The Questions to Ask a Tax Attorney Before You Trust Their QSBS Opinion

We almost lost a seven-figure QSBS exclusion because our first tax attorney never asked about a bridge note that converted into equity two years before our exit. A second opinion caught it in twenty minutes and it turned out to be the difference between a clean exclusion and a claim an acquirer's counsel would have flagged in diligence. If you're about to lean on an attorney's word that your stock qualifies, here are the questions that actually tell you whether they've done this work before or are guessing along with you.

Most tax attorneys have opinions about QSBS. Fewer have defended one.

QSBS sits at the intersection of tax code, corporate history, and cap table mechanics. Most general startup counsel and estate-planning attorneys have read Section 1202. Far fewer have actually built the eligibility file for a real exit, defended it through diligence, or watched a claim survive an audit. The gap between someone who knows the statute and someone who has done the work is enormous, and you usually can't tell the difference from a first phone call unless you ask specific questions.

The questions that separate signal from guessing

Ask these before you hire anyone, or before you fully trust the one you already have.

1. "How would you verify the gross-assets test at issuance, not today?" A good answer references the exact date stock was issued on your cap table, not your company's current valuation. Gross assets can never have exceeded the statutory cap at the moment each tranche of stock was issued, and that threshold changed in 2025, so an attorney who doesn't ask which issuance dates you're talking about is skipping a step.
2. "How do you handle stock issued in multiple tranches, at different dates?" Every option exercise, founder grant, and note conversion starts its own holding-period clock and can fall under different rules depending on when it happened. An attorney who treats your whole position as one lump sum hasn't done this before.
3. "What convertible notes, SAFEs, or bridge financings have you seen disqualify a claim?" This tests real experience with the messy corporate history most startups actually have, not textbook cases.
4. "Will you put the eligibility opinion in writing, and what does an acquirer's counsel usually want to see?" You want a defensible memo, not verbal reassurance you can't show anyone.
5. "Have you handled a case where a stock redemption or buyback affected QSBS status?" Redemptions near an issuance date can disqualify surrounding shares under rules most generalists have never encountered.
6. "Which states don't conform to the federal exclusion, and how does that change my numbers?" A federal-only view of QSBS is an incomplete view. Several states tax the gain in full regardless of what the IRS allows.
7. "What's your process if the IRS challenges the exclusion after the sale closes?" This is the question that tells you whether they've been through a real audit or are speaking hypothetically.

What a real answer sounds like versus a rehearsed one

A vague "yes, that should qualify" delivered flatly, without asking you a single follow-up question about your cap table, is the biggest red flag in this entire process. A real answer sounds specific: it references your actual issuance dates, asks what your gross assets were at each of those points, and asks whether the company has done any stock buybacks. If an attorney can give you a confident yes without asking what year your company was incorporated, they're pattern-matching off memory, not analyzing your facts.

The one document worth insisting on

Ask for a written eligibility opinion before you're in a live deal, not during diligence. Acquirer's counsel will ask for exactly this document, and reconstructing it under deal-timeline pressure costs more, takes longer, and hands the other side leverage if your team looks unprepared. A founder with a clean written opinion sitting in the data room before a term sheet even exists is negotiating from a completely different position than one scrambling to produce it in week three of diligence.

What to do this week

Pull your cap table and list every stock issuance event and its exact date, including option exercises, founder grants, and any note conversions. Bring that list, not just a general question about QSBS, into your first call with a candidate attorney. If they don't ask for it unprompted, you already have your answer about how much of this work they've actually done before.

Frequently asked questions

How do I find a tax attorney who specializes in QSBS?

Look for someone who can point to specific prior deals, not just statutory knowledge, and who asks about your cap table history unprompted in the first conversation.

What does a QSBS eligibility opinion cost?

It varies with the complexity of your cap table, but it's almost always far cheaper than the tax exposure it protects against, and cheaper still than producing one under deal pressure.

Can my regular startup lawyer handle QSBS, or do I need a specialist?

General counsel can sometimes handle straightforward cases, but anything involving multiple tranches, note conversions, or a prior buyback is worth a second opinion from someone who specializes in it.

Should I get a QSBS opinion before or after I have a term sheet?

Before. Waiting until diligence means reconstructing years of cap table history on a deal clock, which costs more and weakens your negotiating position.

What happens if my attorney gets QSBS eligibility wrong?

You could lose the exclusion entirely and owe the full capital gains tax after already planning around a tax-free number, which is why a written, specific opinion matters more than a confident verbal one.