Is your wealth concentrated in one stock?

Options to weigh with your investment adviser

1. An exchange fund: trade the position for a share of a diversified fund. When it’s set up to qualify, there’s no taxable sale; the tax is deferred, not erased, and you generally stay in about seven years.
2. A measured loan against the stock, with the interest cost and margin risk known up front.
3. Sales you do make: plan them around your brackets, the federal long-term capital gains rate and the 3.8% net investment income tax (state tax may apply).

We estimate the tax on each path. Your investment adviser decides on the investment. Illustration, not advice.

Questions

Frequently asked

Can you diversify without a tax bill?

When it’s structured to qualify, an exchange fund swaps one stock for a share of a diversified fund without a taxable sale. Your old basis carries over, so the tax is deferred, not erased, and you generally stay in about seven years.

Is borrowing risky?

Yes. Leverage magnifies losses, and a drop can force a sale. With one stock, that risk is already concentrated.