Watch Out the IRS is Looking At Aggressive Financial Products

Today the IRS issued:

Rev. Rul. 2026-20, which provides that certain contributions of appreciated securities by investors to an ETF as part of a plan involving a distribution of some or all of those securities by the ETF pursuant to a redemption shortly thereafter are properly characterized as taxable exchanges under § 1001 by the contributing investors with the authorized participant rather than a contribution to the ETF that qualifies as a tax-free § 351 transaction .

IRS Notice 2026-62 (Guidance and Other Actions Being Considered Regarding Certain Potentially Abusive Investment Fund Strategies Involving Financial Products) which requests comments on transactions that they noted such as variations of partnership exchange funds,  tax aware strategies , straddles, etc