Jabil Employees: Handling Single-Stock Concentration with a Section 351 Strategy

Healthcare Provider Update: Healthcare Provider for Jabil Jabil employs a diverse range of healthcare providers to support its workforce, focusing on comprehensive health plans that address various medical needs. These providers often include a mix of major national insurance carriers such as UnitedHealthcare, Aetna, and Cigna, which offer extensive networks and accessible care options for employees. Potential Healthcare Cost Increases for Jabil in 2026 As healthcare costs are projected to surge in 2026, Jabil will likely be affected by the anticipated sharp increases in Affordable Care Act (ACA) premiums and medical expenses. With reports indicating that some states may encounter premium hikes exceeding 60%, plus the potential loss of federal subsidies, employees could see out-of-pocket premiums rise significantly-potentially by 75% or more. Coupled with ongoing inflation in medical costs and increasing demand for care, Jabil must strategize to mitigate these financial impacts on employee healthcare benefits in the coming year. Click here to learn more

'Jabil employees with concentrated stock positions should understand that strategies like a Section 351 exchange can offer flexibility in managing large unrealized gains while preserving long-term planning options.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.

'Jabil employees facing concentrated stock exposure may find that a Section 351 exchange provides an effective way to mitigate risk and maintain control over the timing of potential tax liabilities.' – Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. When a Section 351 exchange can help diversify concentrated stock positions without an immediate tax bill.

2. The core eligibility rules (80% control test) and basis/step-up mechanics that drive tax deferral.

3. Sample case studies (James & Sarah) illustrating the numbers and outcomes.

The Strategic Potential of Section 351: An Analysis of a Multi-Stock Case in Tax-Deferred Reorganization

A sizable amount of the wealth of many high-earning professionals at Jabil may be invested in a small number of highly valued equities, including company shares accumulated through restricted stock units (RSUs), the employee stock purchase plan (ESPP), or equity awards earned due to long tenure. While rebalancing may seem out of reach due to the tax ramifications of selling these positions, investors can make tax-deferred contributions of appreciated assets to a new business entity through a Section 351 exchange. When an investor wants to manage several sizable, embedded gains at once, this tactic may be especially useful.

Think about James, a client with a $10 million portfolio. The value of one stock investment, which he purchased for $50,000, has increased to $1 million, or 10% of his total portfolio. At a long-term capital gains rate that can reach 23.8% for certain high-income taxpayers (20% maximum long-term capital gains rate plus the 3.8% Net Investment Income Tax), selling this position would result in a $950,000 capital gain and an estimated $226,100 tax bill. The amount available for reinvestment would be reduced by this tax.

Section 351(a) of the Internal Revenue Code provides: “If property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation, no gain or loss shall be recognized.” Under Section 368(c), “control” generally means ownership of at least 80% of the voting power and 80% of each class of non-voting shares.

The transferor or transferors must own at least 80% of the new corporation’s stock right after the exchange to qualify for this treatment. This can be done for investors with sizable portfolios by joining a larger seeding group or acting as the principal seeder of a new entity.

In a Section 351 transaction, any built-in gains are preserved because the shareholder’s basis in the received stock typically carries over from the contributed property. If the shares are held until death, a step-up in basis under Section 1014 may eliminate the deferred gain.

Another client example involves Sarah, who has a $13 million portfolio. She owns two appreciated stocks:

• Stock A: Originally $300,000, now worth $3 million.

• Stock B: Initial cost basis $500,000, now worth $3 million.

At a long-term capital gains rate that can reach 23.8% for certain high-income taxpayers, the aggregate unrealized gain of $5.2 million would translate into an estimated tax of roughly $1,237,600 if sold today, which can constrain portfolio adjustments.

For employees of Jabil holding concentrated positions, taking part in a Section 351 exchange can reduce concentration risk and defer recognition of these gains without an immediate tax bill. If assets receive a step-up in basis at death, the deferred gain may be fully eliminated under current law, and deferral can provide flexibility in managing future tax obligations.

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Sources:

1.  Internal Revenue Service.  Revenue Ruling 2003-51 . Internal Revenue Bulletin 2003-21, 2003. PDF.

2.  Friedel, David B., and Yaw O. Awuah. “ Sec. 351 Control Requirement: Opportunities and Pitfalls .”  The Tax Adviser , 1 July 2014. Web.

3.  Internal Revenue Service. “ Net Investment Income Tax (NIIT) .”  IRS.gov , last reviewed 1 July 2025. Web.

4.  Internal Revenue Service.  Publication 551: Basis of Assets . December 2024 revision, posted 18 February 2025. PDF.

5.  FINRA Investor Education Foundation (FINRA). “ Concentrate on Concentration Risk .”  FINRA.org , 15 June 2022. Web.