The End Of The Year Will Bring Tax Headaches For Some ETFs
“One of the best things about exchange-traded funds is they rarely pass out year-end capital gains to shareholders. But for some bond ETFs this year, that is painfully not the case. For investors in traditional open-end mutual funds, a longstanding gripe is getting hit with a cap-gains tax bill when the fund sells holdings at a profit and passes tax liability along. Such “gains” often exist only in accounting terms, and may show up even if the fund lost money,” Ian Salisbury Reports From The WSJ.
“ETFs, though, seldom do this because they can swap securities in a clever way that avoids such capital gains. But this year, bond funds from top ETF firms including BlackRock Inc., State Street Corp. and Vanguard Group are found with trading profits, which will now have to be accounted on investors’ tax forms. Investors with capital gains may end up paying rates of 15% on long-term gains and 35% on short-term gains,” Salisbury Reports.
“This comes at a time when bond ETFs are growing in importance, with about $105 billion in assets, more than double what they held at the start of the year, according to the National Stock Exchange. Some types of ETFs, especially leveraged or inverse funds that let investors magnify bets or bet against the market, haven’t always lived up to the promise of no cap-gains surprises for investors,” Salisbury Reports.
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