What Is a QSBS Attestation Letter? How It Works and Examples

There is no prescribed form, so wording varies by company and by its lawyers. A full letter usually identifies the holder, the share class, the number of shares and the issuance date. It then states the following, for that date and the period since:

• EntityThe company was a domestic C corporation, one that pays its own income tax, when the shares were issued and has been since.
• Gross assetsAggregate gross assets did not exceed the ceiling at any time before the issuance or immediately after it. Gross assets are cash plus the tax basis of other property. The letter often gives the figure itself.
• Original issueThe company issued the shares to you directly, for money, property other than stock, or services.
• Active businessDuring the period covered, at least 80% of assets by value were used in a qualified trade or business. That means a business outside the excluded fields, such as health, law, consulting and financial services.
• RedemptionsThe company made no buy-backs of its own stock that would disqualify the shares. The law sets windows around the issuance date in which a buy-back counts.
• Limits of the statementWhat the company does not know or does not represent. This is usually everything about the holder.

A letter that says only “the company believes its stock is QSBS” is weak evidence. One that states each test, the dates and the gross-asset figure is strong. The tests themselves are explained one by one in QSBS requirements.

The letter fills a gap the statute left open. To qualify at all, the company must agree under Section 1202(d)(1)(C) to submit “such reports to the Secretary and to shareholders as the Secretary may require.” The Secretary is the Secretary of the Treasury, who acts through the IRS. The IRS has never said what those reports are. A 2025 legal review found no guidance on their timing or content. So no company files a QSBS report, and holders ask for a letter instead.

When you sell, you report the excluded gain with code Q on Form 8949, the IRS form for reporting sales of investments. Nothing is attached. If the IRS audits the return, you must prove each test. The letter and the documents behind it are how you prove the company-level part. The company produces the letter from its tax-basis balance sheets, its corporate records and its cap table, the list of who owns its shares. Finance usually prepares it with lawyers or accountants, and an officer signs it.

If you hold through a vehicle, the letter must be addressed to the vehicle. Section 1202 lets a partnership pass the exclusion through only if the vehicle itself acquired the shares at original issue, directly from the company. Most SPVs in late-stage companies, vehicles that pool investors’ money for one deal, bought on the secondary market from existing holders. Such a vehicle holds no QSBS for any letter to attest to.

Three more limits apply. First, the letter is the company’s view, and the IRS may disagree with it, for example on what counts as an excluded service business. Second, it is often qualified “to the company’s knowledge,” which lowers its weight. Third, it is only as good as the records behind it. A statement with no balance sheet, signed by someone who was not there, may not survive questioning.

A software company raises two rounds. Its attestation letter has to answer one question for each. What were the company’s gross assets, meaning cash plus the tax basis of everything else, before the round and immediately after it?

So the same company can issue a clean letter to one class and a negative one, or none, to the next. A holder who exercised options between the two rounds needs the figure for the exercise date. That is why a letter should always name its date.

1. 1.0
   Ask earlyRequest a letter after each purchase or exercise, while the people and records of that period are still there. Do not wait for the exit.
2. 2.0
   Write to the right personWrite to the chief financial officer or the general counsel, the company’s chief lawyer. Name your shares, their class, and the issuance or exercise date.
3. 3.0
   Ask for each test and the numberRequest a statement on every company-level test and the gross-asset figure before and after the issuance.
4. 4.0
   Ask again before you sellThe active-business test runs for substantially all of your holding period. A second letter brings the statement up to the sale.
5. 5.0
   Accept that the company may declineThere is no legal duty to issue a letter on demand. Ask for the underlying balance sheets instead, or a narrower statement.

Proof of original issue

Stock purchase agreement or exercise notice, proof of payment, share certificate or ledger entry.

Proof of dates

Issuance or exercise date, Form 3921 for incentive stock options (ISOs), and any 83(b) election with proof of mailing.

Company evidence

Each attestation letter, and the gross-asset statement or balance sheet behind it.

Changes in form

Conversion of preferred to common, gifts received with the donor’s records, any conversion of the company to a C corporation.

The sale

Closing statement, Form 1099-B from your broker and the Form 8949 you filed with code Q.

• Treating the letter as a rulingIt binds no one and, at most, puts the company’s credibility on the line. The IRS reviews the facts behind it.
• A letter with no date or figureGross assets are tested on each issuance date. A general statement does not answer the question for your shares.
• A letter for the wrong holderShares bought from an employee or an earlier investor fail original issue, whatever the letter says about the company.
• Asking only at the exitBy then finance teams have changed, and records from years earlier are hard to rebuild.
• Ignoring your own halfHolding period, related-person redemptions and the cap you already used are yours to document.

QSBS attestation letter

A company’s signed statement that its stock met the company-level Section 1202 tests on a stated issuance date. Also called a representation letter.

Section 1202(d)(1)(C)

The condition that a qualified company agree to submit the reports the IRS may require. No such reports have been prescribed.

Aggregate gross assets

Cash plus the adjusted tax basis of the company’s other property, tested before and immediately after each issuance.

Original issue

Acquiring shares from the company itself. Shares bought from another holder do not count.

Redemption

The company buying back its own stock. Near an issuance date, it can disqualify the shares.

Code Q

The Form 8949 adjustment code used to claim the Section 1202 exclusion in the year of sale.

QSBS

Qualified small business stock: shares whose gain can be partly or fully excluded under Section 1202.

Related: what is QSBS, QSBS stacking and how to exercise stock options. The exercise date is the one the letter must cover.

Every rule was checked against the US Code and the IRS on October 2, 2026. The rules reflect federal law as amended on July 4, 2025. The statement that no reports have been prescribed rests on an April 15, 2025 legal review. We found no later IRS form or regulation. The contents of a letter follow common practice, and no rule prescribes them. The example is illustrative.