What’s the Difference Between 351 Exchanges and Exchange Funds?
Advisors are taking advantage of two tax-deferral and diversifying strategies for high-net-worth clients that can sound pretty similar: 351 exchanges and exchange funds. (We mixed them, too.)
The reason for the increase in popularity is that after several years of high equity market returns, clients may have large stock positions and are likely sitting on sizable unrealized capital gains, which may make it difficult to rebalance portfolios without a significant tax bill. Either one of these tax-advantaged strategies can help clients diversify, but they are complex and costly to enact. Keep in mind, advisors will want to consult with tax and legal experts, along with fund issuers, to ensure a smooth transition. But, while both…
