^{By Todd Stankiewicz | CIO, SYKON Capital | Portfolio Manager, Free Markets ETF (FMKT)}


A single appreciated stock can quietly come to dominate a high-net-worth portfolio, and continuing to hold it indefinitely can increase concentration risk. Todd Stankiewicz of SYKON Capital walks through several planning options that may be considered in the right circumstances, including systematic selling, direct charitable gifting of appreciated shares, and certain exchange structures that may be available to eligible investors.

Concentrated positions are an important planning issue for many high-net-worth clients. The instinct to hold indefinitely and defer the tax is understandable, but concentration risk is real. A single company representing a large percentage of your net worth can expose you to more volatility than a diversified portfolio. In many cases, I prefer to start with relatively liquid strategies that preserve flexibility rather than move immediately to more complex or illiquid structures.

Systematic selling over multiple years is often one possible starting point. By spreading sales across tax years, you may have more control over how gains fall across brackets and whether you qualify for a lower long-term capital gains rate.1 This approach can be especially useful in years where other income is lower or more predictable.

Another structure that may be relevant in limited situations is a Section 351 ETF exchange. In general terms, this may allow eligible investors to contribute appreciated shares into a newly formed ETF in a tax-deferred exchange and receive diversified ETF shares in return. These arrangements are complex, may involve eligibility, liquidity, valuation, manager, and tax considerations, and are not appropriate for every investor. They should be evaluated carefully with legal, tax, and investment guidance before any action is taken.

For clients who already make charitable donations, donating appreciated stock directly instead of cash may be worth evaluating. If the shares have been held long term and the gift is made to a qualified charity, that approach may allow the donor to avoid recognizing the embedded capital gain while also claiming a charitable deduction based on fair market value, subject to applicable IRS rules and limitations.2 Coordinating that kind of transaction correctly requires attention to both the investment and tax sides of the decision.

From an investment standpoint, I also evaluate where the stock sits technically. Understanding price structure, key support levels, and trend conditions can inform the timing of a staged selling plan, adding a market-aware dimension to the tax strategy.


About the Author

Todd Stankiewicz | Chief Investment Officer, SYKON Capital

Todd Stankiewicz is the Chief Investment Officer of SYKON Capital, a fee-only registered investment advisor with offices in Westchester County, NY and Jupiter, FL. He is a recurring guest on Fox Business and the Schwab Network, where he discusses markets, portfolio strategy, and investor behavior.

Learn more at www.sykoncapital.com

^{Advisory services are offered through SYKON Capital LLC, a registered investment advisor with the U.S. Securities and Exchange Commission. This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable as of the date of this report. Past performance is not indicative of future returns, and diversification neither assures a profit nor guarantees against loss in a declining market. Investments involve risk and are not guaranteed.}