Do you have a large portion of your portfolio in one appreciated stock? If so, you should diversify your holdings, to reduce the risk of loss, but selling those shares will trigger a large tax bill. Possible strategies include:
Take losses. If you hold other stocks, in addition to your concentrated position, take losses on those issues whenever possible. After you take a capital loss, sell enough of your concentrated position to take an equivalent gain. No net tax obligation will result. And the proceeds from both sales (the loss and the gain) can be reinvested to increase overall diversification.
Borrow against your concentrated position. Use the proceeds to buy an assortment of stocks, then take losses on those that decline. Again, the losses can offset gains you take as you whittle down your concentrated position. Suppose you hold $200,000 worth of appreciated XYZ stock. You might borrow $100,000, secured by your XYZ stock, and reinvest in 10 different stocks. Borrowing the money won’t trigger a tax bill and the interest payments may be deductible.
Of those 10 stocks, some will probably gain while others lose. You can take capital losses, as opportunities appear, and take offsetting gains on the concentrated position, as above.
