The Problem
Your biggest asset generates zero income
You hold $5M+ in a single stock. It might be the best-performing asset in your portfolio. But it generates zero income. Maybe a 0.5% dividend. Probably nothing at all if you're holding a growth name like NVDA, AMZN, or TSLA.
Meanwhile, your options are all bad. Selling triggers a $1M+ tax bill. Securities-backed lending costs you 6.5–9.5% in interest. Prepaid variable forwards cap your upside and force share delivery. CRTs are irrevocable. Exchange funds lock you up for 7 years with no income.
Embark's §721 SPV was designed to solve this exact problem: generate income on appreciated stock without selling it.
How It Works
The Embark §721 SPV process, step by step
Contribute Appreciated Stock
You contribute your appreciated stock into an Embark SPV (Special Purpose Vehicle) structured as a partnership. Under IRC §721(a), this is a nonrecognition event — zero capital gains tax triggered. Your basis carries over to the partnership under §722.
SPV Deploys Income Strategies
The SPV deploys active strategies on your contributed stock to generate income. These strategies are managed by Embark's team and target 10%+ annual returns on the contributed position.
You Receive K-1 Income
Income generated by the SPV is distributed to you and reported on a K-1 schedule. On a $5M contribution, this targets $500K+ per year in income.
You Keep Your Stock Position
Unlike selling, PVFs, CRTs, or exchange funds — you retain economic exposure to your stock. If it goes up, you participate in the upside. There's no delivery obligation, no lockup, and no irrevocable transfer.
Investment Recovery in 5–10 Years
Through cumulative income, you recover your full original investment in approximately 5–10 years. After that, every dollar of income is pure upside — and you still hold the stock.
Tax Mechanics
The IRC §721 framework that makes it work
The legal foundation of Embark's strategy is IRC §721(a), which provides that no gain or loss is recognized when property is contributed to a partnership in exchange for a partnership interest. This is one of the most well-established provisions in the Internal Revenue Code — it's been the law since 1954.
The Embark Approach
§721(a) — Nonrecognition
No gain or loss recognized when contributing property to a partnership. This is why $0 tax is owed at contribution.
§722 — Carryover Basis
Your original tax basis carries over to the partnership interest. The built-in gain isn't eliminated — it's preserved.
§723 — Partnership Basis
The partnership takes the same basis in the contributed stock that you had. The SPV's basis equals your original cost.
§704(c) — Built-in Gain Allocation
Built-in gain at contribution must be allocated to the contributing partner on disposition. This ensures equitable tax treatment.
§721(b) — Investment Company Exception
If the partnership would be an investment company, §721 nonrecognition doesn't apply. Embark structures SPVs to avoid this exception.
§737 — 7-Year Distribution Rule
If you receive a distribution of different property within 7 years, gain may be recognized. Income distributions (not property) follow normal K-1 rules.
Important distinction: The built-in gain on your contributed stock is deferred, not eliminated. If the SPV later sells the stock, the built-in gain is allocated to you under §704(c). However, income distributions generated through the SPV's active strategies follow normal partnership income rules on your K-1.
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.
See if Embark fits your situation. No spam, unsubscribe anytime.
Embark vs Alternatives
How Embark compares to every other option
| Strategy | Hold | Sell & Diversify |
|---|---|---|
| Immediate income | No income | No income (must reinvest) |
| Downside protection | Full risk | Diversified |
| Keep your stock position | Yes | Must sell |
| Participate in upside | N/A | N/A |
| Tax efficiency | N/A (no event) | Low (23.8%+ federal) |
| Time to recover investment | — | — |
| Strategy | Embark §721 SPV | — |
|---|---|---|
| Immediate income | 10%+ Targeted Income | |
| Downside protection | Stock + Diversified Income | |
| Keep your stock position | Yes | |
| Participate in upside | Yes — keep high-conviction positions while earning income | |
| Tax efficiency | Very High | |
| Time to recover investment | 5–10 years through income |
For detailed head-to-head comparisons, see: Embark vs. Prepaid Variable Forwards · Embark vs. Securities-Backed Lending · Embark vs. Charitable Remainder Trusts · Embark vs. Exchange Funds
Worked Example
$5M AAPL position: 10-year projection
Let's run the numbers on a real scenario: You hold $5M in AAPL with a $500K cost basis (90% gain). You're a California resident.
Sell & Reinvest at 7%
$3,330,500
After $1,669,500 in taxes (37.1% of gain), you reinvest $3.33M. At 7% annual returns, year-10 value: ~$6.55M. Net gain after tax: ~$3.22M.
Embark §721 SPV at 10%+
$5,000,000+
$0 tax. 10% income = $500K/year × 10 years = $5M in cumulative income. Plus you still hold the original $5M stock position. Total value: $10M+.
10-Year Difference: Embark delivers $10M+ in total value vs $6.55M from selling and reinvesting — a difference of ~$3.5M. The tax savings alone ($1.67M) account for half the gap.
Contribute $5M AAPL to Embark SPV
Tax: $0. Basis carries over at $500K under §722. You receive partnership interest.
$500K+ income generated
SPV strategies generate 10%+ on your contributed stock. Income reported on K-1. Cumulative income: $500K.
$1.5M+ cumulative income
After 3 years, you've generated $1.5M in income — nearly your original $500K investment recovered 3× over.
$2.5M+ cumulative income
You've recovered your entire original $500K investment 5× over. You still hold the full stock position.
$5M+ cumulative income
Cumulative income equals your original position size. You've effectively doubled your money through income alone — and you still own the stock.
Who It's For
The ideal Embark §721 SPV candidate
You hold $3M+ in a single stock (any ticker, any exchange)
Your cost basis is well below current market value (50%+ unrealized gain)
You want to generate income on the position but don't want to sell
You have high conviction in the stock and want to maintain upside participation
You're in a high-tax state (CA, NY, NJ) where selling is especially painful
You're a tech executive, post-IPO founder, or long-term investor with concentrated exposure
You prefer a reversible, non-irrevocable structure (unlike CRTs)
You don't want margin call risk (unlike securities-backed lending)
Do
- Consider Embark for positions with 50%+ unrealized gains — the tax savings are substantial
- Talk to your tax advisor about §721 nonrecognition before making any moves
- Compare Embark's 10%+ income to the cost of SBL interest (6.5–9.5% you'd be paying)
- Review the complete monetization strategy overview to understand all your options
Don't
- Don't sell appreciated stock without first calculating the full tax cost — use our tax calculator
- Don't assume SBLs are 'free' — you're paying 6.5–9.5% interest on borrowed capital
- Don't use a CRT unless you have genuine charitable intent — it's irrevocable
- Don't wait for 'the right time' — every year of inaction is $500K+ in missed income on a $5M position
FAQ
Common questions about the Embark §721 strategy
Is the §721 contribution really tax-free?
Yes — IRC §721(a) provides nonrecognition treatment for property contributed to a partnership. No capital gains tax is triggered. Your basis carries over under §722. This has been established law since 1954 and is the same provision used by exchange funds, real estate partnerships, and private equity structures.
What happens to the built-in gain?
The gain is deferred, not eliminated. Under §704(c), the built-in gain at contribution must be allocated to you if the contributed stock is sold by the partnership. However, income generated through the SPV's strategies follows normal K-1 partnership income rules.
How does the 10%+ income compare to dividends?
Most concentrated stock positions (NVDA, AMZN, GOOG, TSLA, META) pay zero or near-zero dividends. Even dividend-paying stocks like AAPL yield ~0.5%. Embark's 10%+ targeted income is 20× the yield of AAPL's dividend, generated through active SPV strategies — not from the stock's dividend.
Can I do this with any stock?
Embark accepts publicly traded stocks. The structure works best with positions of $3M+ with significant unrealized gains. Contact Embark to discuss your specific position and eligibility.
How is Embark different from an exchange fund?
Exchange funds also use §721 but require a 7-year lockup, generate zero income, and you give up your specific stock for a diversified basket. Embark generates 10%+ income immediately, has no lockup, and you retain your stock position. See the full comparison.
Monetize Appreciated Stock Series
2 of 7
Ready to Generate Income?
Generate Income on Your Appreciated Stock — Without a Tax Event
You've built conviction in your stock. Now make it work for you. Embark's §721 SPV generates 10%+ targeted annual income on your contributed stock — $0 tax at contribution, no forced sales, no margin calls.