Announcing... 351.tax (database and visuals)
Plus, holdings evolution of ETFs seeded in-kind by individuals
Basis Northwest registration is open.
Discounts available for wealth managers. Just reply to this message.
Scroll past the 351.tax announcement for more logistics/FAQs.
Earlier this year, Elie Rozner and I pushed our paper Managing Concentrated Public Stock Positions by Seeding an Exchange-Traded Fund to SSRN.
Here’s the abstract…
Wealth managers increasingly seed new exchange-traded funds (ETFs) under Internal Revenue Code Section 351, allowing clients to reallocate low-basis stock into a diversified, professionally managed fund without immediate gain recognition.
The primary challenge for practitioners is distinguishing between routine transactions and those that invite IRS scrutiny. Most Section 351 seeds are straightforward applications of a century-old nonrecognition rule. Still, two fact patterns raise harder questions: “Stuffing,” in which investors use borrowed money to pad a portfolio before seeding, and “Sequential Seeding,” in which investors spread the transaction across multiple funds over time. For each, we identify the facts that could cause the transfer to fail Section 351 and trigger immediate tax. We conclude with a practical diligence guide summarizing the facts that most often drive scrutiny risk.
Our paper is fairly technical, but Larry Swedroe’s summary of our work on Morningstar, is more accessible.
In the back of our paper is a database of ETFs seeded in-kind via Section 351 by individual investors.
Our SSRN paper needs an update to account for two loosely-related things: 1) recent developments, which Bloomberg has reported, and 2) a novel fact pattern and some insights that emerged directly from analyzing 351.tax data.
If you are interested in ETFs coming down the conveyor belt, I’d suggest taking a look at ExchangiFi. Matt Bucklin is on top of the latest, whereas my process is a bit slower and backward-looking.
I would like to thank several sources who wished to stay off the record for this analysis and to again thank Elie Rozner for his fantastic work on all elements of the paper, which gave me the idea to build 351.tax.
There are many false-positive ETFs supposedly seeded in-kind floating around in tables and blogs. If you are interested in how I confirmed individual tickers, just send me the ticker, and I’ll tell you what I did.
351.tax
My reporting, corroborated by regulatory filings and contemporaneous materials, shows that 59 ETFs have been seeded in kind by individual investors under Section 351 since 2022.
The following is educational content, not an endorsement. Hire an adviser for personalized guidance and a tax attorney to scrutinize the latest developments regarding this application of Section 351.
One example of an ETF seeded in-kind is EAGL (Eagle Capital Select Equity), which was seeded with $1.8 billion in 2024.
351.tax chronicles EAGL’s portfolio evolution since launch using publicly available regulatory filings.
When an N-PORT is available (typically 3-9 months following ETF launch), I added its holdings to show how seed portfolios evolve over time.
There are some fascinating nuggets buried in 351.tax. I’ll just highlight a few and leave them to you to discover or possibly as follow-up posts.
Some funds radically and quickly reshape their composition following launch.
At least one fund has distributed considerable capital gains following launch.
Two funds launching somewhat closely included a few tickers with exactly the same number of shares. So, two fund companies, two different launches. The exact same tickers and share counts. I hadn’t contemplated this pattern in our SSRN paper. But I’m calling it “Parallel Seeding,” and I’m investigating it.
Let me know what you think, and especially if you’ve found any errors.
Basis Northwest Logistics
Basis Northwest is May 28-29, 2026, in Seattle, Washington.
Basis Northwest registration is open.
The Tax-Aware Long/Short Working Group will meet on day two (specific time TBD).
The working group session filled up quickly when registration opened. It’s now open to all registered attendees. If you were on the waitlist, you’re in.
Relatedly, a few of you have asked about connecting with other attendees and sponsors. We’ll be sharing an attendee list before and after the event, so you don’t have to worry about tracking down contact info. The list stays within the event and is never sold or shared externally.
The detailed agenda should be available in 2-3 weeks, but the important thing to know is that content will be live until 5 PM PT on both days.
Each evening (Weds, Thurs, Fri), there will be after-hours official and unofficial events. Stay tuned for more about this.
Speaking of which… want to join the ⚾️ 🔱 post-conf (evening of May 29, 2026) Mariners game? Fill out this form
See you in Seattle.
Happy Tues.