One exclusion, thoughtfully multiplied.

The cap is written per taxpayer

For stock acquired on or before July 4, 2025, the exclusion is capped at the greater of $10 million per issuer or ten times basis. For stock acquired after that date, the cap rises to the greater of $15 million, indexed after 2026, or ten times basis. Most founders reading this hold pre-July 2025 stock, for which the $10 million figure is the one that applies. Either way, the cap attaches to the taxpayer, not to the company or the family. Where more than one legitimate taxpayer holds qualified stock, more than one cap may apply. That is the entire premise of what follows.

Basis is decided at incorporation

The lesser-known limb of the cap rewards basis. Because the exclusion can reach ten times basis, stock issued for appreciated property may carry a far larger cap than stock issued for a nominal sum. Practitioners call this packing: an LLC that converts to a C corporation at appreciated value, for instance, may take that value as basis, and the ten-times limb can widen accordingly. The decision lives before or at incorporation, years before any gift or sale, and cannot be revisited later. It is the first of several points in this planning where the calendar, not the structure, does the work.

Gifts carry the clock

Under Section 1202(h), a gift of qualified stock can carry the donor's holding period and the stock's QSBS character to the recipient. The five-year clock does not restart. A trust that receives qualified stock by gift may stand in the founder's shoes, holding period intact, character intact. This is the quiet hinge of the whole plan: the statute itself contemplates gifts, which is why gifting before a sale is a matter of sequence rather than invention.

Estate planning first, exclusion second

A completed-gift non-grantor trust is, first, an estate planning instrument: assets moved out of the taxable estate, held for named beneficiaries, governed by an independent trustee, on terms the family intends to live with for decades. That each such trust may also be treated as a separate taxpayer with its own Section 1202 cap is a consequence, not the design. The distinction is not cosmetic. Treasury officials signaled in 2026 that arrangements with overlapping beneficiaries, accommodating trustees, and no independent purpose face forthcoming scrutiny, and the IRS may challenge structures it views as manufactured. Whether a trust is respected as a separate taxpayer is a question of fact: whether it exists to serve real people, with a real trustee and distinct beneficiaries, on terms that would make sense with no exclusion in view. Those facts are set when the trust is drawn, not when it is examined.

Sequence decides the outcome

A gift made well before a letter of intent is a gift of stock. A gift made after a deal is substantially certain may be treated as an assignment of income, in which case the gain can be taxed to the donor as if no gift had occurred. Between those two points sit valuation, trust drafting, trustee selection, and funding, none of which move quickly. This is why the work belongs 12 to 18 months before the liquidity event, not the quarter it closes. Earlier is also cheaper: stock gifted before a priced event may consume less exemption for the same number of shares.

California does not conform

California does not recognize Section 1202 at all. Gain that is fully excluded federally can be taxed by the state at rates up to 13.3% for its residents. Since 2023, California has also taxed incomplete-gift non-grantor trusts to the grantor, closing the ING route. The path that remains for California families is the completed-gift non-grantor trust sited out of state, which asks something real in exchange: exemption used, control ceded, and throwback rules that can still reach distributions made to California beneficiaries. Residency, situs, and trustee location are facts, not paperwork, and they are examined as facts.

A larger canvas, from 2026

The federal estate and gift exemption stands at $15 million per person from 2026, indexed, roughly $30 million for a married couple. Completed gifts of qualified stock draw against that exemption, so the enlarged figure is the canvas on which this planning is composed: how much stock to give, to how many trusts, for which beneficiaries, while the shares are still modestly valued. Exemptions have been enlarged before and revised before. A plan that depends on today's number should be made while today's number holds.

Where Muse sits

Muse does not draft trusts and does not sell structures. Counsel drafts, CPAs opine and file, trustees administer. Muse's role is the sequence: engaged 12 to 18 months before the liquidity event, holding the deal calendar and the planning calendar in the same hand, so that gifts are complete before the letter of intent, valuations are ordered in time, and the estate plan is finished before the papers are signed. One accountable point, coordinating the bench the family already trusts.