Moreover, at the end of the year, the ETF must “mark to market” all outstanding contracts and treat them as if the fund sold those contracts, and investors would realize those gains for tax purposes.
Taxation of ETNs differs from that of ETFs. ETNs are a type of bond or debt security issued by an underwriting bank and subject to the credit risk of the issuer. Gains in stock, bond and commodity ETNs are taxed at a maximum long-term 23.8% rate and maximum 43.4% rate.
Lastly, physically backed ETFs, like the SPDR Gold Shares (NYSEArca: GLD), which gained 14.6% year-to-date, are treated as if investors held the physical bullion. Physically-backed metal ETFs are taxed as collectibles with long-term gains at a maximum 31.8% tax rate and short-term gains taxed up to a 43.4% rate. [Investors Turn Bullish on Gold ETFs as Crimea Standoff Extends]
For more information on commodities, visit our commodity ETFs category.
Max Chen contributed to this article.