Treasury and the IRS have issued new guidance targeting certain Section 351 ETF exchanges, where investors contribute appreciated stock to a newly formed ETF to defer capital gains. The focus is on transactions where the ETF quickly redistributes those securities and the investor ends up with a materially different portfolio. Legitimate uses remain available, though questions about timing are still open.
As John noted, creating an ETF can run $200,000–$300,000, and in his view the approach doesn’t make sense for anyone contributing less than $100 million in stock.
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