UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next
Author: sportscliche One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2173  
Subject: Re: ETF vs ETN: tax efficiency Date: 11/8/2011 9:54 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0

Yes, the wikipedia page was the first thing I read. I don't have a problem with the ETN concept per se, I just can't comprehend how they can skirt the taxes.

An investment house issues the note. This institution is a C-Corp, not a pass-through. As per the ETN prospectus, they hedge their obligation on the note. At some point, a note holder redeems the note to realize the gain on the index it's tracking. The issuer -- a C-Corp -- cashes out the hedge to pay the note holder. So far, so good.

The problem: It seems corporate taxes are due on the hedge as well as on the individual capital gains tax on the note. Double taxation. Further, wouldn't the corporate tax be passed on to the note holder? Doesn't that kill the efficiency of the index tracking?
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev | Next


Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Swiss Franc, Obamacare, Education: Common Theme
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.