1031 out of company stock into etf?

[jyav]

Hi all,

My company will go public in a couple years. I don't like holding individual stock but also don't want to trigger a tax event.

I was thinking of doing a 1031 "like kind" exchange to sell the company stock and buy an ETF, probably VTI, in a taxable account. But without triggering a taxable event. Can 1031 be used for this purpose?

 

[Winemaker]

Not that I am aware of. "Like kind" usually means trading the "same". Like trading a 3 unit apartment building for a 6 unit apartment building; or a local residential rental unit for a vacation residential rental unit. Never heard of trading a business for a ETF of businesses, even if you own a retailer and are buying a retailing ETF.

 

[Bruceski44]

The only way I'm aware of to defer cap gains on a stock sale is using a Qualified Opportunity Zone, but you'd be buying real estate. Real estate is a great diversifier and there are many passive QOZ investments where you wouldn't need to manage the properties your self.

 

[Doingitwrong]

Look into the 2017 changes to sec. 1031-

The 2017 tax law (Pub. L. No. 115-97), the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA), made amendments to section 1031 by limiting the like-kind exchange rules to exchanges of real property.

 

[OldShooter]

Many years ago I remember reading about a mutual fund that would take individual stock in a tax-free exchange for shares of the fund. They actually took ownership of the "trade-in" stock they received. I don't know how long they held it however.

It was designed specifically for situations like the OP's but it's probably long gone if it ever really existed.

 

[Doingitwrong]

Stock wouldn’t have worked under 1031 before 2017. Now it definitely won’t work.
We used to 1031 business vehicles to no end (pre-2017) and the “gain” on the sale/trade-in was deferred until the next trade-in…forever.
Now a trade-in is reported on 4797 just like the sale of any business property.
The rules really changed for business and investment property in 2017.

 

[jyav]

I'm not interested in getting into real property as I am overseas and will stay in Asia post retirement. If there is no way to dodge a tax event I guess I know which stock to sell first! Technically I think they are just options right now.