Definition
A private partnership that allows multiple investors to contribute appreciated shares and receive diversified fund interests in return, potentially deferring the capital-gains tax that an outright sale would trigger.
An exchange fund, sometimes called a swap fund, pools low-basis stock from many contributors into a single partnership. Each contributor exchanges their concentrated shares for a pro-rata interest in the fund, which now holds a diversified basket of securities. Because no shares are technically sold, the immediate capital-gains event that a direct sale would create may be deferred. The mechanics, eligibility rules, and holding-period requirements are governed by tax law, and a qualified attorney and CPA must evaluate whether a specific situation qualifies.
These structures are generally available only to accredited investors meeting substantial net-worth thresholds, which makes them most relevant at the wealth levels discussed in resources like Wealth at $50 Million and beyond. Illustratively, a technology executive holding a single stock worth several million dollars with a near-zero cost basis might contribute those shares to an exchange fund rather than sell outright and face a large immediate tax bill.
A common confusion is assuming an exchange fund eliminates tax permanently; it does not. The deferred gain generally carries over into the fund interest and becomes due eventually upon redemption or sale. Liquidity is also limited; funds typically impose multi-year lock-up periods. Exchange funds are explored further in the main article on exchange funds, and families often evaluate them alongside hedging and collars and concentrated stock positions strategies.
Zuletzt geprüft August 25, 2026 · Redaktionelle Richtlinien