Beyond the Cap: Stacking QSBS with Opportunity Zones
Beyond the Cap: Stacking QSBS with Opportunity Zones
The “Zero-Tax Waterfall”: How to neutralize the taxable spillover gain (above $15M) using Section 1400Z-2.
Executive Summary
- The Spillover Problem: Even with the OBBBA’s $15M cap, a $30M+ exit leaves substantial taxable gain. QSBS alone cannot shield the excess.
- The OZ Solution: By rolling the excess taxable gain into a Qualified Opportunity Fund (QOF) within 180 days, you defer the tax bill.
- The “Step-Up” Bonus: If you hold the QOF investment for 10+ years, the appreciation on that new real estate/business investment becomes 100% tax-free.
The 180-Day Clock
Unlike the QSBS rollover (Section 1045) which gives you 60 days, the Opportunity Zone rollover grants 180 days from the sale date. Missing this deadline kills the deferral.
Mechanic: The Zero-Tax Waterfall
$15M
QSBS Tier 1
OZ Fund
Tier 2 Shield
10 Years
OZ Hold Time
2026/27
Deferral End
Simulation: $30M Exit (QSBS Only vs. QSBS + OZ)
Tax Shield Efficiency (Coverage on $30M Gain)
| Feature | QSBS (Sec. 1202) | Opportunity Zone (OZ) |
|---|---|---|
| Primary Asset | C-Corp Stock | Real Estate / Business |
| Tax Benefit | 100% Exclusion | Deferral + 10Yr Tax-Free |
| Rollover Window | 60 Days (Sec. 1045) | 180 Days (Sec. 1400Z) |
“Don’t pay tax on the overflow. Use the QSBS ‘spillover’ to seed your next decade of tax-free real estate growth via Opportunity Zones.”