Thinking about converting mutual fund or SMA assets into an ETF—but dreading the capital gains tax bill? Section 351 ETF conversions offer a strategic solution:
** Tax-Deferred Transition**: Move diversified assets into a newly formed ETF without triggering taxable events—your holding period and cost basis carry over.
** Smart Structuring**: The portfolio must meet IRS diversification tests (≤ 25% for any one holding; top five holdings ≤ 50%) and the ETF launches via in-kind contributions.
** Long-Term Advantages**: Enhanced tax efficiency, lower fees, intraday trading, daily transparency, and smoother rebalancing within the ETF structure.
** On the Rise**: The strategy is gaining traction—Practus LLP has led many ETF transactions, and recent launches like the $500M Longview Advantage ETF demonstrate growing adoption.
Bottom Line:
If your portfolio is ready to evolve, Section 351 conversions could offer a seamless, tax-smart upgrade.