How are ETF capital gains distributions taxed?
As with any mutual fund, capital gains will be taxed based on the holding period of the investment sold by the fund. If the fund owned a stock for less than one year prior to its sale, any gain would be classified as short term. If a position was held for longer than one year, any gain would be classified as long term. Investors will be notified as to how to characterize any capital gains they receive. Investors who receive a capital gains distribution are responsible for the taxes on the distributions regardless of whether or not they have sold the ETF. Capital losses are not passed on to shareholders.
