Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with the news that the IRS issued guidance and a revenue ruling drawing boundaries around what it perceives to be legitimate uses of the increasingly popular 351 exchange strategy. While the strategy as a whole remains a viable way to manage securities with large embedded capital gains, the agency warned against certain tactics within ETFs leveraging it, including the rapid turnover of contributed securities, seed baskets that don’t match the ETF’s stated strategy, and transactions that appear pre-arranged. Which suggests that advisors can support clients not only in considering this strategy when appropriate but also in evaluating funds to ensure they will stay on the right side of IRS guidelines (and avoid a potential negative tax surprise for their clients in the process).
Also in industry news this week:
- The Treasury Department announced this week that it auto-enrolled more than 60 million children in the “Trump Accounts” program (though parents still need to claim the accounts to access available government and philanthropic contributions to them)
- A recent survey suggests a valuable role for financial advisors in helping hesitant clients (with the means to do so) spend more in retirement
