Can I diversify a large single-stock holding tax-free by seeding an ETF in-kind?

No. Section 351 tests for diversification at the individual and aggregate levels.

I get a lot of questions about why an investor might seed an ETF in-kind, and the mechanics of the Section 351 conversion.

ETFs offer potentially lower costs, broader investment selection, and heartbeat trade tax efficiency.

Section 351 conversion allows investors to contribute diversified assets in a one-time, pre-launch window without immediate tax con…