--- title: "EA Series Trust files an ETF that expects to start with contributed securities" url: "https://etf.net/news/etf-to-start-with-contributed-securities-2026-11-04" published_at: "2026-11-04T13:01:56.033Z" updated_at: "2026-11-04T13:01:56.033Z" byline: "ETF.net Research" --- # EA Series Trust files an ETF that expects to start with contributed securities The prospectus says a Sept. 28 IRS notice calls one version of contributing securities to a new ETF potentially abusive, and that later guidance could apply retroactively. By ETF.net Research. Published Nov 4, 2026. On Tuesday, Nov. 3, EA Series Trust [filed](https://www.sec.gov/Archives/edgar/data/1592900/000159290026004984/privateadvisory485a.htm) a prospectus with the Securities and Exchange Commission for the High Conviction Series I ETF, a fund that has not started operating. It expects to acquire substantially all of its assets at launch by taking in securities rather than cash. The ticker, the exchange and the management fee are still blank. The filing proposes to become effective 75 days after Nov. 3. That date is Jan. 17, 2027, and it is not a day the shares can be bought. The prospectus says they would be offered as soon as practical after the effective date, and it sets no trading day. "At its launch, the Fund expects to acquire substantially all of its assets through one or more in-kind contributions of securities that are intended to qualify as tax-deferred transactions under Section 351 of the Internal Revenue Code of 1986, as amended (the "Code")." In-kind means the securities themselves, not cash. Section 351 can let a person contribute property without paying tax on the gain at the time, if the conditions are met. The gain is postponed, not eliminated. The fund would take the contributor's tax basis, which may be far below the market price. If the fund sells those securities, the prospectus says the capital gains are taxable to every shareholder. That includes someone who buys later on an exchange and never contributed anything. To qualify, the contributors as a group must own at least 80% of the shares immediately after the contributions, and each contributor's securities must be diversified enough. The fund says it cannot fully verify those facts. It will rely on the contributors' representations. The prospectus does not name the contributors or the amount. Private Advisory Group, of Redmond, Washington, would choose the stocks as sub-adviser. Douglas Bean, the firm's chief investment officer and a partner, is named portfolio manager. Empowered Funds, which does business as EA Advisers, would be the adviser. The fund would seek long-term capital appreciation from approximately 40 to 60 positions, chiefly common stocks of U.S. companies, American depositary receipts and other exchange-traded funds. The prospectus says the process may lead toward themes such as artificial intelligence, robotics and automation, but that the fund is not limited to a theme, sector or style. It is not managed relative to an index. ## What the IRS said on Sept. 28 On Sept. 28, the Internal Revenue Service issued Revenue Ruling 2026-20. The same day, the IRS and the U.S. Department of the Treasury issued Notice 2026-62. The prospectus says only a limited number of institutional investors, called authorized participants and typically broker-dealers, may buy shares from the fund or sell them back, and only in large blocks. Those blocks are generally exchanged for securities rather than cash. Everyone else buys and sells on an exchange, and does not deal with the fund. In the prospectus's account, the ruling describes a specific plan. An investor transfers a diversified portfolio of appreciated securities to a new ETF. As part of that plan, the fund issues shares to an authorized participant and, shortly afterward, redeems them by distributing some or all of the contributed securities. When those steps are done, that ETF holds a materially different portfolio. The prospectus says the IRS treats the investor as having made a taxable exchange with the participant. The prospectus says the ruling does not define "shortly thereafter" or "materially different," and that the IRS may apply that reasoning to different facts. It says no ruling has been or will be sought on this fund's contributions. The prospectus says the notice describes that transaction and variations of it as "potentially abusive," and that future guidance could apply retroactively. The prospectus also says the notice does not address a contribution of securities that fit a new ETF's investment approach and are intended to stay, absent a substantial change in circumstances. It says Private Advisory has represented that the securities expected to be contributed are consistent with this fund's principal investment strategies, and that it expects the fund to keep them absent such a change. The prospectus says the notice does not define that phrase, and that the IRS may disagree. There can be no assurance, the prospectus says, that the IRS will not challenge the tax-deferred treatment, that a court would sustain it, or that future guidance will not apply to the contributions. ## If the fund sells the contributed securities The prospectus says that, to reduce the risk a contribution is recharacterized, meaning treated as taxable, the fund may refrain from distributing contributed securities to authorized participants when they redeem. The fund may sell those securities for cash when it otherwise would have handed them over. The prospectus says a cash sale may cause the fund to realize and distribute more capital gains than it otherwise would, and may reduce the tax efficiency generally associated with an ETF. It says the fund may also hold the contributed securities longer than it otherwise would, which may hurt performance. The prospectus says that if the fund sells, that low tax basis can become a capital gain taxable to every shareholder then, including a person who bought on the exchange and put nothing in. Source: etf.net, https://etf.net/news/etf-to-start-with-contributed-securities-2026-11-04. Please cite the page URL.