Case A: Tech VP
Tech VP — $8M NVDA, California resident, low basis
Profile
VP of Engineering at a major tech company, age 52. Accumulated $8M in NVIDIA (NVDA) stock through RSU grants and ESPP purchases over 12 years. Cost basis: $800K. California resident.
Concentration
NVDA = 72% of $11.1M total liquid net worth. Remaining 28% split between 401(k), cash, and a rental property.
Risk
Single-sector, single-stock exposure with semiconductor cyclicality. Career income also tied to the tech sector. Human capital and financial capital fully correlated.
Goal
Generate retirement income within 8 years. Reduce concentration without a $2.7M tax bill.
The Tax Problem
If Sarah sells the full $8M NVDA position outright:
• Federal LTCG: $7.2M gain × 20% = $1,440,000
• NIIT: $7.2M × 3.8% = $273,600
• California state tax: $7.2M × 13.3% = $957,600
• Total tax: $2,671,200 (33.4% effective rate on the gain)
• Net after tax: $5,328,800
That's $2.67M in taxes — enough to fund 10+ years of retirement spending. The tax friction is the reason Sarah has been paralyzed.
The Strategy: §721 SPV + Systematic Sell-Down
Sarah applies the 10-30-60 framework:
10% Immediate ($800K): Contribute $800K of NVDA to an Embark §721 SPV. No capital gains triggered. The SPV generates targeted 10%+ annual income on contributed assets. Year 1 income: ~$80K. This income funds living expenses and reduces reliance on salary.
30% Over 12 Months ($2.4M): Sell $600K per quarter over the next 4 quarters. Use direct indexing on the proceeds to generate tax losses that offset ~30% of the realized gains. Net effective tax rate drops from 33.4% to approximately 23%. Net tax on $2.4M sale: ~$398K (vs. $802K without loss harvesting).
60% Retain with Protection ($4.8M): Implement a cashless collar on $2.4M (downside protected at -15%, upside capped at +20%). Contribute the remaining $2.4M to the §721 SPV over the following 18 months as the collar rolls off.
Case A Outcome: Tax Savings Over 3 Years
Sell $8M NVDA Outright
$2,671,200
Total taxes in Year 1
All $7.2M gain recognized in a single year. Full federal (20%), NIIT (3.8%), and California (13.3%) rates apply. No loss harvesting offsets. The concentrated tax hit also pushes Sarah into the highest bracket for ordinary income that year.
§721 SPV + Phased Sell-Down + Direct Indexing
~$398,000
Taxes paid over 3 years (on the $2.4M sold)
Only $2.4M sold (30% tranche) — gains offset by direct indexing losses. $3.2M contributed to §721 SPV — tax deferred, generating ~$320K annual income. $2.4M collared — downside protected, gains deferred. Estimated total 3-year tax: ~$398K vs. $2.67M for outright sale. Annual income from SPV: ~$320K.
Case B: Founder
Post-IPO founder — $15M in company stock, lockup expiring
Profile
Co-founder and CTO, age 41. Company IPO'd 8 months ago at $45/share, currently trading at $62/share. Holds 3.2M shares (cost basis: $0.10/share from founder grants). 180-day lockup expires in 2 weeks.
Concentration
$15M in company stock = 94% of liquid net worth. Remaining 6% is cash ($980K). Total compensation still 85% equity.
Constraints
Section 16 insider (10% owner). Requires pre-clearance for all trades. Blackout windows around earnings (4× per year, ~6 weeks each). Board obligations for 2 more years.
Goal
Diversify $10M+ over 24 months while maintaining board confidence and avoiding signal risk.
The Strategy: 10b5-1 Plan + GRAT + Direct Indexing
Phase 1 — 10b5-1 Plan (30-day cooling-off period): After lockup expiration, Marcus adopts a Rule 10b5-1 plan with a 30-day cooling-off period (required for Section 16 insiders since the 2023 SEC amendments). The plan schedules sales of 200,000 shares per quarter for 4 quarters — approximately $12.4M per year at current prices, but spread across quarters to minimize market impact and signal risk.
Phase 2 — Zeroed-Out GRAT ($5M): Marcus contributes $5M of shares to a 2-year zeroed-out GRAT. If the stock appreciates above the §7520 hurdle rate (~5.4%), the excess passes to his children's trust tax-free. With a volatile post-IPO stock, the GRAT has high probability of transferring significant wealth. At 30% appreciation, approximately $1.23M transfers tax-free.
Phase 3 — Proceeds to Direct Indexing: All 10b5-1 sale proceeds are invested in a direct indexing strategy that actively harvests tax losses to offset future gains. Year 1 harvesting typically generates losses equal to 3–5% of the invested amount.
| Strategy Component | Amount | Tax Impact |
|---|---|---|
| 10b5-1 quarterly sales (Year 1) | $12.4M (200K shares × 4 quarters) | $4.1M capital gains tax (offset ~$400K by direct indexing losses in Year 2) |
| Zeroed-out GRAT (2-year term) | $5M contributed | $0 gift tax; ~$1.23M transferred to heirs tax-free (at 30% appreciation) |
| Direct indexing (Year 1 proceeds) | $8.3M invested after tax | ~$332K tax losses harvested in Year 1 (4% of invested) |
| Remaining shares retained | $2.6M (held for Year 2 10b5-1 plan) | Tax deferred until sold |
The Embark Strategy
Generate Income on Your Appreciated Stock — Without a Tax Event
Engineers at Google, Meta & Apple use Embark’s IRS §721 strategy to generate 10%+ targeted income on concentrated positions — keep your stock, participate in upside, with no taxable event.
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Case C: Inheritance
Inherited $3M AAPL with stepped-up basis — very different math
Profile
Retired teacher, age 67. Inherited $3M of Apple (AAPL) stock from her late husband 6 months ago. Cost basis stepped up to $3M at date of death under IRC §1014.
Concentration
AAPL = 60% of $5M total portfolio. Remainder: $1.2M in IRA, $800K in bond ladder. Needs $120K/year income.
Key Advantage
Stepped-up basis = $3M. Current value = $3M. There is zero embedded capital gain. She can sell without any capital gains tax.
Goal
Generate reliable income, reduce concentration, preserve capital for 25+ year retirement.
Why This Case Is Different
Unlike every other case study in this article, Patricia has no tax friction. The step-up in basis under IRC §1014 eliminated the entire capital gain that accumulated during her husband's lifetime. She can sell $3M of AAPL tomorrow and owe $0 in capital gains tax (assuming the stock hasn't appreciated significantly since the inheritance date).
The Strategy: Partial Sale + §721 SPV for Income
Sell $1.5M of AAPL (tax-free): Sell half the position at the stepped-up basis. Zero capital gains tax. Invest proceeds in a diversified bond/equity portfolio generating 4–5% income ($60K–$75K/year).
Contribute $1.5M to §721 SPV: Contribute the remaining $1.5M of AAPL to an Embark §721 SPV. The contribution is tax-free (no gain to defer anyway, but §721 preserves the stepped-up basis inside the partnership). The SPV targets 10%+ income: ~$150K/year. Combined with the diversified portfolio income, Patricia exceeds her $120K income target.
Total income: ~$210K–$225K/year ($60K–$75K from diversified portfolio + $150K from §721 SPV) — well above the $120K target, providing a buffer for inflation and unexpected expenses.
Smart Moves with Inherited Stock
- Sell and diversify immediately when you have a stepped-up basis (zero tax friction)
- Document the fair market value at date of death for basis records
- Use a §721 SPV or income strategy on the portion you want to keep in equities
- Consider a bond ladder for the income floor (predictable, capital-preserving)
Common Inherited Stock Mistakes
- Holding out of emotional attachment when the basis advantage allows tax-free diversification
- Forgetting to update beneficiary designations on the inherited accounts
- Ignoring the fact that new gains from the inheritance date forward ARE taxable
- Treating inherited stock the same as stock with a low original basis
Case D: RSU Exec
Mid-career executive — $2M RSU cliff vesting, high income
Profile
Senior Director at a large-cap tech company, age 38. $2M in company stock from RSU vesting over 5 years. Cost basis = fair market value at each vest date (RSUs are taxed as ordinary income at vest). Effective basis: ~$1.4M.
Concentration
Company stock = 45% of $4.4M liquid portfolio. Also has $1.5M in 401(k) (diversified) and $500K in savings. W-2 income: $450K/year.
Ongoing RSU Grants
Receives ~$300K in new RSUs annually. The concentration problem is recurring — each year adds more company stock. By year 10, could be 60%+ concentrated without active management.
Goal
Prevent concentration from growing. Generate tax alpha. Diversify without triggering large capital gains in an already-high-income year.
The Tax Problem
David's situation is nuanced. His RSU cost basis ($1.4M) is relatively high because RSUs are taxed at ordinary income rates when they vest — meaning the basis equals the fair market value at vest. His embedded gain on the $2M position is 'only' $600K. At federal LTCG (20%) + NIIT (3.8%) + NY state (10.9%): $600K × 34.7% = ~$208K in taxes.
$208K is meaningful but manageable. The real problem is compounding concentration: $300K in new RSUs per year, plus any stock price appreciation, means the position grows faster than he can diversify.
The Strategy: Sell-at-Vest + Collar + §721 SPV
Sell-at-Vest Policy (Going Forward): Sell 100% of new RSU grants within 30 days of vesting. At vest, cost basis = market price, so gain is near-zero. Tax on sale: minimal (short-term capital gains on any appreciation during the 30-day window). This stops the concentration from growing.
Collar on Existing $2M: Implement a zero-cost collar on $1M of the existing position — buy a put at -10% (downside protection) funded by selling a call at +15% (capped upside). Cost: $0 (the call premium funds the put). This protects half the position while David decides on the long-term plan.
§721 SPV Contribution ($1M): Contribute the other $1M to an Embark §721 SPV. Defer the ~$300K embedded gain. Generate ~$100K/year in income. Revisit annually as new RSUs vest and the collar rolls off.
"For executives receiving ongoing RSU grants, the most important strategy isn't diversifying the existing position — it's implementing a sell-at-vest policy that prevents the concentration from compounding. Stop the bleeding first, then treat the wound."
FAQ
Case Study Questions — Answered
Are these case studies based on real clients?
These case studies are composites based on common scenarios Embark encounters. Names, specific stock positions, and exact dollar amounts are illustrative. However, the strategies, tax math, and implementation details are accurate and reflect how these situations are typically approached. Individual results depend on specific facts and circumstances.
How do I know which case study matches my situation?
Focus on the structural similarities, not the exact numbers. Case A (low basis, high gain, approaching retirement) is most common for long-tenured tech employees. Case B (founder/insider) applies to anyone with Section 16 obligations, blackout windows, or lockup expirations. Case C (inherited stock) applies whenever you received stock via inheritance with a stepped-up basis. Case D (recurring RSUs, high W-2 income) applies to mid-career employees at large-cap tech companies. See our concentration risk assessment to quantify your exposure.
Can these strategies be combined?
Absolutely — and they usually are. A typical Embark client might contribute a portion to a §721 SPV (income + tax deferral), sell a portion using direct indexing to harvest offsetting losses, collar a portion for downside protection, and fund a GRAT with another portion for estate planning. The pillar article compares all strategies side by side.
What's the minimum position size for a §721 SPV?
Embark's §721 SPV strategies are designed for concentrated positions of $500K and above. The economics of the partnership structure, legal setup, and ongoing management are most favorable at $1M+. For positions under $500K, direct indexing or systematic selling with tax-loss harvesting may be more cost-effective.
How long does implementation take?
§721 SPV contribution: 4–6 weeks from initial consultation to asset transfer. 10b5-1 plan adoption: 30-day cooling-off period (90 days for Section 16 insiders) after plan adoption before first trade. Collar implementation: same-day execution once approved by the trading desk. GRAT establishment: 2–4 weeks for trust drafting + IRS filing. Direct indexing account setup: 1–2 weeks. Most clients have their full strategy operational within 60–90 days.
Do I need to implement everything at once?
No. The 10-30-60 timing framework explicitly recommends phased implementation. Start with the 10% no-regret tranche (often a §721 SPV contribution or tax-free sale of stepped-up inherited stock), then build out the systematic plan over 12 months. The goal is progress, not perfection.
See Yourself Here?
Your Numbers. Your Strategy. Your Plan.
These case studies represent real scenarios Embark's team encounters regularly. If your situation resembles any of these profiles, the next step is a personalized analysis — same framework, your specific numbers.