The Long Term Investor Trapped By Taxes? How 351 Exchanges Let You Diversify Without Selling Your Stock (EP.225)
Oct 8, 2025
Investors worried about tax implications from selling appreciated stocks can find relief through Section 351 exchanges. This strategy allows the exchange of concentrated stock for ETF shares without immediate tax consequences. Peter Lazaroff discusses eligibility criteria, the non-recognition nature of the exchange, and practical benefits compared to traditional strategies. He highlights why these exchanges are gaining popularity due to advancements in technology and offers insights into key questions to discuss with financial advisors. It's a smart and efficient way to diversify.
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Why He Focused On 351 Exchanges
- Peter says 351 exchanges are the topic he's discussed most this year with clients, advisors, and on conference stages.
- He highlights this approach as especially useful for people holding company stock, inherited shares, or long-held winners.
How A 351 Exchange Works
- A 351 exchange lets you contribute appreciated securities into a newly created ETF and receive ETF shares in return.
- The transaction is a non-recognition event so your cost basis and holding period carry over to the ETF shares.
Eligible Assets And Liquidity
- 351 exchanges apply mainly to publicly traded stocks and ETFs and typically exclude illiquid or private assets.
- The fund structure preserves liquidity: you get daily tradable ETF shares and a 1099 like any other ETF.
