The California billionaire tax, Proposition 40 on the November 3, 2026 ballot, proposes a one-time 5% tax on the net worth of state residents worth $1 billion or more. As written, it would reach only a few hundred people. Its real significance for the broader high-net-worth community is what it signals: California is sharpening its…
Continue reading ›If you are a California founder or investor counting on the Qualified Small Business Stock exclusion, there is a trap you need to understand before you sell. The California QSBS rules do not follow the federal ones. You can qualify for a 100% federal exclusion under Section 1202, exclude every dollar of gain on your…
Continue reading ›Claiming the Qualified Small Business Stock exclusion on your tax return is not the finish line. It is the moment the position becomes reviewable. A QSBS audit is the IRS’s examination of whether a Section 1202 exclusion was actually earned, and because these claims routinely shelter seven- and eight-figure gains, they draw serious attention. When…
Continue reading ›The 2025 QSBS changes are the most significant expansion of the Qualified Small Business Stock rules in more than a decade. Enacted as part of the One Big Beautiful Bill Act, the new law rewrites key parts of Section 1202 for stock acquired after July 4, 2025. It shortens the wait for a partial exclusion,…
Continue reading ›Qualified Small Business Stock (QSBS) is one of the most powerful tax benefits available to founders, early employees, and investors. Under Section 1202 of the Internal Revenue Code, a taxpayer who holds qualifying stock in a small C corporation can exclude a large portion, and in many cases all, of the capital gain when the…
Continue reading ›If you have just received an IRS audit notice, the first question is almost always the same: why me? Did the IRS catch something specific? Did a software algorithm flag the return? Did someone report you? Was it random? The honest answer is that IRS audit selection is rarely random, and “why was I selected…
Continue reading ›California’s proposed billionaire tax has put the California residency audit back in the national spotlight, and made it the single most important issue for wealthy individuals who have recently left the state or are thinking about it. As Proposition 40, the 2026 Billionaire Tax Act, heads toward a statewide vote, the California Franchise Tax Board…
Continue reading ›Tax professionals and taxpayers alike have noticed a shift: IRS frivolous return notices (Letter 3176C) are landing on returns that claimed ordinary tax credits, not the tax-protester filings the program was built to catch. If you claimed a credit you believed you were entitled to and received a notice calling your position frivolous, the explanation…
Continue reading ›Not all IRS audits are the same. The IRS conducts three distinct types of IRS audits: correspondence audits, office audits, and field audits. The differences among them are not cosmetic. Each type involves different procedures, different IRS personnel, different scope, and different stakes. Identifying which type of audit you are facing is the first defensive…
Continue reading ›Receiving a frivolous return notice when you filed an ordinary, good-faith tax return is jarring. The IRS uses the word “frivolous” to describe positions it considers baseless — the stuff of tax-protester theories — yet a growing number of taxpayers are getting these letters (IRS Letter 3176C) for returns that were nothing of the sort.…
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