What is Stacking?
Under Section 1202 of the Internal Revenue Code (IRC), which governs qualified small business stock (QSBS), noncorporate taxpayers who acquire stock at original issuance, satisfy the applicable holding period, and comply with the many other relevant restrictions may exclude all or a significant portion of gain from the sale or exchange of their QSBS.
Eligible taxpayers may exclude the greater of: (1) the applicable cumulative dollar limitation — $10 million for stock acquired on or before July 4, 2025, and $15 million for stock acquired after that date (in each case reduced by prior eligible gain claimed with respect to the same issuer) — or (2) 10 times the aggregate adjusted basis of the QSBS issued by the corporation and sold by the taxpayer during the taxable year. Importantly, this generous exclusion applies on a per taxpayer basis (Section 1202(b)(1)).
As a result, investors have used “stacking” as a planning technique to multiply the benefit of the per-taxpayer QSBS exclusion. Under this approach, ownership of QSBS is divided among multiple taxpayers, often through gifts to family members or trusts, or through the use of multiple entities, so that each taxpayer may claim a separate per-issuer exclusion.
Currently, the IRC does not explicitly prohibit this practice, and Section 1202(h) specifically provides that QSBS retains its status and holding period when transferred by gift. Recently, however, senior Treasury Department and IRS officials have indicated that forthcoming guidance may seek to limit or restrict QSBS stacking strategies.
On May 20, 2026, Kenneth Kies, Treasury’s assistant secretary for tax policy, said at a conference in Washington, D.C., that the IRS is working on guidance for the expanded exemption that would address what he referred to as the stacking abuse. “Let me just warn you, we don’t like stacking,” Kies said.
What Clients Should Know Now
At present, there are no regulations prohibiting stacking, and taxpayers may still be able to implement these structures. However, IRS guidance is expected soon, and the opportunity to multiply the QSBS exclusion could soon be curtailed or eliminated. Importantly, this guidance may be retroactive, as we anticipate the IRS will take the position that stacking has always been prohibited under the terms of the IRC or judicial doctrines. Among other possibilities, this guidance could invoke a general anti-abuse rule in Section 643(f) pertaining to the creation of certain trusts for tax avoidance purposes.
If you own or expect to sell QSBS and are considering gifting shares to trusts or family members to maximize your exclusion, you should consult your tax adviser promptly. Transactions completed before new guidance is issued may continue to be respected if the guidance is not retroactive, but future opportunities to multiply the QSBS exclusion through stacking could become limited or eliminated.
Conclusion
The Treasury Department’s focus on stacking suggests that changes affecting QSBS planning may be on the horizon. Advance planning and a clear understanding of available options are essential to maximize tax benefits and remain in compliance as new guidance emerges.
If you have questions about QSBS, stacking, or potential regulatory changes, please reach out to us for further information.
© Copyright CBIZ, Inc. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.
“CBIZ” is the brand name under which CBIZ CPAs P.C. and CBIZ, Inc. and its subsidiaries, including CBIZ Advisors, LLC, provide professional services. CBIZ CPAs P.C. and CBIZ, Inc. (and its subsidiaries) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. CBIZ CPAs P.C. is a licensed independent CPA firm that provides attest services to its clients. CBIZ, Inc. and its subsidiary entities provide tax, advisory, and consulting services to their clients. CBIZ, Inc. and its subsidiary entities are not licensed CPA firms and, therefore, cannot provide attest services.
