Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 4
The famously tax-efficient ETF market is about to add a new string to its bow, with the arrival of two funds offering a fresh way for investors to cut what they owe on capital gains.
The Cambria Tax Aware ETF (ticker TAX) and the Stance Sustainable Beta ETF (STSB) will each be seeded with the appreciated securities of wealthy investors, who will swap their assets for shares in the funds rather than buy into them with cash. That’s a way of disposing of holdings without actually selling, which would realize a taxable gain.
… the Cambria fund is directly inviting individual investors to bring appreciated stocks from wherever they are held.
“You’ll contribute your portfolio from Schwab, Fidelity, wherever it is,” said Meb Faber, co-founder and chief investment officer of Cambria Investment Management, the quant firm advising TAX. “Let’s say you’ve got $1 million in all these stocks, and then the next day you’ll have TAX ETF — and it’s not a taxable event.”
https://www.bloomberg.com/news/articles/2024-10-07...This could be an opportunity for many longterm BRK holders. Could help them diversify without having to sell and pay CGT.
No. of Recommendations: 0
I was just about to post this.
Certainly interested - here is another link:
https://www.wealthmanagement.com/etfs/tax-busting-...“You’ll contribute your portfolio from Schwab, Fidelity, wherever it is,” said Meb Faber, co-founder and chief investment officer of Cambria Investment Management, the quant firm advising TAX. “Let’s say you’ve got $1 million in all these stocks, and then the next day you’ll have TAX ETF — and it’s not a taxable event.”
The products resemble so-called “swap funds” or “exchange funds,” which also combine the holdings of investors in return for shares in a pooled portfolio. Those have traditionally been arranged by banks for the super rich, but have become more common after the now 15-year-long stock rally minted a new class of millionaires, especially in the tech sector.
No. of Recommendations: 4
This reminds me of a fund back in the 90's, you give them $XXX of stock as collateral for a cheap loan. Years later you would pay back the loan and they'd return your stocks, and of course you also get whatever gains the stocks had over the years.
Turned out it was a scam, they immediately sold the stocks you gave them.
The IRA was not amused and said, "Oh, no, you (your agent) sold the stocks and therefore you are responsible for the capital gains tax. Which you did not declare on the long past 1040, so now you owe the tax plus interest plus penalties.
I don't think Cambria is doing a scam here, but I could well see the IRS deciding that it WAS a taxable event.
As I read it, this TAX ETF is going to just hold the stocks that are put into it. That seems, um, suboptimal. Who is deciding what the ETF is going to be invested in? Anybody? If/when the ETF sells a stock, doesn't that cause the capital gain to be realized?
At any rate, you are eventually going to have to pay the capgain tax, so at best you are just delaying it.
No. of Recommendations: 4
I heard the similar things where some company offers a fund where tech company employees can put their employee stocks in the fund in exchange for a share of the fund. A friend asked my advice about it. My only concern is this fund may consists of many stocks that people would prefer to sell, likely high pe tech stocks.
This ETF has similar problems. It may consist of many highly appreciated stocks, making the fund has very high PE (and if someone contributes their BRK share it will bring down the PE). But are you willing to exchange your BrK with a basket of stocks perhaps made of Tesla etc?
No. of Recommendations: 8
I confess I did not understand this at all.
Is the idea that I give the ETF highly appreciate stock, and receive in return shares in an ETF whose basis is reset, tax free, to the current value of the stock?
If such a thing it possible, it is, to me, further evidence that the main problem of the US tax system is not that its rates are insufficiently progressive, but that its means of "tax avoidance" are unconscionably vast and lacking in social purpose.
Baltassar
No. of Recommendations: 5
Is the idea that I give the ETF highly appreciate stock, and receive in return shares in an ETF whose basis is reset, tax free, to the current value of the stock?
Your cost basis doesn't get reset; you just get equivalent number of shares of the ETF in return for contributing your appreciated shares. You just get the diversification benefit. BTW this idea is nothing new; it was very popular back in the dot com bubble days when big bracket wealth management companies like Merrill Lynch, Smith Barney & Morgan Stanley were pitching this idea to their wealthy clients in return for fat fees. Except there were no ETFs back then; the wire houses manage the private partnerships formed.
No. of Recommendations: 0
Your cost basis doesn't get reset
I am relieved to hear it. When I first read the announcement I thought the world might be even more out of joint than I have previously supposed.
Baltassar
