Treasury Sec. Bessent, IRS crack down on ETF strategy the wealthy are using to avoid capital gains taxes

One of the selling points of ETFs is that they can be highly tax-efficient for managing capital gains and losses, but wealthy investors may have to rethink certain ETF tax-deferral strategies following recent communications from the Internal Revenue Service and U.S. Treasury. At issue are certain use cases of Section 351 exchanges , in which wealthy individuals, through an intermediary, create new ETFs with a basket of highly appreciated stocks. The intent is to defer capital gains taxes — which remains a legitimate strategy, but with additional qualifications, according to new guidance from tax authorities.