Guide to 351 ETF Conversions
What is a Section 351 conversion?
A 351 conversion allows investors to transfer assets like stocks, ETFs, or SMAs into an ETF on a tax-deferred basis.
Key Benefits of 351 Conversions
Liquidity & Flexibility
ETFs provide improved liquidity and allow easier rebalancing without immediate tax consequences.
Diversification Compliance
The assets transferred must meet IRS diversification requirements, making them suitable for regulated investment companies like ETFs.
Tax Efficiency
Contribute assets in-kind without realizing capital gains, preserving investment value.
Requirements for 351 Conversion
Portfolio composition
Assets must not aim for diversification post-conversion. All transferred assets should collectively form a well-diversified portfolio.
Diversification rules
No single asset can exceed 25% of the portfolio, and assets over 5% must together make up less than 50% of its total value.
IRS compliance
Conversions must align with IRS guidelines to maintain tax-deferred status.
When is a 351 Conversion right for you?
SMAs, stocks, and other ETFs with locked-in gains are well-suited for portfolios needing diversification or restructuring.
Long-term growth
Perfect for investors looking to streamline operations, lower costs, and access advanced instruments like ETFs.
Tax efficiency
Deferring capital gains now can help enhance long-term growth potential.
Kurv’s HNW bespoke 351 program
Advisor consultation
Parabolic helps source and coordinate financial and tax advisors to ensure your strategy aligns with both goals and compliance.
Evaluate portfolio suitability
We’ll confirm that your assets meet the IRS diversification and transfer criteria.
Trusted ETF sponsor
We’ll manage the legal and structural details of the 351 conversion, simplifying the process for you.
IRS Section 1.351 transfers are complex and have several requirements including diversification and record-keeping requirements. IRS and Investment Company Act rules apply and must be met prior to proceeding with a Section 1.351 conversion to an ETF, a registered investment company. In addition, IRS Section 1.351 transactions typically involve the issuance of a written opinion from a qualified tax professional. Please consult with your professional tax advisor to determine whether a Section 1.351 transfer is a viable option for you.