Breaking Down Exchange Funds vs. Exchange-Traded Funds (ETFs): How Investors Can Diversify Without Tax Pain
For investors holding concentrated stock positions or those with significant unrealized gains, diversifying can incur a hefty capital gains tax bill. Enter exchange funds and exchange-traded funds (ETFs)—two options that cater to different scenarios while offering unique benefits. Let’s demystify their differences and explore how you can use them to achieve diversification. What Are Exchange […]
The “Look-Through” Rule: A Closer Look at ETF Diversification in 351 Exchanges
Section 351 of the Internal Revenue Code offers a powerful tax-deferral tool for investors seeking to diversify their portfolios without triggering immediate capital gains. This provision allows individuals to contribute appreciated assets to a corporation, often an Exchange-Traded Fund (ETF), in exchange for shares, deferring taxes on those gains. However, this tax-free exchange is contingent […]
A Tax Loophole for the Elite: How the Wealthy Can Avoid Capital Gains Indefinitely
The US tax code, with its myriad rules and regulations, can seem like a labyrinth designed to confound the average taxpayer and full of tax loopholes. However, hidden within its complex structure lies a powerful tool that allows the rich and connected to avoid capital gains taxes indefinitely: the Section 351 conversion. Section 351 of […]