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Tri Pointe Homes Employees: Handling Single-Stock Concentration with a Section 351 Strategy

Healthcare Provider Update: Healthcare Provider for Tri Pointe Homes Tri Pointe Homes employees typically have access to a variety of healthcare options, with the Retirement Group, a division of Wealth Enhancement, recognized as a key partner in providing guidance for health care planning and retirement strategies. Potential Healthcare Cost Increases for 2026 Anticipated healthcare costs for employees of Tri Pointe Homes are expected to rise significantly in 2026 due to upcoming changes in the Affordable Care Act (ACA). Without renewed federal premium subsidies, average out-of-pocket expenses may soar by over 75%, impacting nearly all marketplace enrollees. This surge, driven by heightened medical costs and substantial insurer rate hikes averaging up to 66% in certain states, could strain the budgets of many, particularly those on fixed incomes or nearing retirement. Employees are encouraged to proactively reassess their healthcare strategies to navigate these looming financial challenges effectively. Click here to learn more

'Tri Pointe Homes 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.

'Tri Pointe Homes 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:

When a Section 351 exchange can help diversify concentrated stock positions without an immediate tax bill.
The core eligibility rules (80% control test) and basis/step-up mechanics that drive tax deferral.
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 Tri Pointe Homes 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 Tri Pointe Homes 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.