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Treasury and IRS Target Tax-Avoiding Section 351 ETF Conversions

By Drooid · Oct 2, 2026, 6:17 PM UTC · How we work

Summary

Story summary

U.S. Treasury Secretary Scott Bessent announced guidance targeting Section 351 ETF conversions that aim to dodge taxes.
The IRS revenue ruling states such conversions don’t work under existing law, Bessent posted on X.
Treasury said it is serious about cracking down on ETFs used as tax-avoidance conduits.
Section 351 allows tax-free transfers if no asset exceeds 25% and top five holdings stay under 50%.
The notice also flags partnership transfers and box-spread option strategies as potential audit targets.

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Story summary

U.S. Treasury Secretary Scott Bessent announced guidance targeting Section 351 ETF conversions that aim to dodge taxes.
The IRS revenue ruling states such conversions don’t work under existing law, Bessent posted on X.
Treasury said it is serious about cracking down on ETFs used as tax-avoidance conduits.
Section 351 allows tax-free transfers if no asset exceeds 25% and top five holdings stay under 50%.
The notice also flags partnership transfers and box-spread option strategies as potential audit targets.