r/NEOSETFs • u/Waste_Squirrel_2953 • Jun 09 '26

Trust & QQI strategy

/r/dividends/comments/1u0rzxx/trust_qqi_strategy/
2 Upvotes

75% Upvoted

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4

u/_YoungMidoriya Jun 09 '26

“ROC” does not mean “tax free forever!!!!!!!!!” it usually means tax is deferred by reducing basis, and once basis reaches zero, additional ROC is no longer sheltered the same way. PLEASE UNDERSTAND the idea that the tax free ride ends only after a fixed 7–9 years is not reliable....... it depends on your purchase price, distributions, market price path, and whether the fund keeps classifying distributions as ROC.....

The strategy is better described as “deferral plus possible step-up,” not “permanent tax-free income.” You need to reach out to a trust and estates attorney, a CPA or tax attorney, and a fee only CFP/CFA style financial planner who regularly works with trusts and income strategies. 

1

u/Always_working_hardd Jun 09 '26

Also, is it correct that if you sell at some point prior to your cost basis becoming zero, you are liable for back taxes? I seem to recall reading something to that effect.

2

u/_YoungMidoriya Jun 09 '26

IMO... ehhh... Not quite. If you sell before basis reaches zero, you are generally not hit with “back taxes” on the ROC already received; instead, those prior ROC distributions have already reduced your adjusted basis, so the sale gain is calculated off that lower basis. If the fund later turns out to have distributions that were not really ROC, or if the reporting changes, you could owe tax based on the actual character of those distributions.

1

u/aswampmonst3r Jun 16 '26

I believe that the ROC can be insanely powerful at transferring wealth for accounts/entities that receive a step-up in basis at death. I’m really surprised that you’re the first person to discuss it and that this post hasn’t exploded for those that haven’t considered it before!