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General Dynamics Employees: Strategic Ways to Reduce Capital Gains on Appreciated Stock

Healthcare Provider Update: For General Dynamics, the primary healthcare provider is UnitedHealthcare, which offers health insurance benefits to many employees and their families. Looking ahead to 2026, consumers are bracing for significant healthcare cost increases, particularly in the context of the Affordable Care Act (ACA). With insurers predicting record premium hikes, some states could see increases exceeding 60%, largely due to rising medical expenses and the potential expiration of enhanced federal subsidies that currently help millions of policyholders. Without these subsidies, it is projected that many individuals could experience a shocking 75% rise in out-of-pocket premiums, greatly impacting affordability and access to healthcare for millions across the nation. Click here to learn more

'General Dynamics employees can benefit from understanding that strategies like a Section 351 exchange, charitable donations, and tax loss harvesting may work together to help manage appreciated stock efficiently while aligning with broader long-term financial goals.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.

'General Dynamics employees should recognize that thoughtful planning with tools such as Section 351 exchanges, gifting strategies, and tax loss harvesting can help them manage highly appreciated stock while supporting both personal and philanthropic objectives.' – Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

How a Section 351 exchange can defer capital gains on highly appreciated stock.
Alternative tax-efficient strategies such as charitable donations, tax loss harvesting, and gifting.
The role of inheritance rules, step-up in basis, and combined approaches in long-term tax planning.

A Tax-Aware Q&A on How to Manage Highly Appreciated Stock

From the Section 351 exchange to other practical approaches, this Q&A addresses key considerations General Dynamics employees may encounter when dealing with highly appreciated shares.

Section 351 Exchange: The Fundamental Approach

Q: What is an exchange under Section 351?
A: Under certain circumstances, an investor may transfer property, such as highly appreciated shares, to a company in exchange for its stock under a provision of the Internal Revenue Code that allows the deferral of capital gains or losses.

Q: What is the primary advantage of exchanging my appreciated stock through a Section 351 exchange?
A: The main advantage is tax deferral. Gains transferred to corporations may be postponed under Section 351, though this applies only if specific diversification requirements are met, especially when transferring to investment companies like exchange-traded funds (ETFs). ¹

Q: What is meant by the “Control Test”?
A: The investor or group of investors who use their portfolio assets to fund the new entity must own at least 80% of the voting power and 80% of the total number of shares of all other classes of stock in the new company immediately after the exchange. ¹

Q: When seeding an ETF, how is the Control Test usually satisfied?
A: It is typically satisfied by either a single substantial investor making a significant asset contribution or multiple investors pooling assets to create a seeding pool for the ETF’s launch.

Q: What is the ultimate tax payment date for the deferred gain?
A: The deferred gain is recognized when the ETF shares acquired through the exchange are sold; distributions from taxable funds must also be reported in the meantime.

Other Tax-Efficient Techniques

Q: What is a straightforward method, aside from a Section 351 exchange, to sell highly appreciated shares without incurring large taxes?
A: Donating shares directly to a qualified charity is one option that some General Dynamics employees may benefit from.

Q: What tax advantages come with donating valuable stock to a charity?
A: Subject to holding period and adjusted gross income (AGI) limits, you can bypass capital gains taxes on the appreciation and may receive an income tax deduction for the stock’s full fair market value.

Q: What is a Donor-Advised Fund (DAF)?
A: A DAF allows you to donate appreciated stock, receive an immediate tax deduction, and then recommend grants to charities over time, while the assets in the DAF grow without tax impact. ²

Q: Can I give a family member my appreciated stock as a gift?
A: Yes. In most cases, the cost basis from the donor carries over to the recipient.

Q: Why would I give a family member in a lower tax bracket appreciated stock?
A: If they sell the stock, the lower income could result in a reduced capital gains rate, potentially as low as 0% for long-term gains. ³

Tax Loss Harvesting and Other Approaches

Q: What is harvesting tax losses?
A: Selling investments at a loss to offset gains from other sales is known as tax loss harvesting, a strategy sometimes considered by General Dynamics employees seeking opportunities to leverage bouts of market volatility.

Q: Can I deduct a certain amount of loss from my regular income?
A: Yes. If your capital losses exceed your gains, you can use up to $3,000 per year ($1,500 if married filing separately) to offset ordinary income, with remaining losses carried forward indefinitely. ⁴

Q: What is a Qualified Opportunity Fund (QOF)?
A: A QOF provides investors with tax incentives for investing in tracts of land designated as 'opportunity zones'. Capital gains reinvested in a QOF within 180 days of being realized can be temporarily tax deferred, while QOF investments helpd for at least 10 years may confer a permanent capital gains exclusion. ⁵ That said, 2025 legislation changes may prompt IRS updates to this rule.

Inheritance and Step-Up in Basis

Q: What is meant by a “step-up in basis”?
A: This adjusts an inherited asset’s cost basis to its fair market value at the time of the owner’s death, eliminating capital gains accumulated during their lifetime. ⁶

Q: If I gift shares while living, will I receive a step-up in basis?
A: No. The original cost basis transfers to the recipient without adjustment.

Determining the Right Strategy

Q: What is the best course of action for me?
A: The most suitable approach will depend on factors such as your gain size, income level, charitable intentions, and liquidity needs.

Q: Do any of these strategies call for professional guidance?
A: Yes. Given the complexity of the tax code, working with a qualified financial advisor and tax professional is strongly recommended before implementing these strategies.

Q: Is it possible to combine these strategies?
A: Yes. For example, you might execute a Section 351 exchange on part of your portfolio for tax-deferred rebalancing while donating another portion to a DAF for an immediate deduction.

Q: Is there a loophole in the Section 351 exchange?
A: No. This is a legitimate tax code provision designed for corporate restructuring and adapted for use in the ETF market. It is intended for tax deferral, not permanent tax elimination.

Featured Video

Articles you may find interesting:

Sources:

1. Kitces. ' Using Section 351 Exchanges to Tax-Efficiently Reallocate Portfolios With Embedded Gains ,' by Ben Henry-Moreland and Brent Sullivan. 12 Mar. 2025.

2. Kiplinger. “ A Donor-Advised Fund Can Give Your Charitable Giving a Boost ,” by Samuel Gaeta. 9 May 2024.

3. Internal Revenue Service. “ Topic No. 409, Capital Gains and Losses .” IRS.gov , 8 July 2025.

4. Wealth Enhancement. ' 6 Essential Tax-Loss Harvesting Tips ,' by Jim Wiley. 6 April 2022.

5. Congressional Research Service. ' Tax Incentives for Opportunity Zones ,' by Donald Marples. 26 Apr. 2022.

6. Investopedia. “ Carryover Basis: What It Is, How It Works, Gift Taxes ,” by Julia Kagan. 16 Jan. 2023.

How does General Dynamics Corporation ensure that employees understand their eligibility for retirement benefits under the General Dynamics retirement plan? What resources are available to help employees navigate the complexities of the plan, and how does the company assist employees in applying for these benefits?

General Dynamics Corporation ensures that employees understand their eligibility for retirement benefits under the General Dynamics retirement plan by providing detailed plan documents and resources such as the General Dynamics Service Center. This center assists employees in navigating the complexities of the retirement plan and in applying for benefits. Employees can contact the service center for further guidance through the phone number and website provided in the retirement plan documentation(General_Dynamics_Corpor…).

In what ways does the structure of the retirement plan at General Dynamics Corporation accommodate long-term employees who may be considering early retirement? Can you detail the benefits available to these employees and the processes they must follow to access these benefits?

The General Dynamics retirement plan accommodates long-term employees considering early retirement by allowing retirement after age 55 with 10 years of continuous service. These employees may receive reduced benefits to account for the extended payment period. The plan provides multiple benefit options, such as immediate commencement or deferral of payments until age 65. Employees must contact the service center to initiate the retirement process(General_Dynamics_Corpor…).

How does General Dynamics Corporation define Continuous Service, and what impact does this definition have on an employee's eligibility for retirement benefits? Discuss the scenarios in which service may be interrupted and the implications of such interruptions on the retirement plan.

Continuous Service is defined as uninterrupted employment with General Dynamics or its subsidiaries. This is crucial in determining eligibility for retirement benefits. Breaks in service, such as leaves of absence or layoffs, can impact an employee's service. However, certain periods, such as military service, may not interrupt Continuous Service if specific conditions are met(General_Dynamics_Corpor…).

What are the financial implications for employees considering a transition from active employment to retirement at General Dynamics Corporation? Describe how the retirement plan initiatives are structured to provide financial security for retiring employees and any related considerations they should be aware of.

Financially, General Dynamics' retirement plan provides stability by incorporating a defined benefit structure that does not require employee contributions. The plan is designed to supplement other retirement income sources, such as Social Security and 401(k) plans. Employees should be mindful of the potential reduction of benefits if they opt for early retirement, as these reductions impact monthly payouts(General_Dynamics_Corpor…).

How does the General Dynamics Corporation retirement plan compare with standard industry practices in terms of benefit offerings and eligibility criteria? Analyze how General Dynamics maintains competitiveness while ensuring the financial sustainability of the retirement plan.

Compared to industry standards, the General Dynamics retirement plan offers competitive benefit structures, including a defined benefit formula based on final average pay. The company maintains competitiveness while ensuring the sustainability of the plan by covering all associated costs and monitoring government regulations to avoid excessive liabilities(General_Dynamics_Corpor…).

What are the specific provisions of the General Dynamics retirement plan regarding death benefits for employees who pass away before retirement? Explain how beneficiaries are determined and what processes beneficiaries should follow to claim these benefits.

In the event of an employee’s death before retirement, the General Dynamics plan provides death benefits to surviving spouses. The benefit is typically structured as a lifetime monthly annuity, and the spouse may defer payments until the employee would have been eligible for retirement. Beneficiaries should contact the service center to initiate the claim process(General_Dynamics_Corpor…).

How does General Dynamics Corporation handle the situation for employees who experience a total disability prior to retirement? Detail the implications of this scenario on benefit accrual and eligibility for retirement benefits once the employee recovers.

If an employee experiences a total disability prior to retirement, the plan may suspend benefit accruals. The employee may still be eligible for retirement benefits once they recover, depending on their service history and the nature of the disability. The impact on their accrued benefits depends on the duration of the disability(General_Dynamics_Corpor…).

In light of changes to IRS limits and regulations, how has General Dynamics Corporation adjusted its retirement plan offerings? Discuss the challenges and strategies the company employs to remain compliant while providing valuable retirement options to employees.

General Dynamics adjusts its retirement plan offerings in response to changes in IRS limits and regulations to remain compliant. The company uses strategies such as modifying contribution and benefit limits and providing employees with updated information on how these changes affect their retirement planning(General_Dynamics_Corpor…).

What role does the General Dynamics Service Center play in the overall administration of retirement benefits? Evaluate the center's capacity to address employee inquiries and its effectiveness in communicating essential information regarding the retirement plan.

The General Dynamics Service Center plays a pivotal role in administering retirement benefits, answering employee inquiries, and guiding them through the process of applying for and receiving benefits. The center's resources, including online tools, help employees make informed decisions about their retirement(General_Dynamics_Corpor…).

How can employees at General Dynamics Corporation contact the company to learn more about their retirement benefits? Provide the various channels available, including direct contacts and online resources, along with a brief overview of what employees can expect when seeking assistance.

Employees can contact General Dynamics to learn more about their retirement benefits through the General Dynamics Service Center at 1-888-GD-BENEFITS (1-888-432-3633) or by visiting www.gdbenefits.com. These resources provide employees with comprehensive support, from understanding eligibility to selecting benefit options(General_Dynamics_Corpor…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

General Dynamics provides RSUs and stock options to eligible employees.