Mini Case Study: 351 Exchange (Intel)
This week, we helped one of our high-net-worth clients in Danville, CA diversify $500K of concentrated Intel stock without triggering any tax liability.
Here’s what that looked like:
Years ago, our client received stock options from a private company he worked for. That company was later acquired by Intel, and his shares converted into Intel stock.
With Intel up more than 4x over the past year, the position had grown well above the weight we were comfortable with in his portfolio. But, selling would have triggered a substantial capital gain, so we needed a different plan.
Since his cost basis per share was under $1, we contributed $500K of Intel stock, along with $1.6M of other positions (to satisfy diversification requirements), into a Section 351 exchange. Think of it as similar to a 1031 exchange*, but for securities instead of real estate.
This allowed us to trim the concentrated position without creating a six figure tax bill.
His portfolio is now more diversified, all while still preserving the ability for a step-up basis to pass to his children.
If you have concentrated equity position and want to diversify it without creating a tax liability, a 351 Exchange is a great option.
At Summit, we have now helped 15 households contribute a combined $20M into 351 Exchanges.
Send me an email (nick@swrpteam.com) or book a time on my calendar if you’re dealing with a similar situation and need a trusted Advisor that can help.
*Read our blog on 1031 exchanges here.
This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.