How to exempt capital gains from tax

Personal Finance / Macroeconomic Trends & Risks

Unthreaded | Threaded | Whole Thread (2)

Post New | Post Reply | Report Post | Recommend It!

No. of Recommendations: 5

People who have massive capital gains have a way to exempt capital gains from tax. This one is new to me - I never heard of it before.

wsj.com - The tax strategy for people suffering from stock market success

# The Tax Strategy for People Suffering From Stock-Market Success ## If big gains on stocks have locked you in place, here’s one way to break free By [Jason Zweig](wsj.com - Jason zweig), The Wall Street Journal, July 17, 2026 … Exchange-traded funds offer a potential solution. In what’s called [a 351 exchange](SSRN: Research paper), you can contribute shares of one or more stocks—or ETFs, for that matter—to the launch of an ETF. In return, you get shares of the newly minted ETF with the same total value. You no longer own the original stock directly; it’s become part of the diversified basket of stocks held by the new ETF. You won’t owe capital-gains tax until you sell the ETF. You’d then owe tax on the difference between what you paid for the original stock and what you sell the new ETF for. Holding indefinitely is also an option. If the new ETF goes into your estate, your heirs will inherit it at its market value on your date of death. That “step up” would effectively erase most of the long-term, capital-gains tax liability… Under federal law, for you to be able to defer capital-gains tax in a 351, a single issuer’s stock can’t exceed 25% of the portfolio you contribute to the ETF, and five stocks can’t exceed 50% of your total. Cash doesn’t count in the calculations…\[end quote\]

Of course, anyone planning to use this should research it in more depth and discuss it with any tax or financial advisors.

Wendy

Post New | Post Reply | Report Post | Recommend It!

Print the post Share: X · FacebookFB · LinkedInLI · WhatsAppWApp · Email

Members reply directly to WendyBG here — and replies get answered. Reading is free; so is joining the conversation. Join Shrewd'm »

This community has written 4,454 posts about Macroeconomic Trends & Risks. The article-length ones it recommended most:

AI Tarpits · 36 recs · 2026

End of an era - profit slowdown · 36 recs · 2023

Control Panel: Trend changes in 2026 · 34 recs · 2026

From the Oregon Bay Area (a blogger) · 33 recs · 2025

Lerner Symmetry Theorem · 32 recs · 2025

Unthreaded | Threaded | Whole Thread (2)

Prev | Next

Announcements

Macroeconomic Trends & Risks FAQ

Contact Shrewd'm
Contact the developer of these message boards.

A community forum supporting civilized, and highly helpful, self-educating investors that come together for Shrewdness and merry spirits. These message boards closely follow the look and feel of the old message boards at boards.fool.com prior to the boards redirected to discussion.fool.com. Shrewd'm is not affiliated with the comprehensive and excellent investment website The Motley Fool (TMF) in any way. The Shrewd community here has owed, and continues to owe, gratitude to The Motley Fool for nurturing a culture of jovial irreverence towards Wall St, and that tradition will continue here.