Concentrated Equity Exit & Tax-Overlay Reality Check · IRC §§ 1259, 1091, 1092 & 7701(o)

Concentrated Stock vs. Tax-Aware Long-Short (TALS) Analyzer

Evaluating a 130/30, 150/50, 200/100, or 300/200 Tax-Aware Long-Short SMA to exit a low-basis stock position? Model the exact carrying-cost drag (Manager Fee + Custodian Margin & Short Rebate Spreads), 2026 Schwab & Fidelity restrictions, and compare against Direct Indexing or Staged Diversification into CleverAlpha CAPM-BL ETFs.

Visual Explainer · The Kitces TALS Reality Check

Why TALS Carrying Costs (60–400+ bps/yr) Often Erode the Upfront Tax Deferral

CONCENTRATED STOCK $2,000,000 Basis: $100,000 · Gain: $1,900,000 Upfront Tax if Sold: $628,900 LEVERAGED TALS (200/100) 200 bps/yr Carrying Drag ($40k/yr) Defers cap gains, but bleeds fees & locks basis at $0 STAGED SALE -> CLEVERALPHA ETF 25 bps Advisory · 0 Margin Spread Pays tax cleanly, resets basis high & compounds unlevered YEAR 10 OUTCOME $3,180,000 Compare Pre- vs. Post-Liquidation
Calculating...
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1Position & TALS Terms
Click any i to inspect the Kitces / IRC formula.
130/30 = +30% Long / 30% Short. 200/100 = +100% Long / 100% Short (Schwab max cap).
Per unit of extension (~100 bps std)
Margin spread + short rebate spread
Pre-tax alpha on extension (-200 to +200)
Years to stage direct sale (1–10)
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All-In TALS Carrying-Cost Hurdle vs. Capital Gains Tax

200/100 Extension
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10-Year Net Wealth Comparison (4 Exit Strategies)

Exit Strategy Cum. Tax Paid Cum. Fees & Margin Drag End Cost Basis Pre-Liquidation Value After-Liquidation Net
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2026 Custodian Eligibility (Schwab / Fidelity) & IRS Statutory Radar

4

Year-by-Year Wealth & Carrying-Cost Erosion Schedule

Year CleverAlpha Staged Net Direct Indexing Net TALS Cum. Losses TALS Cum. Drag Paid Selected TALS Net
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Your Concentrated Position Action Playbook