Successful investing can sometimes create an unexpected challenge.
Over time, a single stock may grow into a very large portion of someone’s wealth. This might happen through equity compensation, founding a company, or simply holding a long-term winner for many years.
While that success is worth celebrating, it can also create a difficult decision. Selling the position may trigger a significant capital gains tax. Continuing to hold it, however, leaves the portfolio heavily concentrated in a single company.
Many investors in this position feel stuck between two imperfect choices. Fortunately, there may be another option worth understanding.
A relatively new strategy called the 351 Exchange is beginning to attract attention as a way for investors to potentially diversify appreciated stock positions while deferring capital gains taxes.
This paper explains what a 351 Exchange is, who it may be appropriate for, and how it compares to more traditional solutions investors have used in the past.
