1. Private Investment Fund Considerations

• Confirm whether you will receive shares or cash upon IPO
  • Share distributions are generally not taxable at distribution.
  • Share distributions are preferred, given the control they provide over the
    timing of gain recognition.
• QSBS Eligibility (Qualified Small Business Stock)
  • Potential federal gain exclusion of up to $10 million or 10 times basis.
  • State conformity varies. For example, California does not conform to the
    federal QSBS exclusion.
• Holding Period Planning (IRC §1045)
  • If the five-year QSBS holding requirement has not yet been met:
    • Share distributions may allow the holding period to continue at the
      investor level through “tacking.”
  • If the fund sells early:
    • Gains may be rolled into a replacement QSBS investment within 60 days.

2. Trust & Estate Structuring

• Pre-IPO Transfers
  • Gift shares or fund interests into a trust established in a no-income-tax
    state, such as Nevada, for the benefit of others or to accumulate income
    within the trust.
  • Potential benefit of a lower pre-IPO valuation, resulting in a reduced gift
    tax impact.
  • Future gains may be eligible for more favorable state income tax treatment
    when properly structured.
• Post-IPO Transfers
  • Although transfers occur at full market value, limiting gift tax efficiency,
    they may still be effective in shifting future growth and preserving potential
    state tax benefits.
• Advanced Structures Based on Planning Goals
  • GRATs — Grantor Retained Annuity Trusts
  • SLATs — Spousal Lifetime Access Trusts
  • IDGTs — Intentionally Defective Grantor Trusts
  • CRTs — Charitable Remainder Trusts
• Additional Consideration
  • Evaluate Generation-Skipping Transfer planning for multigenerational wealth
    transfer, including Dynasty Trusts.

3. Charitable Strategies for Concentrated Positions

• Donate Appreciated Pre-IPO or Post-IPO Shares
  • Avoid capital gains tax on the donated portion.
  • Secure a charitable deduction.
• Donor-Advised Funds (DAFs)
  • Contribute long-term appreciated stock.
  • Receive an immediate deduction at fair market value, generally up to 30% of
    adjusted gross income, with a five-year carryforward.
  • No capital gains tax on the sale of contributed assets within the DAF.
  • Flexible for gifting before or after the applicable lock-up period.
• Private Foundations
  • Provide control over investments and board composition.
  • May donate to organizations outside the United States, subject to applicable
    rules, unlike many DAF arrangements.
  • Subject to a 1.39% excise tax on net investment income.
• Charitable Remainder Trusts (CRTs)
  • Transfer shares into a tax-exempt trust.
  • The CRT sells the shares without immediate capital gains taxation.
  • Provides a lifetime or term-based income stream back to the donor or other
    designated beneficiaries.
  • The remaining assets pass to charity at the end of the trust term.
  • May provide a partial upfront charitable deduction and income-tax deferral.
  • Flip CRUTs may be particularly effective for illiquid pre-IPO shares.
• Timing Insight
  • Acting before an IPO or early after an IPO may:
    • Move more future appreciation outside the taxable estate.
    • Improve charitable deduction efficiency.

4. Advanced Tax Strategy & Portfolio Coordination

• Tax-Loss Harvesting
  • Offset gains arising from IPO-related liquidity events.
  • May be executed across public portfolios and certain alternative investments.
• Direct Indexing and Long/Short Extensions
  • Strategies such as 130/30 or 150/50 may maintain market exposure while
    generating meaningful short-term capital losses.
  • These strategies may be particularly useful during lock-up periods when
    shares cannot be sold.
• Options-Based Hedging Strategies
  • Use puts, calls, or other options-based strategies to manage downside risk,
    generate income, and enhance flexibility around concentrated positions.
  • Balance protection, upside participation, liquidity, and tax considerations
    within the overall portfolio strategy.
• Exchange Funds
  • Contribute shares to a pooled vehicle with shares from other investors.
  • Potentially diversify a concentrated equity position without immediate
    capital gains recognition when properly structured and executed.
• Qualified Opportunity Zone Planning
  • Potentially defer eligible capital gains through reinvestment into a
    Qualified Opportunity Fund.
• Staged Sales Strategy
  • Sell shares across multiple tax years after the lock-up period.
  • Manage taxable income and tax brackets annually.

5. Employee Equity & Stock Option Planning

• Early Exercise Considerations
  • Exercising Incentive Stock Options before an IPO may:
    • Start the long-term holding-period clock.
    • Reduce future tax exposure in certain circumstances.
• Alternative Minimum Tax Modeling
  • Model potential tax outcomes for:
    • ISOs — Incentive Stock Options
    • NSOs — Non-Qualified Stock Options
    • RSUs — Restricted Stock Units
• Review Prior Exercises
  • Evaluate current positioning ahead of an IPO and identify any potential
    planning adjustments.

6. State Residency Considerations

• California and New York
  • Both states are highly aggressive in conducting residency audits.
  • Residency planning must be implemented carefully and well in advance.
  • This may be particularly relevant when holding stock directly, as liquidity
    events may sometimes be coordinated with a properly executed residency change.