Silicon Valley investors have discovered a way to multiply the benefits of a popular tax break through what tax attorneys call 'trust stacking.' The practice involves transferring shares to multiple trusts in relatives' names to exploit the Qualified Small Business Stock exclusion multiple times.

Originally designed to help founders and early investors, the QSBS provision allows taxpayers to exclude up to $15 million in capital gains from selling small business stock. However, investors are now attempting to exclude $60 million or more by creating chains of family trusts.

The strategy has drawn attention from the Trump administration, which is examining whether these arrangements violate the spirit of the tax code. Tax professionals report seeing the technique used increasingly at venture capital firms and private equity shops.

This scrutiny could reshape how wealthy founders and angel investors approach exit planning. The IRS may challenge whether trust stacking truly qualifies for the small business stock benefits, potentially forcing investors to pay back taxes plus penalties on millions in excluded gains.