Brad Dillon

Head of Tax & Estate Strategy @ a16z Perennial, a wealth management division of Andreessen Horowitz
Creating structural alpha for founders and entrepreneurs.

[Brad Dillon @itsbraddillon]

1. Let's have some fun and do a plain english thread on long-short tax loss harvesting (LS-TLH). Btw, I love the chart below.

[Brad Dillon @itsbraddillon]

@TaxAlphaInsider Gotta cross Fidelity off the list, unless you've been grandfathered in

[Brad Dillon @itsbraddillon]

@TaxAlphaInsider Hoping Treasury doesn't see this! haha

[Brad Dillon @itsbraddillon]

The 25/50 tests get you into 351 non-recognition, but Treasury’s July comments were aimed at the next step of using in-kind redemptions to rotate the contributed low-basis names into the target book. That’s the sequence they said the redemption mechanism was not designed for, so investment purpose and ordinary-course trading still have to stand on their own.

[Brad Dillon @itsbraddillon]

@Invested_In_You Just remember that the loss harvesting window shrinks fast once the book is seasoned, but this is a great thread for the "just buy the ETF" crowd. :)

[Brad Dillon @itsbraddillon]

@roseajohnson Super excited about this!

[Rose Johnson @roseajohnson]

BREAKING NEWS: SF and LA Tech Week calendars are LIVE!

You can now register for events: https://t.co/IElfyON9rg

2,300+ event submissions across San Francisco and Los Angeles

📍SF: October 5-11
📍LA: October 12-18

People always ask about the data, so a few stats:
-SF once again takes the crown for “biggest tech week ever” with 1,500+ events
-1 in 7 SF events is about agentic AI: 213 events in SF and 53 in LA are explicitly about agents (in the title or description). In 2024 there were only about a dozen!
-There are 124 hackathons across the two weeks, and the variety is huge: everything from hardware to defense, media/creative, fintech, civic/social good, etc. Everyone is a builder now.
- LA, the OG Tech Week (now in its fifth year!), has seriously doubled down on deep tech with 100+ events and lots of El Segundo activity.

Last year, Tech Week saw attendees from over 100 countries. It’s going to be a party.

See you there! 🥳

[Brad Dillon @itsbraddillon]

Check out the recent episode of the In Plain English podcast where they did a lot of reporting on this. Seems the biggest issue was the NDAs signed without community support. Water was a very small issue comparatively - more the secretive nature behind their buildout, according to the reporting.

[Brad Dillon @itsbraddillon]

Check out this podcast I did:

QSBS for Startup Founders and "Structural Alpha" on QSBS Solved.

https://t.co/1CRqmDETTp

[Brad Dillon @itsbraddillon]

@TaxAlphaInsider Wow, this is gold. Thanks!

[Brad Dillon @itsbraddillon]

This is a reminder that PPLI can be awesome but is not for everyone, and especially not for folks who think they're going to need to take $ from it within a few years. Gotta park it for a loooong time before that happens. Oh, and it takes a lot of cash!

https://t.co/wIBNcwgBW2

[Brad Dillon @itsbraddillon]

@genzzztrade You can also put some of your riskier assets inside your DAF to move the risk into your charitable bucket.

[Brad Dillon @itsbraddillon]

I don’t think they’ll kill 351 contributions to ETFs altogether. But I do think concentrated stock conversions are in their sights, even without the extra shenanigans. A lot may come down to how quickly the ETF dumps the contributed stock and whether that was clearly the plan from the start. We'll see...maybe. :)

[Brad Dillon @itsbraddillon]

@MrNQDC If you can untangle the shorts, you could give the zero basis shares to charity for a nice deduction. Alternatively, you could role it into another deferral strategy, like QOZs, get another 5 years of deferral (then get more losses from another LS program to offset those gains).

[Brad Dillon @itsbraddillon]

1. Let's have some fun and do a plain english thread on long-short tax loss harvesting (LS-TLH). Btw, I love the chart below.

[Brad Dillon @itsbraddillon]

7. There are real risks, the main one being leverage (borrowing).

Leverage is the engine of the strategy. More leverage means more stock positions can be created, which means more chances to create losses, faster.

Say you put in $100 and the manager borrows $30 and buys more stocks. If those extra stocks drop 20%, that's a $6 hit on money that borrowed funds that you're still responsible for.

More leverage = more losses = more risk.

Finally, more leverage takes longer to unwind and can create gains you're trying to avoid in the first place. So buyer beware here.

[Brad Dillon @itsbraddillon]

6. How do you actually use it?
Suppose you've got $10M low basis stock you don't want to dump in one year. If the shares can be used as collateral, a manger lawyers the long-short sleeve on top of the position.
As losses show up, you sell slices of the concentrated name and pair those gains against the harvested losses.

[Brad Dillon @itsbraddillon]

5. A typical LS-TLH program is called 130/30. Here's an example:
$100 in the account.
Borrow $30 to buy more stocks (now $130 long).
Short $30 of other stocks.
Net market exposure still ~$100.
Gross exposure ~$160.
Same economic bet on “the market,” but more tax lots.

[Brad Dillon @itsbraddillon]

4. To account for this, you add "shorts."
Long = you own it. Profit if it rises.
Short = borrow and sell it. If it rises, covering the short creates a capital loss.
Long-short TLH runs both.
Market up → shorts can produce losses.
Market down → longs can produce losses.
No matter whether the market goes up or down, you've got losses!

[Brad Dillon @itsbraddillon]

3. The strategy is an edit of basic TLH.

Sometimes a stock you own goes down. You can sell it, lock in that loss, and use the loss to reduce taxes on gains somewhere else. Then you buy a similar stock so you stay invested. Not the exact same one (the IRS blocks that quick flip). In any year, some will be down even if the market is up. Those are the ones you sell for the tax loss. It works for a while. Each time you sell a loser and buy the replacement, the new stock is cheaper. It has to fall again before you get another loss. Over time, there are fewer easy losses left.

[Brad Dillon @itsbraddillon]

2. The job of the strategy is to stay roughly fully invested in the market while manufacturing capital losses you can use against gains from concentrated stock, a business sale, or other sales. It's a deferral strategy, not an elimination strategy.