Investing After the Exit: Why TALS May Be the Right Strategy After Your Business Sale

Many founders arrive at a liquidity event with a relatively young taxable portfolio. For years, cash went back into the business. The personal investment account was secondary. Then the sale closes, the number is real, and the tax bill is no longer theoretical — it's a line item with a deadline.

Tax-loss harvesting is one of the tools used to reduce that bill. It works by selling investments that have lost value to offset gains elsewhere in the portfolio. It works well, but it has a shelf life. Over time, as investments grow in value, it becomes harder to find losses to harvest. The strategy that once saved you money quietly stops working as well, right when you might need it most.

TALS is designed to solve that problem. But it's not for everyone.

TALS stands for Tax-Aware Long/Short. It combines regular investing — buying stocks you expect to go up — with short selling, which means borrowing stocks you expect to go down, selling them, and buying them back later at a lower price. Every time a short position is closed at a loss, that loss can be used to offset gains elsewhere. This creates a fresh, ongoing source of tax savings that a regular investment portfolio simply can't produce.  

One thing to understand upfront: the mechanics behind TALS are borrowed from hedge funds. It is more complex than a standard investment account, and its success depends heavily on doing it well.

Good investing still comes first

Some firms sell TALS purely as a tax savings tool. We think that misses the point. Tax savings enhance your returns, they don't replace them. A strategy that saves you money on taxes but produces weak investment returns is just a tax-efficient way to fall behind. The strategies that build the most wealth over time do both: they generate strong investment returns and harvest losses along the way.

When TALS genuinely helps

There are three situations where TALS can make a real difference.

When regular tax-loss harvesting has run out of road. If your portfolio has been growing for years, most of your positions are probably sitting on gains. There's nothing left to harvest. TALS keeps generating tax savings regardless, because the short side of the portfolio creates new opportunities constantly.

When you're facing a large, one-time tax bill. This is where most founders find themselves. The closing date is set. The number is known. The question is no longer whether you're harvesting losses — it's whether you can generate enough losses to meaningfully offset a specific, large gain in a specific tax year. TALS can do that. A regular portfolio usually can't.

When you're stuck in a stock you can't easily sell. If you own a lot of one stock that has grown significantly in value, you face two problems at once: too much risk in one place, and a big tax bill if you sell. TALS can reduce the risk while also generating losses to offset the eventual sale. It's one of the few tools that tackles both problems at the same time.

The real costs and risks

TALS is powerful, but it comes with tradeoffs that deserve honest treatment.

It's bumpier than a regular portfolio. Because of the leverage involved, this strategy can swing more than a conventional account, even when the market is doing the same thing. You need to be prepared for that and willing to stay the course.

It costs more to run. Borrowing stocks to short them isn't free. Those costs add up over time and eat into the tax savings. The math only works if the tax benefit is large enough to cover them.

Getting out isn't easy. When you eventually wind down a TALS strategy, there are tax costs involved in doing so. Three years is generally considered the minimum time horizon, and longer is better. For founders accustomed to illiquid, long-term commitments, that's familiar territory — but it's worth stating clearly for anyone expecting flexibility.

Picking the wrong manager is hard to undo. With a regular investment account, switching managers is inconvenient but manageable. With TALS it isn't, not without significant tax friction. Getting the right manager from the start matters more here than in almost any other strategy.

Is TALS right for you?

If you've recently sold a business, or are within a few years of doing so, most of the boxes probably check themselves. But the full picture looks like this.

It likely makes sense if you have a mature taxable portfolio where tax-loss harvesting has mostly run its course, you're in a high tax bracket, and you have a specific tax problem on the horizon: a business sale, significant equity compensation, or a large concentrated position.

It probably doesn't make sense if your investments are in retirement accounts, you have a shorter time horizon, your account is under $1 million, or your current strategy is still working well.

The key word is specific. TALS solves a defined problem with a real dollar amount attached to it. It is not a general upgrade for every taxable account.

How we think about it

We ask one question before recommending TALS to any client: has traditional tax-loss harvesting largely run its course, and is there a specific, meaningful tax need on the horizon?

If both answers are yes, TALS may add real value. If either answer is no, a simpler approach is usually the better fit.

Most founders spend decades building something worth protecting. TALS, when the fit is right, is one of the most effective tools we have for doing exactly that — keeping more of what you built, not just managing what you have.

At Balentine, we bring our deep knowledge of investments and tax planning to help business owners optimize their tax strategies. If you’re interested in discussing your personal situation further, please don’t hesitate to reach out — clients can contact their relationship manager and all others are welcome to submit a “contact us” form, linked in the footer.  

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The opinions expressed are those of Balentine LLC (“Balentine”). The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. This content is not intended as an offer to sell, or a solicitation of any investment product or service. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Balentine is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. More information about Balentine’s investment advisory services can be found in its Form ADV Part 2, which is available upon request.