The Long Game Managing a Concentrated Position: 351 Exchanges & Other Tools (w/ Brent Sullivan
Mar 6, 2026
Brent Sullivan, a tax and investment strategist focused on capital gains and ETF/deferred-tax techniques. He explains 351 exchanges as a little-known tax-deferral tool for concentrated stock positions. Short talks cover using ETFs to convert holdings in kind, sponsor rules and diversification tests, operational mechanics and IRS scrutiny, and alternative tools like collars and prepaid forwards.
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How 351 Exchanges Defer Tax With Diversification Guardrails
- A 351 exchange lets you contribute appreciated assets in kind to a new ETF and defer capital gains tax at contribution.
- The contributor must meet two diversification tests: no issuer >25% and top five names <50% of the contributed portfolio, so it's partial diversification.
Size Contributions To Pass 25/50 Tests Or Be Rejected
- You can't contribute an overly large single-stock stake; you must size the contributed portfolio to meet the 25/50 tests or the sponsor will reject it.
- Sponsors will often accept total contributions as small as $150k–$250k, but operational readiness varies by sponsor.
Only Use 351 At ETF Launches And Do Sponsor Diligence
- Only newly launching ETFs can accept 351 in-kind contributions because contributors must have control on day one.
- Validate the ETF sponsor, prospectus mandate, and that the fund can redeem contributed holdings in kind before pursuing a contribution.