When you sell an illiquid asset such as a business or real estate holding, you often must sell the entire asset at once — creating a large, immediate capital gain and a substantial tax bill in one year.
In contrast, a concentrated stock position can be sold gradually. However, many investors hesitate due to tax timing, emotional attachment, or a desire to maintain exposure to a familiar company or sector. In both cases, the challenge remains the same: how to manage or mitigate a significant capital gain while keeping your wealth strategically invested.
What if you could reinvest those proceeds into a market-based strategy that not only reduces current or future tax liability but also gives you greater control over when and how gains and losses are recognized?
That’s the purpose of a long-short investment strategy —a market-based tax mitigation solution that creates passive capital losses to offset gains from major liquidity events, while repositioning wealth into a diversified, liquid portfolio built for long-term control and flexibility.
Key Point: A long-short strategy helps investors manage large liquidity events through tax-efficient, market-based positioning without sacrificing investment flexibility.
Whether you’re selling your business, an investment property, or managing a highly appreciated stock position, you face a similar challenge: a large, one-time capital gain.
Because illiquid assets must be sold in full, the transaction often results in a massive, immediate tax event—even if reinvestment is planned. Stockholders face the same exposure, even when choosing not to sell for timing or emotional reasons.
Key Point: Large liquidity events often create unavoidable tax exposure—unless planned mitigation strategies are applied in advance.
A long-short investment strategy leverages publicly traded securities to create passive losses in a controlled, risk-managed way. It can be used:
By proactively building losses, investors can prepare for tax-efficient liquidity events rather than reacting afterward.
This structure keeps your core portfolio invested while the margined overlay generates the desired tax offset.
Key Point: Long-short portfolios use balanced exposure and margin efficiently to harvest losses without speculative market risk.
Many investors associate margin with high-risk trading, but in this context, margin functions more like a loan against an asset, similar to a mortgage or business credit line.
The purpose is not speculation but efficient capital access —allowing the creation of long and short positions that produce meaningful tax results. Because exposures are closely matched, market risk is minimal, and portfolio movements are tightly managed.
This approach is market-based but not market-dependent —designed to achieve tax-efficient outcomes through structured positioning rather than market outperformance.
Key Point: Margin here is a controlled financial instrument, not a speculative lever.
This strategy combines market liquidity, leverage, and tax-aware portfolio design to deliver flexibility and compliance.
Key Point: A long-short structure supports compliance, control, and adaptability while efficiently reducing taxable exposure.
Whether transitioning from a business, property, or stock position, this strategy enables investors to:
This approach helps re-embed wealth into the market with liquidity and flexibility—reducing the long-term drag of capital gains taxes.
Key Point: Transforming concentrated wealth into a liquid, diversified portfolio creates both tax efficiency and financial freedom.
Consider an investor realizing a $5 million gain from a business sale or concentrated stock position. Without mitigation, taxes could exceed $1 million.
By implementing a long-short investment strategy :
Key Point: Real-world implementation shows substantial tax savings while maintaining investment growth potential.
You’ve worked hard to build and grow your wealth—the sale of your business, property, or stock shouldn’t automatically lead to an outsized tax bill.
A long-short investment strategy offers a market-based, compliant, and risk-managed path to offset or prepare for capital gains.
In Summary:
Disclaimer: This blog is for informational purposes only and does not constitute financial or tax advice. Always consult a professional before making investment or tax decisions.
Horizon Wealth is a registered investment advisor. The information presented in this publication is the opinion of Horizon Wealth and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. Statements in this publication are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in this publication. Investing in alternative and private offerings involve risks, including the potential loss of principal. Always consult an investment advisor regarding your specific situation.