Treasury targets ETF tax loopholes with new IRS ruling
The US Treasury and IRS issued a new ruling on September 28, 2026, targeting the '351 conversion' strategy used by wealthy investors to avoid capital gains taxes via exchange-traded funds (ETFs). The move marks the first concrete enforcement step after earlier warnings in July. Treasury Secretary Scott Bessent stated that such tactics are 'designed to dodge taxes.' The ruling recharacterizes these transactions as taxable exchanges, potentially impacting the 'tax alpha' industry, which has seen significant growth. Shares of Affiliated Managers Group, which owns AQR, a pioneer in these strategies, fell 2% on the news.