When moving investments is — and isn't — taxable Under US tax law, a transfer of securities is taxable only when it constitutes a 'sale or exchange' — a disposition of property for cash or other consideration that triggers gain or loss recognition. Moving the same shares from one account to another, without selling them, is not a taxable event. The IRS doesn't care where your shares sit; it cares whether you sold them. However, several common transfer scenarios do trigger taxes — often unexpectedly. Liquidating positions because they can't transfer in-kind creates a taxable sale. Transferring between retirement and taxable accounts can create distributions. Selling at a loss and repurchasing within 30 days triggers wash sale disallowances. And contributing to certain investment partnerships can be taxable under §721(b) if the partnership qualifies as an 'investment company.' Taxable vs Non-Taxable The complete matrix Cost Basis Transfer Rules How your tax history follows your shares When securities transfer in-kind between brokerage accounts, the cost basis must transfer with them. Under the Emergency Economic Stabilization Act of 2008, brokerages are required to report and transfer cost basis data for 'covered securities' — stocks acquired after January 1, 2011, mutual funds after January 1, 2012, and bonds/options after January 1, 2014. This transfer happens electronically via the Cost Basis Reporting System (CBRS). For 'noncovered' securities acquired before these dates, the delivering brokerage is not required to transfer basis data. The receiving brokerage will show these positions with unknown or zero cost basis. You are responsible for maintaining and reporting the correct basis on your tax return. Keep your original purchase confirmations and statements. Tax Trap: If cost basis fails to transfer and the receiving brokerage defaults to $0 basis, any future sale will show your entire proceeds as capital gain. This is the most common and most expensive tax mistake in account transfers. Verify your basis data within 30 days of transfer completion. When contributing stock to a partnership under §721(a), the basis rules change slightly: your basis in the partnership interest equals your basis in the contributed stock (§722). The partnership takes a carryover basis in the stock (§723). The economic effect is the same — your original cost basis is preserved — but it's reported differently: through the K-1 partnership return rather than a brokerage 1099-B. Where Embark fits Moving assets carefully avoids tax. It doesn't create income. Once the position is where you want it, see what it could actually earn you. Moving the position into Embark is a move, not a disposition — and it starts paying you income No gain recognised, no basis reset, no holding-period break And unlike a plain move, the position starts earning Run the numbers Live prices · takes under a minute · no obligation Wash Sale Risks The 61-day window that applies across all accounts Under IRC §1091, if you sell a security at a loss and acquire a 'substantially identical' security within 30 days before or after the sale, the loss is disallowed — added to the basis of the replacement security. The wash sale rule applies across all your accounts, including IRAs, joint accounts, and accounts at different brokerages. An in-kind transfer does not trigger a wash sale because no sale occurs. But here's the trap: if you sell a stock at a loss at Broker A, then buy it back at Broker B during a transfer period, the wash sale rule applies — even though the transactions occurred at different firms. The IRS aggregates your activity across all accounts. Transfer shares in-kind via ACATS or DTC — no sale, no wash sale risk Contribute appreciated stock to §721(a) partnership — no sale occurs Sell a position and wait 31+ days before repurchasing Sell at a gain — wash sales only apply to losses Wash Sale Triggers

Sell at a loss at one broker and buy the same stock within 30 days at another Sell at a loss in a taxable account and buy in an IRA within 30 days Buy a 'substantially identical' ETF (same index, different issuer — debatable but risky) Lot Selection Strategy FIFO vs specific lot identification When you transfer securities and later sell, the lot identification method determines which shares are deemed sold first — and therefore how much tax you owe. The IRS default is FIFO (First In, First Out), which sells your oldest (often most appreciated) shares first. Specific lot identification lets you choose exactly which shares to sell, optimizing your tax outcome. Lot identification is particularly critical for concentrated stock holders with multiple acquisition dates. RSU shares vesting quarterly over four years create many distinct lots, each with a different cost basis (the fair market value at each vesting date). Choosing the right lots to sell — or contribute — can mean tens of thousands of dollars in tax savings. When contributing to a §721(a) partnership, you can specify which lots to contribute. Contributing your lowest-basis lots to the SPV (where they won't be sold) while retaining higher-basis lots in your personal account (where you have more flexibility to sell with less tax impact) is a common strategy discussed in partnership tax planning. Concentrated Stock Tax Math Why in-kind contribution saves the most $3M Position — $400K Cost Basis (GOOGL) Sell to Diversify Federal + state capital gains tax $2.6M long-term gain at 20% federal ($520K) + 3.8% NIIT ($98.8K) + CA 13.3% ($345.8K) = ~$964.6K, less SALT considerations. Net available to reinvest: ~$2.51M. In-Kind §721(a) Contribution Tax at contribution Shares contributed to Embark SPV(a). No sale, no gain recognition. Full $3M position preserved. Carryover basis of $400K under §723. Income generated at partnership level. The Tax Delta: The difference between selling and contributing in-kind grows with the size of the unrealized gain. For a $3M position with $400K basis, the §721(a) path preserves nearly $500K that would otherwise go to federal and state taxes — capital that remains invested and generating income. Frequently Asked Questions Does transferring stocks between brokerages trigger capital gains tax? No, as long as the transfer is in-kind — meaning the actual shares move, not cash from selling them. An ACATS transfer or DTC delivery between accounts you own is not a taxable event. The IRS does not consider moving shares from one brokerage to another as a sale or exchange. However, if the delivering brokerage must liquidate certain positions (like proprietary mutual funds) because they cannot transfer, those forced sales are taxable and will generate a 1099-B. Always check which assets will transfer in-kind before initiating. What happens if my cost basis doesn't transfer correctly? If cost basis data fails to transfer — or transfers incorrectly — the receiving brokerage may default to $0 or 'unknown' basis. This means any future sale will calculate capital gains based on the full sale price as profit, dramatically overstating your tax liability. For covered securities (stocks acquired after January 1, 2011), the delivering broker is required to send basis data via the CBRS system. If it doesn't arrive within 15 business days, contact both brokerages. For noncovered securities, you must provide the basis data yourself using purchase confirmations or historical statements. Is contributing stock to a partnership always tax-free? Not always. While §721(a) provides nonrecognition for contributions to a partnership, §721(b) creates an exception: if the partnership would be treated as an 'investment company' — essentially a diversified pool of securities contributed by multiple investors (a 'swap fund') — the nonrecognition rule does not apply. Embark's SPV structures are designed to satisfy the §721(b) test. Additionally, if you receive anything other than a partnership interest in exchange for your contribution (cash, a note, relief from liabilities), the transaction may be partially taxable as a disguised sale under §707. Do I get two sets of tax forms in the year I transfer? Yes. Both the delivering and receiving brokerages will issue tax forms for the year the transfer occurs. The delivering brokerage issues 1099-DIV and 1099-INT for any dividends and interest received while the account was active there, plus 1099-B for any sales (including forced liquidations). The receiving brokerage issues 1099 forms for activity occurring after the transfer settles. You must report both sets on your tax return. An in-kind transfer itself does not generate a 1099-B — only actual sales do. ACATS, DTC & In-Kind Transfers Series How to Transfer Stocks Without Selling How to Transfer Brokerage Accounts (ACATS) Zero Tax at Contribution Move Concentrated Stock Without Capital Gains Embark's SPV structure accepts in-kind contributions of appreciated stock — no sale, no gain recognition. The IRS treats it as a nonrecognition event under IRC §721(a). Run the calculator to see how this applies to your position.