engaging in an active trade or business and not operating in certain excluded industries.

When met, the QSBS exclusion can significantly reduce or eliminate capital gains taxes, making it a valuable planning tool for entrepreneurs and early-stage investors.

#CapitalGainsTaxPlanning #EarlyStageInvesting #EntrepreneurTaxIncentives #QSBS #QualifiedSmallBusinessStock

Financial Literacy

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#Finterms: Adjusted Taxable Income (ATI)

Adjusted Taxable Income (ATI) is a measure of income used primarily in tax and financial calculations, particularly for determining business interest expense limitations under U.S. tax law.

It is generally calculated as taxable income before considering non-cash deductions such as depreciation, amortization, and depletion, as well as interest expense and certain tax attributes.

By excluding these items, ATI provides a clearer picture of a business’s operating earnings for tax purposes.

This figure is key in applying the IRS Section 163(j) limitation, which caps the amount of deductible business interest expense.

#AdjustedTaxableIncome #Amortization #CorporateTaxPlanning #Depreciation #IRS #BusinessInterestExpenseLimitation

Financial Literacy

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#Finterms: Lifetime Estate and Gift Tax Exemption

The Lifetime Estate and Gift Tax Exemption—also called the Unified Credit, Lifetime Exemption, or Basic Exclusion Amount—is the total amount an individual may transfer during life or at death without paying federal estate or gift tax. The exemption is unified, meaning lifetime taxable gifts reduce the amount available at death.*

For 2025, the exemption is $13.99 million per individual (or $27.98 million for married couples). Beginning in 2026, the exemption permanently rises to $15 million per person (or $30 million for couples) with future adjustments for inflation. Transfers above these thresholds are taxed at the applicable estate or gift tax rate.

This exemption is a cornerstone of estate planning, allowing families to transfer wealth efficiently and minimize future tax exposure.

*A spouse may transfer an unlimited amount to the other spouse during life or at death without gift or estate tax consequences. (Unlimited Marital Deduction)

#UnifiedCredit #WealthTransferPlanning #EstatePlanningStrategies #TaxEfficientGifting

Financial Literacy

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