Nevertheless, ETFs are still very tax efficient. According to Morningstar, less than 10% of all ETFs issued capital gains in 2010. BlackRock has also been boasting that 99% of iShares ETFs will not distribute gains this year, and it’s a noteworthy accomplishment on delivering on the tax promise of ETFs.
Investment advisors have told clients to hold bond ETFs in individual retirement accounts and 401(k) plans to avoid potential capital gains. [ETFs and Tax-Loss Harvesting]
Fund companies usually distribute capital gains in December.
For more information on the ETFs and taxes, visit our taxes category.
Max Chen contributed to this article.