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Treasury Sec. Bessent, IRS crack down on ETF strategy the wealthy are using to avoid capital gains taxes

Treasury Secretary Bessent and the IRS are cracking down on an ETF investment strategy used by wealthy investors to avoid capital gains taxes. On September 28, 2026, the agencies issued Revenue Ruling 2026-20 and Notice 2026-62 to target these arrangements. The IRS specifically flagged 351 conversion transactions as potentially abusive. This action targets not only the investors but also the financial, tax, and investment advisors who facilitate these strategies to shield income from taxation.

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  • ✓ Treasury Secretary Bessent and the IRS are cracking down on an ETF strategy used by wealthy investors to avoid capital gains taxes.
  • ✓ The Treasury and IRS issued Revenue Ruling 2026-20 and Notice 2026-62 on September 28, 2026.
  • ✓ The IRS is targeting 351 conversion transactions as possibly abusive.
  • ✓ The crackdown targets wealthy investors and their financial, tax, and investment advisors.
🛡️ Source Corroboration: 8 independent reporting domains (100% confidence) ⏱ Read time: ~2 min

What changed

The Treasury and IRS issued Revenue Ruling 2026-20 and Notice 2026-62 on September 28, 2026.

Live updates

  1. Treasury and IRS Target Wealthy Investors Using ETF Tax Strategies

    Treasury Secretary Bessent and the IRS are cracking down on an ETF investment strategy used by wealthy investors to avoid capital gains taxes. On September 28, 2026, the agencies issued Revenue Ruling 2026-20 and Notice 2026-62 to target these arrangements. The IRS specifically flagged 351 conversion transactions as potentially abusive. This action targets not only the investors but also the financial, tax, and investment advisors who facilitate these strategies to shield income from taxation.

    Why it matters

    These strategies functioned as tax black holes for capital gains. The Treasury is now closing these loopholes to ensure wealthy investors cannot bypass standard income tax obligations through specific ETF structures.

    What is confirmed

    • Treasury Secretary Bessent and the IRS are cracking down on an ETF strategy used by wealthy investors to avoid capital gains taxes.
    • The Treasury and IRS issued Revenue Ruling 2026-20 and Notice 2026-62 on September 28, 2026.
    • The IRS is targeting 351 conversion transactions as possibly abusive.
    • The crackdown targets wealthy investors and their financial, tax, and investment advisors.

    What to watch next

    • Legal challenges from investment firms regarding the validity of Revenue Ruling 2026-20
    • IRS enforcement actions or penalties issued against specific 351 conversion transactions
    Sources used for this update (8)
    1. WSJ — Treasury Takes Aim at Tax-Avoiding Investment Strategies
    2. Current Federal Tax Developments — Tax Treatment of ETF Security Transfers: An Analysis of Revenue Ruling 2026-20 and Notice 2026-62
    3. www.cnbc.com — Treasury, IRS crack down on ETF ploy wealthy use to avoid ...
    4. CNBC — Treasury Sec. Bessent, IRS crack down on ETF strategy the wealthy are using to avoid capital gains taxes
    5. GuruFocus — IRS Targets Wealthy Investors Using ETFs to Avoid Capital Gains Tax
    6. Bloomberg.com — ‘Black Holes’ for Capital-Gains Tax Come Under Treasury Fire
    7. www.newsbreak.com — Treasury Sec. Bessent, IRS crack down on ETF strategy the ...
    8. www.mayerbrown.com — IRS Targets “351 Conversion Transactions” and Flags Various ...
    confidence 100%
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