Section 1202 QSBS Valuation: Maximizing the $10M Capital Gains Exclusion

Section 1202 qualified small business stock, often shortened to QSBS, can be one of the most valuable federal income-tax provisions available to founders, early employees, angel investors, and other noncorporate shareholders of growing C corporations. In the right facts, Section 1202 may allow a noncorporate taxpayer to exclude a large portion of gain from the sale or exchange of qualified small business stock held for more than five years. The headline benefit is often described as a “$10 million exclusion,” but that shorthand is incomplete. The statute uses a limitation formula tied to the greater of a dollar amount or 10 times aggregate adjusted basis for QSBS disposed of by the taxpayer during the taxable year, subject to statutory details. The outcome depends on the taxpayer, issuer, stock block, holding period, percentage exclusion, adjusted basis, and other facts that must be reviewed by qualified tax advisers (Legal Information Institute [LII], n.d.-a).

Valuation belongs in the QSBS conversation because many of the facts that support planning, diligence, and reporting have valuation components. A supportable business valuation or business appraisal can help document fair market value assumptions, capital structure, stock-block economics, contributed-property values, financing events, equity allocations, and transaction proceeds. It can also help founders and advisers distinguish statutory aggregate gross assets from enterprise value, post-money valuation, equity value, or a common-stock value used for a 409A analysis. However, a valuation report does not certify QSBS eligibility, does not replace CPA or tax counsel analysis, and should not be marketed as an IRS-required “QSBS valuation report.”

Simply Business Valuation provides independent valuation support for founders, investors, CPAs, attorneys, and wealth advisers who need reliable documentation around private-company stock. For Section 1202 planning, SBV can help document valuation assumptions, enterprise and equity value, capital structure, stock-block economics, aggregate gross asset support schedules, financing effects, and exit modeling. Your CPA and tax counsel should confirm eligibility, tax reporting, transaction structure, and whether Section 1202, Section 1045, or any other planning rule applies to your specific facts.

Quick answer: where valuation affects QSBS planning

The biggest QSBS mistake is treating valuation as something to reconstruct only after a sale. Better practice is to preserve evidence throughout the company lifecycle: formation, original issuance, property contributions, financings, option grants and exercises, redemptions, reorganizations, and exit planning. The following table shows where valuation most commonly supports the adviser process.

QSBS issue	Why valuation matters	Common documents	Adviser lead	Key source
Original issuance and stock-block identity	Supports facts around what was issued, when, to whom, for what consideration, and at what economics	Charter, stock purchase agreements, subscription agreements, board consents, stock ledger, cap table	Tax counsel/CPA with valuation adviser support	Section 1202(c) (LII, n.d.-a)
Aggregate gross assets	Helps reconcile cash, contributed property, balance sheets, financing proceeds, and asset values; should not be reduced to a generic enterprise value cap	Balance sheets, financing closing sets, asset schedules, contribution records, valuation analyses	CPA/tax counsel with valuation adviser support	Section 1202(d) (LII, n.d.-a)
Active business and excluded activity review	Valuation can document operations, revenue mix, asset deployment, and nonoperating assets; counsel applies statutory categories	Financial statements, revenue by line, product descriptions, customer data, asset schedules	Tax counsel/CPA	Section 1202(e) (LII, n.d.-a)
409A and option exercises	A 409A valuation may support common-stock fair market value for stock-right compensation context, but it does not prove QSBS eligibility	409A reports, option grants, exercise notices, board approvals, cap table	Compensation/tax counsel, CPA, valuation adviser	Section 409A and Treasury Regulation § 1.409A-1 (LII, n.d.-e; LII, n.d.-f)
Exit and benefit modeling	A valuation model can reconcile enterprise value, equity value, stock-block proceeds, basis, holding periods, and transaction allocations	Purchase agreement, closing statement, stock-block schedule, Form 8949 and Schedule D workpapers	CPA/tax counsel with valuation adviser support	Section 1202(b), IRS Form 8949 and Schedule D instructions (IRS, n.d.-b; IRS, n.d.-c; LII, n.d.-a)

What Section 1202 is: why valuation belongs in the conversation

The potential benefit in practical terms

Section 1202 provides rules for excluding gain from certain qualified small business stock for taxpayers other than corporations when the statutory requirements are met. At a high level, taxpayers considering the provision usually focus on several questions: Was the stock issued by a qualifying domestic C corporation? Was it acquired at original issuance in a qualifying way? Was the corporation a qualified small business when the stock was issued? Did the corporation satisfy active-business requirements during the relevant period? Was the stock held for more than five years? Are there redemptions, reorganizations, or transfers that complicate the analysis? What limitation applies to the taxpayer’s stock block? The statute, not a valuation report, supplies the legal framework (LII, n.d.-a).

The common “$10 million” phrase is only a simplified description. Section 1202(b) limits eligible gain by reference to a per-issuer rule involving the greater of a dollar amount or 10 times aggregate adjusted basis for relevant QSBS disposed of during the taxable year, subject to statutory details and reductions for prior excluded gain from the same issuer. Because adjusted basis and stock-block facts matter, valuation often becomes part of the planning model. For example, founder stock acquired for a nominal cash contribution has a very different basis profile than stock acquired through an option exercise or shares received in exchange for property. Sale proceeds may also need to be allocated among stock blocks with different acquisition dates, bases, and eligibility facts.

For business owners, the key is to treat QSBS planning as an evidence project, not a slogan. If the company might eventually be sold for a significant gain, the shareholder and company should preserve documents early. A later exit team may need to reconstruct formation documents, stock ledgers, financing rounds, redemption history, 409A reports, board approvals, balance sheets, and tax records. A professional valuation process can help connect those documents to the economic assumptions used by CPAs, attorneys, investors, and buyers.

The key caution: valuation support is not tax eligibility

A valuation professional can estimate value and document assumptions. A tax adviser applies the law. That division matters. Section 1202 has statutory requirements involving issuer status, stock acquisition, holding period, aggregate gross assets, active business, redemptions, and other rules (LII, n.d.-a). A valuation report can support facts relevant to those requirements, but it cannot make a nonqualifying company qualify, cannot override missing legal documentation, and cannot require the IRS to agree with a taxpayer’s reporting position.

Professional standards reinforce the importance of scope and documentation. NACVA’s professional standards address valuation services, assumptions, documentation, and reporting responsibilities for valuation analysts (National Association of Certified Valuators and Analysts [NACVA], n.d.). AICPA-CIMA’s VS Section 100 similarly provides valuation standards for AICPA members performing valuation engagements (Association of International Certified Professional Accountants [AICPA-CIMA], n.d.). Those standards support disciplined valuation work, but they are not Section 1202 eligibility rules.

The practical message is simple: ask the valuation adviser to do valuation work, and ask CPA/tax counsel to do tax analysis. A high-quality valuation can make the adviser file stronger by presenting fair market value, capital structure, method selection, normalization adjustments, and scenario analyses in a coherent report. It should not overstate its role by saying the stock is “QSBS certified.”

Why business owners should not wait until the sale

QSBS evidence often begins years before a sale. Formation documents may show the original issuance of founder stock. Board minutes may support stock grants, option approvals, or repurchases. Financing documents may show cash inflows and post-closing capitalization. Balance sheets may support aggregate gross asset analysis. 409A reports may document common-stock fair market value for option grants. Redemptions and secondary transfers may need separate review. If those documents are incomplete or inconsistent, a sale-year scramble can be expensive and risky.

Early valuation support is especially useful when a company has contributed intellectual property, complex preferred stock, SAFEs or convertible notes, large option exercises, secondary transactions, or financing rounds near the statutory aggregate gross asset threshold. It is also useful when shareholders have multiple stock blocks: founder shares, early purchased shares, exercised options, gifted shares, or shares received in a reorganization. Each block may require its own date, basis, holding-period, and proceeds analysis.

Section 1202 requirements that create valuation questions

Qualified small business stock and original issuance

Section 1202(c) defines qualified small business stock in terms that include original issuance by a domestic C corporation and acquisition in exchange for money, property other than stock, or services, subject to statutory details and exceptions (LII, n.d.-a). That is why stock identity matters. The shareholder’s file should show which shares were acquired, from whom, on what date, for what consideration, and under what instrument.

Valuation may enter the original-issuance analysis when property or services are involved. Section 83 addresses property transferred in connection with the performance of services, and related regulations discuss terms relevant to restricted property and options (LII, n.d.-d; LII, n.d.-g; LII, n.d.-h). If founders receive restricted stock, if employees exercise options, or if shareholders contribute property, advisers may need to understand fair market value at the relevant date. A business appraisal can help document the economic assumptions behind that value.

For options, be especially careful. An option is not the same thing as stock. Whether and when a stock acquisition occurs, whether the holding period starts, how basis is determined, and whether the resulting shares qualify for Section 1202 are tax questions for counsel and CPA. The valuation professional can support fair market value analysis and capital-structure allocation, but should not present option tax treatment as a valuation conclusion.

The five-year holding-period concept

Section 1202(a) refers to qualified small business stock held for more than five years (LII, n.d.-a). The simple planning takeaway is that dates matter. Formation stock, option exercises, stock purchases, gifts, conversions, recapitalizations, and reorganization events can create different holding-period questions for different blocks.

A valuation report does not establish the holding period, but a valuation engagement often exposes missing date evidence. A cap table may list ownership percentages without showing issuance dates. A stock ledger may omit certificate numbers or repurchase history. Board minutes may approve a plan but not the exercise records. When the valuation team asks for stock-block schedules, option exercise notices, and transaction histories, it can help the CPA and attorney identify the records needed for a reliable QSBS file.

Aggregate gross assets: not simply “company value under $50 million”

One of the most important accuracy points in QSBS planning is that Section 1202(d) uses an aggregate gross assets test. It should not be casually described as “the company was worth less than $50 million,” “post-money valuation was below $50 million,” or “enterprise value was below $50 million.” The statutory test refers to aggregate gross assets and contains rules for measuring money and property held by the corporation. Under Section 1202(d), aggregate gross assets generally means the amount of cash plus the aggregate adjusted bases of other property held by the corporation, and contributed property is treated as having basis not less than its fair market value when contributed. Timing also matters because the qualified small business requirement includes tests before and immediately after issuance, so counsel and CPA may need records around the issuance or financing date, not only year-end statements (LII, n.d.-a).

Why does valuation still matter? Because companies often need help reconciling statutory concepts with real-world records. Cash from a financing round, contributed intellectual property, tangible assets, balance sheet accounts, and fair market value of contributed property may all need analysis. The asset approach can be useful because it focuses attention on the company’s assets and liabilities rather than only earnings multiples or venture financing headlines. IRS Publication 561 provides general taxpayer guidance on fair market value in the donated-property context; while it is not QSBS-specific, it is a useful reminder that valuation depends on facts, assumptions, and evidence (Internal Revenue Service [IRS], n.d.-d).

The valuation adviser should not apply Section 1202(d) as legal counsel. Instead, the adviser can prepare schedules, valuation support, and reconciliations that allow the CPA and attorney to apply the statute. For example, a valuation memo might compare book value, tax basis, fair market value of contributed assets, cash balances before and after financing, enterprise value, equity value, and the specific statutory measure counsel is analyzing.

Active business requirement and excluded businesses

Section 1202(e) generally requires, for substantially all of the taxpayer’s holding period, that at least 80 percent by value of the corporation’s assets be used in the active conduct of one or more qualified trades or businesses. It also excludes certain categories of businesses from qualified trade or business treatment, including categories described in the statute (LII, n.d.-a). Because the statutory list is detailed, the final determination belongs with tax counsel. A valuation report should not make legal conclusions about whether a company is an excluded business.

Valuation can still support the factual record. A valuation report may describe products and services, revenue by line, customer concentration, operating assets, intangible assets, nonoperating assets, and management’s business plan. If a company has multiple revenue streams, a holding-company structure, substantial investment assets, or changing operations, those facts may be important for counsel’s analysis. The business appraisal becomes a disciplined record of the company’s economics at a specific date.

Redemptions, repurchases, and reorganizations

Section 1202 includes redemption-related rules that can affect qualified small business stock status (LII, n.d.-a). Private companies often repurchase founder shares, employee shares, investor shares, or small shareholder interests. They may also complete recapitalizations, conversions, mergers, or other reorganizations. Section 368 provides definitions relating to corporate reorganizations, which may be relevant background when counsel reviews transaction history (LII, n.d.-c).

A valuation engagement can help reconstruct repurchase pricing, dates, parties, capitalization effects, and board rationale. It can also identify whether historic transactions were priced using 409A reports, negotiated values, formula values, or unsupported assumptions. The valuation professional should not advise whether a redemption disqualifies stock; the proper role is to document economics and flag the issue for tax counsel.

What a QSBS-focused valuation engagement should and should not do

What the business appraisal can support

A QSBS-focused valuation engagement may support several workstreams. First, it can estimate business enterprise value and equity value at a relevant date. Second, it can allocate value among securities when the company has preferred stock, common stock, options, warrants, SAFEs, or convertible instruments. Third, it can help document common-stock fair market value for option or restricted-stock contexts. Fourth, it can support schedules for contributed property and aggregate gross asset diligence. Fifth, it can help model sale proceeds, basis, and limitation scenarios for stock blocks.

That work can be useful to founders, investors, CPAs, attorneys, wealth advisers, and transaction teams. A valuation report prepared under professional standards should identify the subject interest, valuation date, standard of value, premise of value, sources of information, assumptions, limitations, methods considered, methods used, and conclusion. Those elements help create a workpaper trail that is easier to review than informal spreadsheets or unsupported emails.

What the valuation report should not promise

A valuation report should not promise that the stock qualifies for Section 1202. It should not promise tax savings, determine shareholder-level eligibility, prepare tax returns, provide a tax or legal opinion, or provide legal advice. It should not say that the IRS mandates a specific QSBS valuation product. It should not assert that a post-money valuation, 409A valuation, or transaction price automatically satisfies the aggregate gross asset requirement.

It should also avoid unsupported precision. Early-stage private-company values can be uncertain. Forecasts can change, financing markets can move, and preferred-stock rights can materially affect common-stock value. A credible valuation explains its assumptions and limitations rather than presenting a model as certainty.

Recommended scope language

A practical scope statement might read as follows:

Simply Business Valuation can provide independent business valuation and business appraisal support for founders, investors, CPAs, and attorneys evaluating Section 1202 planning. Our work can help document valuation assumptions, capital structure, enterprise and equity value, stock-block economics, aggregate gross asset support schedules, financing events, and adviser workpapers. The client’s CPA and tax counsel should confirm Section 1202 eligibility, tax reporting, and transaction structure.

That language respects the boundary between valuation services and tax advice while making the value proposition clear.

Valuation methods for QSBS planning

QSBS planning does not require one universal valuation method. Method selection depends on company stage, available data, purpose, valuation date, capital structure, and the specific question being addressed. The three broad families of valuation methods, income approach, market approach, and asset approach, may all be relevant. For complex venture-backed companies, option-pricing, backsolve, or scenario-based allocation methods may also be needed.

Discounted cash flow method

A discounted cash flow method estimates value based on expected future cash flows discounted for risk and timing. It can be useful when a company has supportable forecasts, a defined business model, and enough operating history or pipeline evidence to make projections meaningful. In QSBS planning, a DCF may help estimate enterprise value for transaction planning, stock-block modeling, or value allocation.

For early-stage companies, DCF analysis requires caution. A startup’s projections may depend on financing availability, product-market fit, customer adoption, regulatory approvals, key employees, and competitive response. A valuation report should reconcile projections to actual performance, runway, financing plans, and milestone risk. The DCF output may support fair market value analysis, but it does not determine Section 1202 eligibility.

Market approach

The market approach uses pricing evidence from comparable public companies, guideline transactions, financing rounds, or secondary transactions. It can be helpful when the selected data are genuinely comparable and when adjustments are made for growth, profitability, size, risk, rights, preferences, and liquidity. In private-company QSBS planning, the market approach is often attractive because founders and investors already think in terms of financing rounds and transaction values.

The danger is overreliance on unsupported multiples. A public-company revenue multiple may not apply to a small private company with different growth, risk, margins, customer concentration, and capital needs. A preferred-stock financing price may not equal common-stock fair market value because preferred shares often carry rights that common shares do not. A valuation report should explain why market data were selected, how they were adjusted, and how the method fits the purpose.

Asset approach

The asset approach estimates value by analyzing assets and liabilities. It can be especially relevant for aggregate gross asset diligence, contributed-property valuation, asset-heavy companies, holding-company concerns, and companies with significant nonoperating assets. In QSBS planning, the asset approach can help separate several concepts that are often confused: book value, tax basis, fair market value, statutory aggregate gross assets, enterprise value, and equity value.

For example, a company may have a high post-money valuation because investors expect future growth, while its balance sheet assets are mostly cash and internally developed intangibles. Another company may have low EBITDA but valuable equipment, real estate, intellectual property, or investment assets. The right analysis depends on the question. If counsel is reviewing Section 1202(d), the valuation adviser should support the asset and fair market value evidence counsel needs rather than substitute a generic enterprise value calculation.

Option-pricing, backsolve, and scenario methods for complex capitalization

Venture-backed companies often have capital structures that include preferred stock, liquidation preferences, conversion rights, participation features, warrants, option pools, SAFEs, and convertible notes. In those cases, estimating common-stock value may require allocation methods such as option-pricing, backsolve analysis, or probability-weighted expected return methods. These methods can be relevant to 409A valuation and to stock-block economics.

Section 409A and related regulations are commonly discussed in connection with private-company stock rights and fair market value for deferred compensation and option pricing contexts (LII, n.d.-e; LII, n.d.-f). But a 409A report is not a QSBS opinion. It may help document common-stock FMV at a grant or exercise date, yet QSBS analysis also requires review of original issuance, issuer status, aggregate gross assets, active business, redemptions, holding period, and shareholder-level facts.

EBITDA and later-stage QSBS companies

EBITDA can be a useful valuation input for mature operating companies because it approximates operating earnings before interest, taxes, depreciation, and amortization. For later-stage QSBS companies with stable revenue and margins, EBITDA-based analysis may help compare performance to market evidence or support an income approach. However, many QSBS candidates are early-stage companies that are reinvesting heavily, losing money, or prioritizing growth over current profitability. In those cases, forcing an EBITDA multiple can be misleading.

A credible valuation chooses methods that fit the company, not methods that fit a template. EBITDA may be one input; it is not a universal answer.

Valuation method selection matrix

Method	Best suited for	QSBS planning relevance	Main risk if misused	Source anchor
Discounted cash flow	Companies with supportable forecasts and cash-flow visibility	Enterprise/equity value modeling, exit planning, scenario analysis	Forecasts become unsupported optimism; discount rate not tied to risk	Professional valuation standards (NACVA, n.d.; AICPA-CIMA, n.d.)
Market approach	Companies with relevant comparable companies, transactions, or financing evidence	Market corroboration, transaction planning, financing-date support	Unsupported multiples or ignoring preferred-stock rights	Professional valuation standards
Asset approach	Asset-heavy companies, holding-company concerns, contributed-property analysis	Aggregate gross asset support, asset schedules, FMV reconciliation	Confusing book value, tax basis, FMV, and statutory aggregate gross assets	Section 1202(d), IRS FMV background (IRS, n.d.-d; LII, n.d.-a)
Option-pricing/backsolve	Venture-backed companies with complex preferred/common structures	Common-stock value, option exercises, capital-structure allocation	Treating preferred price as common value without allocation	Section 409A context and valuation standards
Scenario/PWERM-style analysis	Companies with identifiable exit, IPO, financing, or downside scenarios	Exit modeling and security allocation	Probabilities and outcomes are unsupported	Professional valuation standards
EBITDA-based income or market analysis	Mature operating companies with meaningful earnings	Later-stage company valuation and buyer analysis	Applying earnings multiples to pre-profit or high-risk companies	Professional valuation standards

The $10 million / greater-of limitation model

How to explain the limitation without oversimplifying

Section 1202(b) contains a limitation framework for the amount of gain that may be taken into account for the exclusion. The popular “$10 million” phrase captures only one side of that framework. The statute refers to a per-issuer limitation involving the greater of a dollar amount or 10 times the aggregate adjusted bases of qualified small business stock issued by the corporation and disposed of by the taxpayer during the taxable year, subject to statutory details and reductions for prior excluded gain from the same issuer (LII, n.d.-a). Because basis matters, valuation and stock-block records can affect planning discussions.

The goal of a planning model is not to prepare the tax return inside the valuation report. The goal is to help the taxpayer, CPA, and attorney see which facts matter: acquisition dates, basis, issuance documents, holding periods, stock splits, option exercises, gifts, redemptions, transaction allocation, and sale proceeds.

Why valuation affects the model

Valuation affects the model in at least four ways. First, it can support the fair market value of property or services exchanged for stock. Second, it can help document equity value at issuance, financing, exercise, or sale dates. Third, it can allocate enterprise value among securities and stock blocks. Fourth, it can reconcile expected transaction proceeds to shareholder-level schedules.

Here is a simplified calculation block. It is intentionally not a tax computation and should be reviewed by a CPA or tax attorney before any filing position is taken.

Hypothetical, simplified QSBS planning model, not tax advice

Shareholder: Founder A
Issuer: Domestic C corporation assumed eligible for planning discussion only
Stock block A acquisition date: January 15, 2020
Stock block A basis: $200,000
Gross sale proceeds allocated to block A: $12,000,000
Realized gain before Section 1202 analysis: $11,800,000

Potential Section 1202 limitation framework:
- Apply the statutory greater-of limitation under Section 1202(b)
- Confirm eligibility, percentage exclusion, holding period, issuer status,
  active business status, redemption history, and reporting with CPA/tax counsel

Valuation support needed:
- Issuance-date records
- Capitalization table by date
- Current enterprise value and equity value
- Allocation of transaction proceeds to stock block A
- Basis support and consideration paid
- Assumptions used in exit model

The lesson is that valuation helps quantify and document; tax advisers determine eligibility and reporting.

409A valuation vs. QSBS valuation support

What a 409A valuation is commonly used for

Private companies often obtain 409A valuations to support common-stock fair market value for stock options and other equity compensation contexts. Section 409A addresses nonqualified deferred compensation, and Treasury Regulation § 1.409A-1 provides definitions relevant to covered plans and stock rights (LII, n.d.-e; LII, n.d.-f). In practice, companies use 409A analyses to help set option exercise prices and support compensation compliance.

A 409A valuation may include useful information for QSBS planning: company description, capitalization, preferred-stock terms, financial statements, forecasts, option-pricing allocation, and common-stock value. Those items can help reconstruct stock economics at a grant or exercise date.

Why a 409A report does not prove QSBS status

A 409A report answers a different question than Section 1202 eligibility. It may support common-stock fair market value for a compensation-related purpose. It does not necessarily analyze original issuance, aggregate gross assets, active business, excluded business categories, redemptions, shareholder holding periods, or the taxpayer’s gain-exclusion limitation. Therefore, a shareholder should not tell a CPA, buyer, or auditor that “the 409A proves QSBS.” It does not.

The better statement is: “The 409A report may be one piece of valuation evidence, but tax counsel and CPA should perform a separate Section 1202 analysis.”

When a separate QSBS-focused valuation memo may be useful

A separate valuation memo or business appraisal may be useful at formation, when founders contribute property, when the company raises financing near the aggregate gross asset threshold, when a large option exercise occurs, when the company completes a secondary sale or redemption, when a reorganization is contemplated, or when a sale process begins. The memo can focus on the valuation facts the tax team needs rather than the compensation-purpose questions addressed by a 409A report.

Comparison matrix: 409A, QSBS-focused support, transaction valuation, and estate/gift valuation

Valuation type	Primary purpose	Typical timing	Main output	What it supports	What it does not prove
409A valuation	Common-stock FMV for stock-right compensation context	Often after financings or periodically for option grants	Common-stock value and supporting analysis	Option pricing, equity compensation governance	QSBS eligibility, aggregate gross asset compliance, tax exclusion amount
QSBS-focused valuation support	Document valuation facts relevant to Section 1202 planning	Formation, financing, exercise, redemption, reorganization, pre-exit	Valuation report, memo, schedules, stock-block economics	Adviser workpapers, FMV assumptions, asset schedules, transaction modeling	Legal/tax conclusion that stock qualifies
Transaction valuation	Estimate value for purchase, sale, merger, or investor negotiation	Before or during transaction process	Enterprise/equity value, pricing support, deal analysis	Buyer/seller diligence and negotiation	Tax qualification unless separately analyzed
Estate/gift valuation	Value private stock for transfer-tax or planning purposes	Gift, estate, trust, charitable planning dates	Fair market value conclusion for subject interest	Transfer-tax reporting and planning	QSBS eligibility or buyer transaction price

Practical documentation checklist

Formation and issuance records

Founders and early investors should preserve records from day one. The following items are often requested by CPAs, attorneys, buyers, and valuation professionals:

• Certificate/articles of incorporation and evidence of C-corporation status.
• Initial board approvals and organizational consents.
• Founder stock purchase agreements or subscription agreements.
• Evidence of cash paid for shares.
• Documentation of services or property exchanged for shares.
• Stock ledger and certificate records.
• Cap table by date, not just current ownership.
• Section 83(b) election records when applicable, reviewed by tax counsel.
• Founder vesting and repurchase terms.

Financing and aggregate gross asset records

Financing events can create major QSBS documentation needs. Preserve:

• Term sheets and financing closing sets.
• Pre- and post-money capitalization tables.
• Balance sheets immediately before and after funding.
• Bank statements showing financing proceeds.
• Asset schedules, including intangible property and contributed property.
• Convertible note, SAFE, preferred-stock, warrant, and option-pool terms.
• Accounting workpapers and CPA memos.
• Valuation reports or board materials used for pricing decisions.

Operational and active-business support

For active-business review, preserve:

• Product and service descriptions.
• Revenue breakdown by business line.
• Customer and contract summaries.
• Asset deployment schedules.
• Nonoperating asset schedules.
• Headcount and functional organization charts.
• Budgets and board decks showing operating plans.
• Counsel analysis of excluded business categories.

Exit and reporting support

Before and after a transaction, preserve:

• Letter of intent, purchase agreement, merger agreement, or stock sale agreement.
• Disclosure schedules and closing statement.
• Allocation schedules and escrow/earnout terms.
• Stock-block history by shareholder.
• Basis support for each stock block.
• Holding-period analysis prepared by CPA/tax counsel.
• Form 8949 and Schedule D workpapers reviewed by CPA.
• Any Section 1045 rollover analysis if reinvestment is considered.

Founder/investor QSBS valuation checklist

• At incorporation
  • Confirm C-corporation status with counsel.
  • Preserve formation documents, founder stock agreements, board approvals, and stock ledger.
  • Document consideration paid or property/services contributed.
• At first financing
  • Save closing set, cap tables, balance sheets, bank evidence, and board materials.
  • Consider valuation support if property, intangible assets, or aggregate gross asset questions exist.
• Before significant repurchase or reorganization
  • Ask counsel to review Section 1202 implications.
  • Obtain valuation support for pricing and capitalization effects if appropriate.
• Annually or after major value-changing events
  • Update cap table and stock-block records.
  • Preserve 409A reports and board approvals.
  • Reconcile financial statements to major asset and financing events.
• 12–18 months before expected exit
  • Build a stock-block schedule by shareholder.
  • Identify missing issuance, exercise, transfer, or repurchase documents.
  • Request valuation support for enterprise/equity value and proceeds allocation.
• After sale when CPA prepares reporting
  • Provide purchase agreement, closing statement, stock-block schedule, basis support, and adviser memos.
  • Confirm Form 8949 and Schedule D reporting with CPA.

QSBS valuation workflow

Common QSBS valuation mistakes and risk matrix

Mistake 1: using post-money valuation as the aggregate gross assets answer

A post-money valuation is a financing metric. It may reflect investor expectations, preferred-stock rights, growth potential, and negotiated deal terms. Section 1202(d) refers to aggregate gross assets, not simply post-money enterprise value or equity value (LII, n.d.-a). The two concepts may overlap in evidence, but they are not the same test.

Mistake 2: treating 409A as a QSBS opinion

A 409A valuation can be valuable evidence for common-stock FMV, but it is not designed to determine the full Section 1202 framework. Do not use it beyond its scope.

Mistake 3: ignoring redemptions and secondary repurchases

Private companies often buy back shares or facilitate secondary transactions. Those transactions may be important under Section 1202’s redemption-related rules. Valuation can document pricing and dates, but counsel should evaluate the legal consequences.

Mistake 4: waiting until exit to reconstruct records

Sale-year reconstruction can be difficult. Missing stock documents, inconsistent cap tables, and incomplete financing records can slow diligence and weaken adviser confidence. Build the QSBS file early.

Mistake 5: using unsupported valuation multiples

Valuation multiples should be based on relevant evidence and professional judgment. A spreadsheet using an uncited multiple may create false confidence. If a market approach is used, document the source, comparability, adjustments, and limitations.

Risk	Risk to QSBS planning	Valuation/documentation response	Adviser to involve	Timing priority
Missing stock issuance documents	Hard to prove stock block identity and original issuance facts	Reconstruct cap table, collect agreements, compare ledgers and board minutes	Corporate counsel, CPA	Immediate
Stale or inconsistent cap table	Stock-block dates, bases, and ownership may be wrong	Build date-by-date cap table and reconcile to financing documents	Counsel, valuation adviser	Immediate
Unsupported contributed-property value	Basis and aggregate asset support may be weak	Prepare FMV analysis and supporting schedules	CPA, tax counsel, valuation adviser	High
Financing near aggregate gross asset threshold	Statutory test may require careful evidence	Reconcile cash, assets, balance sheets, and contributed property	CPA/tax counsel, valuation adviser	High
Redemptions or repurchases	Redemption rules may complicate eligibility	Document dates, prices, parties, and capitalization effects	Tax counsel, valuation adviser	High
Reorganization history	Stock identity and continuity may require legal analysis	Prepare transaction chronology and capitalization bridge	Tax counsel	High
409A report used outside scope	Advisers may overstate what the report proves	Use 409A as one evidence item; prepare separate QSBS support if needed	CPA/tax counsel, valuation adviser	Medium
Unsupported market approach inputs	Valuation conclusion may be unreliable	Document comparable selection, adjustments, and reconciliation	Valuation adviser	Medium

Case studies and practical examples

Case study 1: founder stock at formation and later financing

Assume a domestic C corporation is formed by two founders. The founders receive common stock for cash and services. The company later raises a seed round and begins issuing options to employees. Years later, the company receives an acquisition offer.

The valuation issues begin at formation. The founders need records showing original issuance, consideration paid, stock agreements, vesting terms, and board approvals. If shares were issued for services, Section 83 issues may need CPA or counsel review (LII, n.d.-d). When the company later grants options, a 409A valuation may support common-stock FMV for option pricing. That 409A report may become useful evidence, but it does not prove the founder shares qualify for Section 1202.

The practical lesson is that early records matter. If the company waits until a sale to reconstruct its stock ledger, it may discover missing agreements, unclear vesting, or inconsistent cap tables. A business appraisal prepared at relevant dates can support fair market value and capital-structure assumptions, but it works best when legal records are complete.

Case study 2: growth company approaching aggregate gross assets threshold

Assume a startup raises multiple financing rounds and contributes valuable intellectual property into the corporation. The founders believe the company qualifies for QSBS because the latest post-money valuation was negotiated below a certain figure. That is not enough.

The Section 1202(d) question is about aggregate gross assets under the statute, not a casual post-money headline (LII, n.d.-a). Advisers may need to review balance sheets before and after financings, cash from investors, contributed-property values, asset schedules, and accounting records. A valuation adviser can help prepare FMV support for contributed property and reconcile asset schedules to financing events. Counsel and CPA then apply the statutory test.

The practical lesson is not that valuation replaces tax analysis. It is that valuation can prevent category errors. Enterprise value, equity value, post-money valuation, common-stock value, book value, tax basis, and aggregate gross assets are different concepts. A good adviser file labels them clearly.

Case study 3: pre-exit model with multiple stock blocks

Assume a shareholder owns founder shares, shares acquired through option exercises, and later-purchased shares. The shares have different acquisition dates and bases. Some shares may have been held for more than five years; others may not. The company is negotiating a sale with cash at closing, escrow, and possible earnout payments.

A pre-exit model should separate stock blocks. It should identify acquisition dates, basis, holding periods, proceeds allocation, escrow treatment, and transaction contingencies. Section 1202(b)’s limitation framework may apply differently depending on stock-block facts. If a sale occurs before the shareholder wants to recognize gain, Section 1045 rollover planning may be a topic for tax counsel, subject to its own requirements (LII, n.d.-b).

The valuation adviser can help reconcile enterprise value to equity proceeds and allocate value among securities. The CPA and attorney should determine eligibility, limitation, reporting, and whether any rollover strategy is available.

How Simply Business Valuation can help

Professional CTA

Simply Business Valuation helps business owners, founders, investors, attorneys, CPAs, and wealth advisers prepare independent business valuation reports for planning, transaction, and documentation purposes. For Section 1202 planning, SBV’s valuation work can support discussions around fair market value, enterprise value, equity value, capital structure, stock-block economics, financing events, asset values, aggregate gross asset support schedules, and adviser workpapers.

SBV does not provide tax advice, legal advice, tax return preparation, or QSBS eligibility certification. The appropriate process is collaborative: SBV prepares valuation support; your CPA and tax counsel confirm Section 1202 requirements, filing positions, transaction structure, and any related planning such as Section 1045 rollover analysis.

When to request a valuation

Consider requesting valuation support when:

• The company is formed and founders contribute property, services, or intellectual property.
• A financing round changes cash balances, preferred-stock terms, or capitalization.
• A company may be approaching aggregate gross asset issues.
• A 409A valuation cycle, option exercise, or large equity grant occurs.
• A secondary sale, redemption, or repurchase is planned.
• A reorganization, acquisition, or recapitalization is contemplated.
• A shareholder expects a potential exit within 12–18 months.
• Private stock is involved in estate, gift, charitable, or wealth-transfer planning.

The earlier the valuation record is built, the easier it is for advisers to review the facts before transaction pressure compresses the timeline.

Building a defensible QSBS valuation file

A defensible QSBS valuation file is not just the final report. It is the combination of source documents, schedules, valuation analysis, adviser memoranda, and management explanations that allow a later reviewer to understand what happened and why the valuation assumptions were reasonable. The file should be organized by valuation date and transaction event. If a company had a formation issuance, a seed financing, an option exercise, a repurchase, and a sale, each event should have its own folder or workpaper index.

Separate company-level value from shareholder-level tax modeling

A common source of confusion is the difference between company-level value and shareholder-level tax modeling. A business valuation may estimate enterprise value or equity value for the whole company. Section 1202 modeling, however, often requires stock-block detail for a specific shareholder. One shareholder may own founder stock acquired at formation. Another may own preferred stock purchased in a financing. A third may own common shares acquired through an option exercise. Those blocks may have different dates, bases, holding periods, rights, and proceeds allocations.

For that reason, the valuation report should be connected to a stock-block schedule. The schedule should identify the class of stock, acquisition date, quantity, consideration paid, basis support, holding-period notes, and transaction proceeds allocated to that block. The valuation conclusion can then be used appropriately: as support for company value, security value, or proceeds allocation, not as a blanket conclusion about every shareholder’s tax outcome.

Reconcile enterprise value, equity value, and security value

Enterprise value, equity value, and security value are related but different. Enterprise value generally represents the value of the operating business before considering how the business is financed. Equity value generally represents value available to equity holders after debt-like obligations and cash or nonoperating adjustments are considered. Security value focuses on a specific class or instrument, such as common stock, preferred stock, options, warrants, or a particular shareholder block.

QSBS planning can require all three perspectives. A sale process may begin with enterprise value. The purchase agreement may convert that value into equity proceeds after debt, cash, working capital, escrows, expenses, and other adjustments. The proceeds then must be allocated among securities and stockholders based on the capitalization and transaction terms. A valuation adviser can help build that bridge so the CPA is not forced to infer stock-block proceeds from an incomplete closing statement.

Illustrative value bridge, simplified and hypothetical

Enterprise value indicated by transaction: $75,000,000
Less debt-like obligations:             (5,000,000)
Add cash retained by sellers:             3,000,000
Less seller transaction expenses:        (2,000,000)
Indicated equity proceeds:              $71,000,000

Next step: allocate equity proceeds by class and stock block
based on the capitalization table, liquidation preferences,
conversion terms, merger agreement, and closing schedule.

This bridge does not determine Section 1202 eligibility. It simply shows how a valuation model can connect the company-level transaction price to shareholder-level reporting workpapers.

Document assumptions at the time they are made

Valuation support is strongest when assumptions are documented close to the valuation date. If management prepares a forecast, the file should preserve the version that existed at the time, not only a later revised forecast. If the company relied on a board-approved budget, save the board package. If a financing round was used as market evidence, save the financing documents and terms. If a repurchase price was negotiated, document the parties, date, approvals, pricing rationale, and any valuation materials.

Later reconstruction is possible, but it is less persuasive. Memories fade, employees leave, cap table systems change, and data rooms are archived. A disciplined valuation process creates a contemporaneous record that is easier for CPAs, attorneys, buyers, and tax authorities to review.

Avoid mixing standards of value without explanation

Fair market value, investment value, strategic value, fair value for financial reporting, and deal price may not mean the same thing. QSBS-related valuation support often discusses fair market value, but transaction planning may also involve strategic buyer value or negotiated purchase price. The report should identify the standard of value and explain why it is appropriate for the engagement. If management also considers strategic buyer scenarios, the report should separate those scenarios from the fair market value conclusion.

This is especially important for high-growth companies. A strategic acquirer may pay for synergies unavailable to financial buyers. A venture investor may price preferred stock based on negotiated rights and future expectations. A 409A analysis may estimate common-stock FMV under a compensation framework. None of those automatically equals the statutory aggregate gross asset measure or the value of a specific shareholder’s stock block.

Pre-exit QSBS valuation project plan

When a company expects a sale, recapitalization, or major secondary transaction within the next 12 to 18 months, the valuation and adviser team should build a project plan. The plan does not have to be complicated, but it should assign responsibility and sequence the work so issues are found before the buyer’s diligence clock starts.

Workstream	Key question	Valuation role	CPA/tax counsel role	Output
Stock-block inventory	Who owns which shares, when acquired, and for what basis?	Reconcile cap table to valuation and proceeds schedules	Determine holding-period and basis treatment	Shareholder stock-block schedule
Issuer eligibility file	What records support company status and business activity?	Summarize operations, revenue, assets, and value drivers	Apply Section 1202 legal requirements	Eligibility memorandum or adviser workpapers
Aggregate gross asset support	What asset evidence exists at issuance and financing dates?	Prepare asset schedules, FMV support, and reconciliations	Apply statutory aggregate gross asset test	Gross asset support package
Transaction value bridge	How does enterprise value become shareholder proceeds?	Build enterprise-to-equity and security-allocation model	Review tax reporting and allocation issues	Proceeds allocation schedule
Reporting package	What will the shareholder provide to the return preparer?	Provide valuation report and schedules	Prepare or review tax reporting	CPA-ready documentation file

Step 1: inventory stock blocks before negotiating tax language

A buyer’s letter of intent or purchase agreement may include tax representations, rollover provisions, indemnity provisions, or schedules that require accurate stock information. If the seller does not know which stock blocks may qualify, the negotiation can become reactive. Inventory stock blocks first. Identify founder shares, investor shares, option-exercise shares, gifted shares, transferred shares, and repurchased shares. Then match each block to documents.

Step 2: identify valuation dates

The team should identify the dates that may require valuation support. Potential dates include formation, property contribution, option grant, option exercise, financing close, redemption, reorganization, gift, death, charitable transfer, and sale. Not every date needs a full appraisal, but each should be considered. A short memo explaining why a date does or does not require valuation support can be valuable.

Step 3: build the aggregate gross asset workpaper

If aggregate gross assets are relevant, build a workpaper that ties to primary records. Start with balance sheets and bank records. Add financing proceeds, contributed-property support, and schedules for tangible and intangible assets. Reconcile the workpaper to the company’s accounting records and document any fair market value assumptions. CPA and tax counsel should then review the statutory application.

Step 4: align the valuation model with the deal model

The valuation model should not live in isolation from the transaction model. If the purchase agreement includes debt payoff, cash adjustments, working capital true-ups, escrow, earnout, rollover equity, or transaction expenses, those items may affect proceeds allocation. A valuation adviser can help reconcile the deal model with the cap table, liquidation preferences, and stock-block schedules.

Step 5: prepare the CPA-ready reporting package

After closing, the shareholder’s CPA may need to review Form 8949, Schedule D, basis records, holding-period evidence, and Section 1202 workpapers. IRS Publication 550 and the IRS instructions for Form 8949 and Schedule D provide taxpayer reporting context, but the CPA should use the current instructions for the applicable tax year (IRS, n.d.-a; IRS, n.d.-b; IRS, n.d.-c). A CPA-ready package should include the valuation report, stock-block schedule, purchase agreement, closing statement, basis support, and tax counsel memoranda where applicable.

How QSBS valuation differs by company stage

QSBS planning looks different at formation, seed stage, growth stage, and exit stage. A mature, profitable company may require an EBITDA-oriented market or income analysis. A newly formed technology company may require more emphasis on contributed intellectual property, option plans, financing terms, and scenario analysis. A capital-intensive manufacturer may require more asset schedules and equipment valuation support. The valuation method should follow the company’s facts.

Company stage	Common valuation focus	QSBS documentation emphasis	Common mistake
Formation	Founder stock, contributed property, initial capitalization	Original issuance, consideration, C-corporation records, cap table	Assuming low value requires no documentation
Seed or venture financing	Preferred-stock terms, option pool, cash proceeds, 409A support	Financing close records, aggregate gross asset support, stock rights	Treating preferred price as common-stock value
Growth stage	Forecasts, revenue quality, customer concentration, asset deployment	Active business facts, nonoperating assets, updated cap table	Ignoring changes in operations or asset mix
Pre-exit	Enterprise value, equity proceeds, stock-block allocation	Holding periods, basis, purchase agreement, closing statement	Modeling only total proceeds, not stock blocks
Post-exit reporting	Tax forms, exclusion support, adviser files	Form 8949/Schedule D workpapers and retained records	Trying to recreate records after deadlines

The stage-specific lens helps owners avoid generic valuation work. It also helps control cost and scope. A formation-stage memo may not need the same analysis as a full transaction appraisal. A pre-exit report may need deeper proceeds allocation and scenario modeling. A 409A update may be useful but insufficient if the actual question is Section 1202 diligence.

FAQ

1. What is Section 1202 qualified small business stock?

Section 1202 is a federal tax provision that can allow exclusion of gain from certain qualified small business stock if statutory requirements are satisfied. Those requirements include rules involving the issuer, original issuance, holding period, qualified small business status, active business, and other limitations (LII, n.d.-a). Eligibility should be confirmed by CPA and tax counsel.

2. Is the Section 1202 benefit always exactly $10 million?

No. The “$10 million” phrase is shorthand. Section 1202(b) uses a limitation framework involving the greater of a dollar amount or 10 times the aggregate adjusted basis for relevant QSBS disposed of during the taxable year, subject to statutory details and reductions for prior excluded gain from the same issuer (LII, n.d.-a). The actual outcome depends on taxpayer, issuer, stock-block, basis, percentage exclusion, and transaction facts.

3. Does my company’s 409A valuation prove the stock is QSBS?

No. A 409A valuation may support common-stock fair market value for stock-right compensation purposes, but QSBS status requires separate analysis of Section 1202 requirements. The 409A report can be evidence; it is not a QSBS opinion.

4. Is the $50 million test based on enterprise value, equity value, or aggregate gross assets?

Section 1202(d) refers to aggregate gross assets. Do not reduce it to enterprise value, equity value, post-money valuation, or 409A common-stock value. CPA and tax counsel should apply the statutory test, and a valuation adviser can support the asset and FMV evidence.

5. When should a company get a QSBS-related valuation?

Consider valuation support at formation, property contribution, financing rounds, option exercises, secondary transactions, redemptions, reorganizations, and pre-exit planning. The goal is to document valuation-sensitive facts before records are lost or transaction pressure increases.

6. Can a business appraisal determine whether my company is an excluded business?

A business appraisal can describe operations, revenue streams, assets, customers, and economics. Tax counsel should determine whether the company falls within an excluded category under Section 1202(e). The appraisal supports facts; it should not make the legal conclusion.

7. How does discounted cash flow fit into QSBS valuation?

A discounted cash flow analysis can support enterprise or equity value when forecasts are supportable. It may help with transaction planning, stock-block modeling, or fair market value support. It does not determine QSBS eligibility.

8. When is the market approach useful for QSBS planning?

The market approach is useful when relevant comparable-company, transaction, financing, or secondary-market data exist and are appropriately adjusted. It is risky when unsupported multiples are applied without considering stage, growth, risk, profitability, rights, preferences, and liquidity.

9. When is the asset approach useful?

The asset approach is useful for asset-heavy companies, contributed-property questions, holding-company concerns, nonoperating assets, and aggregate gross asset diligence. It helps distinguish book value, tax basis, fair market value, enterprise value, equity value, and statutory asset concepts.

10. How does EBITDA matter for QSBS valuation?

EBITDA may matter for later-stage operating companies with meaningful earnings. It may be less useful for early-stage, high-growth, or pre-profit companies. A valuation should not force EBITDA multiples when another method better fits the facts.

11. What records should founders keep from day one?

Founders should keep incorporation documents, stock purchase agreements, subscription documents, board approvals, stock ledgers, cap tables by date, evidence of consideration paid, vesting terms, 83(b) election records when applicable, financing documents, and valuation reports.

12. What should I give my CPA before claiming a QSBS exclusion?

Provide stock-block schedules, acquisition dates, basis support, holding-period evidence, issuance documents, cap tables, financing records, redemptions or repurchase history, purchase agreement, closing statement, and any valuation reports. The CPA should also review current Form 8949 and Schedule D instructions (IRS, n.d.-b; IRS, n.d.-c).

13. What is a Section 1045 rollover?

Section 1045 provides rules for rollover of gain from qualified small business stock to replacement qualified small business stock when statutory requirements are met (LII, n.d.-b). It is a tax-planning topic for qualified advisers, not something a valuation report can implement by itself.

14. Can private letter rulings be used as authority for my transaction?

Private letter rulings may illustrate how the IRS addressed particular taxpayer facts, but written determinations generally may not be used or cited as precedent under Section 6110(k)(3) (LII, n.d.-i). This article does not rely on private letter rulings for final rules. If counsel uses a PLR in planning, counsel should explain its limited role.

Conclusion

Section 1202 can be powerful, but the benefit is not automatic. The best QSBS outcomes usually come from early documentation, clean stock-block records, careful distinction among valuation concepts, and coordinated work among founders, investors, CPAs, attorneys, and valuation professionals. Valuation helps by documenting fair market value, capital structure, aggregate gross asset support, stock-block economics, and exit scenarios. It does not certify eligibility or replace tax advice.

If your company may have QSBS potential, do not wait until a buyer is already requesting diligence. Build the valuation file now. Simply Business Valuation can help prepare independent business valuation and business appraisal support that gives your CPA and tax counsel better records for planning, modeling, and reporting discussions.

References

• Association of International Certified Professional Accountants. (n.d.). Statement on Standards for Valuation Services, VS Section 100. https://www.aicpa-cima.com/resources/download/statement-on-standards-for-valuation-services-vs-section-100

• Internal Revenue Service. (n.d.-a). Publication 550, Investment income and expenses. https://www.irs.gov/publications/p550

• Internal Revenue Service. (n.d.-b). Instructions for Form 8949. https://www.irs.gov/instructions/i8949

• Internal Revenue Service. (n.d.-c). Instructions for Schedule D (Form 1040). https://www.irs.gov/instructions/i1040sd

• Internal Revenue Service. (n.d.-d). Publication 561, Determining the value of donated property. https://www.irs.gov/publications/p561

• Legal Information Institute. (n.d.-a). 26 U.S.C. § 1202: Partial exclusion for gain from certain small business stock. https://www.law.cornell.edu/uscode/text/26/1202

• Legal Information Institute. (n.d.-b). 26 U.S.C. § 1045: Rollover of gain from qualified small business stock to another qualified small business stock. https://www.law.cornell.edu/uscode/text/26/1045

• Legal Information Institute. (n.d.-c). 26 U.S.C. § 368: Definitions relating to corporate reorganizations. https://www.law.cornell.edu/uscode/text/26/368

• Legal Information Institute. (n.d.-d). 26 U.S.C. § 83: Property transferred in connection with performance of services. https://www.law.cornell.edu/uscode/text/26/83

• Legal Information Institute. (n.d.-e). 26 U.S.C. § 409A: Inclusion in gross income of deferred compensation under nonqualified deferred compensation plans. https://www.law.cornell.edu/uscode/text/26/409A

• Legal Information Institute. (n.d.-f). 26 C.F.R. § 1.409A-1: Definitions and covered plans. https://www.law.cornell.edu/cfr/text/26/1.409A-1

• Legal Information Institute. (n.d.-g). 26 C.F.R. § 1.83-3: Meaning and use of certain terms. https://www.law.cornell.edu/cfr/text/26/1.83-3

• Legal Information Institute. (n.d.-h). 26 C.F.R. § 1.83-7: Taxation of nonqualified stock options. https://www.law.cornell.edu/cfr/text/26/1.83-7

• Legal Information Institute. (n.d.-i). 26 U.S.C. § 6110: Public inspection of written determinations. https://www.law.cornell.edu/uscode/text/26/6110

• National Association of Certified Valuators and Analysts. (n.d.). Professional standards. https://www.nacva.com/standards