A $140 Billion Capital-Gains Tax Break Is Getting More Lucrative (2)

At business breakfasts and investor lunches across the US, the topic du jour is a strategy pioneered in Silicon Valley to avoid paying taxes on billions of dollars of capital gains.

Company owners and their advisers are exploring how they, too, can benefit from an obscure provision of the tax code, Section 1202 for “qualified small business stock,” better known as QSBS.

Here’s how it works in the most lucrative scenario: Step one is starting a business or acquiring an ownership stake when a company is still relatively small, with no more than $75 million in gross assets. Next, hold onto ...