When someone is facing a large capital gain, I often hear it framed as two choices: sell now and take the hit, or hold the asset, carry the risk, and hope for a more efficient exit down the road. But it’s not a binary choice. Between those two poles sits a real set of strategies, some routine and some genuinely advanced, that can offset, defer, or reshape the tax on a sale. The more useful question is this: what if you could sell a highly appreciated asset, mitigate the tax, and put far more of that capital back to work than you thought possible?
I compiled a list of eight strategies that seem to be most relevant, ordered loosely by how often they become impactful. Consider it a map of what exists. It's educational, not a recommendation: each strategy carries its own thresholds, costs, and tradeoffs, and whether any of them fits depends entirely on your circumstances and on coordination with your CPA and estate attorney.
The basics are simply standard practice: harvesting losses as they appear, choosing which specific lots you sell, timing sales into lower-income years, and being charitable. They remain the foundation, and what follows goes beyond them.
This one leads the list because, in most situations, it's the most impactful tool here. The losses it harvests can offset much of the gain on almost any sale you make, not just a stock holding: real estate, a business interest, a private equity stake, a concentrated position. That broad applicability is what makes it so widely useful.
Here's how it works. A long/short separately managed account is designed to produce usable capital losses whether the market rises or falls, while keeping you invested. The offsets are there when you need them, regardless of which way the market has gone. This matters because ordinary harvesting only helps when a position is actually down, and a healthy, long-held portfolio eventually runs out of losers. The winners keep winning, and there's nothing left to harvest exactly when a large gain arrives.
It also asks more in return: added complexity in deferring the gain, account minimums, and lead time. The earlier it's in place, the more losses it can accumulate ahead of the gain you're planning to realize.
This one sits at number two for a different reason: it's the most ubiquitous strategy here, applied across every portfolio we manage rather than reserved for a specific situation. It's about where you hold your investments rather than what you own. The idea is to place your least tax-efficient holdings in tax-sheltered accounts (IRAs, 401(k)s, Roths) and keep the most tax-efficient ones in your taxable account. Done consistently, it reduces the ongoing tax drag on the whole portfolio, and over time the size of the gains you'll eventually have to manage. It's less a one-time move than an ongoing discipline, revisited as rates and holdings change. If you already have a portfolio with our office, this is built into how we manage your accounts (link HERE).
As a general matter, industry research from Vanguard (link HERE p. 19) suggests asset location can add up to 60 basis points (0.6%) of after-tax return annually.
Rather than selling a concentrated, appreciated stock and triggering the gain, you contribute it into a professionally managed pool and receive a diversified partnership interest in return. There's no taxable sale at contribution, and your original basis carries forward. In effect, you step out of a concentrated, higher-risk position and into a diversified, lower-risk portfolio, without the sale that would normally trigger the tax.
The tradeoffs are real and worth weighing up front: these funds typically require a multi-year commitment (often around seven years) to preserve the tax treatment, they're required to hold a portion in illiquid assets to qualify under the rules, and they're generally available only to accredited investors or qualified purchasers. The diversification is genuine, but it comes with a lockup.
A newer approach with a similar goal and a different structure. You contribute a diversified basket of appreciated securities into a newly created ETF in a non-taxable transfer, and receive ETF shares in return. It's a clean way to diversify out of an appreciated, lopsided portfolio without an immediate tax bill.
There's a guardrail worth knowing: the basket you contribute has to be diversified enough to qualify, meaning no single position can make up too large a share of what you put in. The irony is that the very concentrated holder this appeals to most often can't use it on a single position alone, and has to blend that position with other holdings to get through the door. That's solvable, but it's a planning step, not a one-click move.
This one targets state income tax specifically, so it's relevant only if you have income sourced to a high-tax state. By contributing appreciated assets to an incomplete-gift, non-grantor (ING) trust established in a no-tax jurisdiction, income can be taxed at the trust level, often 37% federally but 0% at the state level. The assets stay in your estate (preserving the eventual step-up), and distributions back to you aren't subject to gift tax.
The ideal candidate lives in a high-tax state, doesn't want to move, isn't reliant on the income, holds highly appreciated assets, and, importantly, lives in a state whose rules permit the structure. (Some high-tax states have moved to tax these trusts anyway, so the state-specific analysis matters.)
A Qualified Opportunity Fund invests in real estate and operating businesses located in designated Opportunity Zones, economically distressed areas the program is meant to direct capital toward. By reinvesting a capital gain (the gain itself, not the full proceeds) into a QOF within 180 days, you can defer that gain and put only the gain to work while pocketing your basis. Hold the investment long enough (10+ years) and the appreciation on it can escape capital gains tax entirely, though the original deferred gain still has to be recognized on its own schedule.
Timing matters here. Under the original program, deferred gains are generally recognized no later than December 31, 2026. Recent legislation made the program permanent for investments going forward, but on modified terms. Because the rules differ depending on when you invest, and are still settling, treat the specifics as of the year you transact and confirm them with your tax advisor.
The simplest "strategy" of all is never realizing the gain: hold an appreciated asset until death, and heirs generally receive a stepped-up basis that resets the embedded gain for income-tax purposes. The sophistication lies in how you live off the asset in the meantime, and in capturing that step-up as fully as possible.
A few approaches come up here. "Buy, Borrow, Die" uses borrowing against the asset for liquidity while it keeps compounding, with the step-up arriving at death. And for married couples, how an asset is titled, along with your state's property rules, can determine whether you capture a full step-up or only half, which is a detail that's easy to miss. These are largely estate planning objectives and attorney-led. The point here is simply knowing they exist so you can raise them in the right room.
For the charitably inclined, a CRT lets you contribute an appreciated asset to an irrevocable trust that pays income to you (or other beneficiaries) for life or a set term of up to 20 years, with the remainder passing to charity at the end. You receive a charitable deduction at funding based on the present value of the remainder, the assets can be sold and reinvested inside the trust without an immediate gain, and you've effectively diversified an appreciated position into an income stream.
Worth knowing: the income you receive isn't tax-free. The payments carry out the trust's income and gains to you over time, so you've spread the tax out rather than made it disappear. For high-income owners of appreciated assets who are already inclined to give, that combination of a deduction, deferral, and diversification is a strong one.
That's the real question, and the honest answer is that it depends on what you're trying to accomplish. Some of these reduce the tax now, some defer it while solving a diversification problem, and some avoid realizing the gain at all in exchange for patience and planning. The right move, often a combination, comes down to the asset, the size of the gain, your timeline, and how the rest of your plan is arranged. If you have a sale or liquidity event on the horizon, that's the conversation worth having early.
But there's a second group this is really for: people who've been holding an appreciated asset (a property, a business stake, a concentrated position) mainly because they don't want to trigger the capital gain that selling would create. If that's you, it's worth knowing that the gain may be more manageable than you think. With the right strategy in place, an asset you'd written off as "unsellable because of the tax" can become one you're free to sell, diversify, or redeploy on your own terms.
That's often the more valuable realization, and it's exactly the kind of thing worth mapping out before you make a move.
This is where our planning process earns its keep. We map out the tax mechanics of each strategy, then loop in your CPA and estate planning attorney so the final call reflects your full picture, not just the capital gains piece. The strategy is only as good as the coordination behind it.