Abusive §351 is dead, long live routine §351

Treasury's new ruling taxes ETF seeding transactions used as tax-free conduits to dump ill-fitting stock, but leaves routine seeding intact.

• Two documents, different roles: Notice 2026-62 requests industry comments (due October 28) on "subject transactions" like box-spread ETFs and dividend rotation, while Revenue Ruling 2026-20 actively taxes abusive cases now.
• Substance over form, not mechanics: The ruling concedes 351's 80% control and 25/50 diversification tests are easily satisfied, so IRS instead attacks the whole sequence as a pre-arranged "plan" using an ETF as a "conduit."

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