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I hold ETFs in a regular brokerage fund that is not tax shielded. I have about 20,000$ in VT, 6,500$ of that is profit. I wanted to swap VT with VEU. Are there any financial instruments that I could use to swap one security with another in my portfolio? I don't want to sell VT and buy VEU.

Are there options or swaps or anything like that I could use to do this VT -> VEU conversion?

Are there any exchanges where I can barter shares of one company for shares of another company?

Edit: I live in the United States, this question is for US tax laws.

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    @rhavelka, that's not remotely close to reality. Trading is taxable.
    – quid
    Apr 14 at 18:08
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    @Aditya Your question about how an ETF sells an underlying asset A without capital gains tax is excellent, and the answer is extremely complicated and clever. Let's say an ETF wishes to sell some of its holdings in asset A to an investment bank. (1) The investment bank buys a basket of shares of all the underlying assets in the ETF. (2) It gives the basket to the ETF, in exchange for shares of the ETF. (3) A couple days later, it redeems the shares of the ETF, in exchange for only shares of asset A. Note that all three steps are tax free.
    – user106227
    Apr 14 at 18:39
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    See bloomberg.com/opinion/articles/2019-03-29/… (scroll down to the section titled "Heartbeat"; there's a paragraph about the "advanced" explanation). The ETF can only accept redemptions of at least zillions of dollars, so you won't be able to pull off the same trick that the investment bank can.
    – user106227
    Apr 14 at 18:42
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    @quid But I think that's what rhavelka is saying, that the mechanisms to defer taxes (swaps, etc.) that the OP mentions are not available to smaller, retail investors, not that the rich can make the same trades without tax consequence. Eventually the tax man comes for everyone.
    – D Stanley
    Apr 14 at 18:57
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    It's not a mythical exchange - it's an actual financial instrument. Look up "equity swap" - If I own 1 million shares of MSFT and want to "exchange" it for TLSA I can do an equity swap, which "effectively" gives me cash flows equivalent to owning TLSA instead of MSFT. And with no immediate tax consequences. I'm refuting your comment that "that's not remotely close to reality" by saying that there are ways to "swap" without tax consequences, but they're not available to retail investors. But I agree that this isn't going anywhere :)
    – D Stanley
    Apr 14 at 19:39
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You can't "exchange" one asset for another similar asset, if the asset you hold is a stock.

If you instead wanted to do this for investment real property (not a residence) or a business, you'd possibly be able to pull off a 1031 exchange (a "like-kind" exchange). Even this is very complicated (I don't have experience with it).

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If your goal is to avoid short-term capital gains tax you could

  • buy a put + sell a call on VT (same strike/maturity, i.e. a synthetic forward) and
  • buy a call (+ sell a put or put spread, if your option agreement/risk tolerance allows) on VEU

with maturity dates far enough in the future that you'll have held your VT position for over a year.

The main risk is that you might get assigned early on the short call on VT and that the premium of the shorts might not cover the cost of the longs.

If you decide to sell puts, you'll also need to maintain sufficient margin on those.


With VT @ 101.41/sh and VEU @ 62.60/sh you'll need to sell two contracts on VT and buy three contracts on VEU (if you have some extra cash, you can buy the missing 19 shares outright)

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