The Monet Blog · Investing

Borrow, sell, or give: three ways out of a concentrated position

A large low-basis holding creates one question with three answers. Each changes your tax bill, your risk, and your flexibility in a different direction.

By Sankha NagChoudhurySeptember 12, 20267 min read

One stock, one property, or one business becomes most of the balance sheet, and every path out has a cost. The tax bill is only one of them — concentration risk, liquidity, and flexibility all move at the same time. This is educational, not a recommendation about any security or asset.

Selling: pay the tax, remove the risk

The simplest answer is often the right one. A concentrated position can fall further than the tax you were trying to avoid, and timing gives you more control than most people use.

Choose the year deliberately — a low-income year, a sabbatical, or a year with harvested losses available.
Sell in tranches rather than all at once if the decision is emotionally hard.
Loss carryovers from prior years can absorb a meaningful part of a gain.

Borrowing: keep the asset, add a new risk

Borrowing against a position creates liquidity without a sale. It also creates a margin obligation that does not care why the asset fell.

Interest cost and rate changes make this a financing decision, not a tax trick.
A forced sale during a decline is the exact outcome the strategy was meant to avoid.
Size the loan against a severe decline scenario, not the current price.

Restructuring: diversify or defer

Several structures exist between selling and holding. Each one trades liquidity or control for diversification or deferral.

Exchange funds pool concentrated holdings for diversified exposure, with multi-year lock-ups.
Qualified Opportunity Zone funds can defer a gain in return for a long holding period and real project risk.
A charitable remainder trust can convert an appreciated asset into an income stream with a charitable remainder.

Deciding well

Write down what the money is for before choosing a path. A position you are holding out of habit is a different problem from one you are holding for a reason.

Ask what happens to your plan if this asset drops 50% and stays there.
Compare after-tax outcomes across a realistic range, not just the best case.
Bring a CPA and, where a trust or structure is involved, an attorney into the decision before you commit.

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Tap a question to open Monet with it ready to edit. Educational guidance only — not tax, legal or investment advice.

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