The Strategy
The core recommendation is to transfer a portion of Jeff’s shares into a separately created irrevocable trust before any sale occurs. Because the QSBS exclusion applies per taxpayer, an irrevocable trust is treated as its own taxpayer and gets its own $10 million exclusion. That means Jeff keeps his exclusion personally, and the trust claims a second one on its portion of the gain. This “QSBS stacking” can be powerful but carries some disadvantages.
The recommendation is to treat this as a special-purpose vehicle, separate from a general estate or revocable living trust. The irrevocable trust’s sole job is to absorb and shelter part of the liquidity event. Jason suggested a rough split of 50% of Jeff’s shares into the irrevocable trust and 50% retained personally, which would cover a combined $20 million in gain tax-free. Any proceeds above that threshold would be subject to capital gains tax, which Jeff said he is comfortable accepting. “Split the baby” concept when a clear answer is elusive.
On a side question, Jeff’s wife runs a luxury travel agency generating $35,000 to $65,000 in net income annually through the same LLC. An S Corp election was explored and declined. The cost of an S Corp (tax returns, payroll processing) would run around $3,000 per year, and the self-employment tax savings at that income level would roughly match the cost. With no state income tax in Florida, there is no pass-through entity tax benefit to add to the calculation. The structure stays as is for now.
