iShares To Pay Cap Gains On 5 ETFs

By Staff
November 27, 2012


iShares, the world’s largest ETF provider, said it expects to have capital gains distributions on five of its 280 U.S.-listed ETFs before the end of the year, with all of the funds with tax consequences focused on the fixed-income space.

ETFs are often heralded for their tax efficiency, but that doesn’t mean they are exempt from paying capital gains distributions when profits from the sale of securities have to be recorded at the fund level.

Investors have to pay federal taxes on capital gains distributions, something that’s in sharper focus these days given that an expected overhaul of the U.S. tax code next year could mean significantly higher cap gains taxes starting in 2013.

“While ETFs can be highly tax-efficient investment products, many investors are surprised to find out that it’s possible to owe taxes on capital gains distributions made by ETFs even if they didn’t sell the security at a gain that year,” Patrick Dunne, iShares’ head of global markets and investments, said today in a press release.

“When it comes to tax efficiency, investors need to be asking the right questions or they may get a surprise in their tax bill at the end of the year,” he added.

The funds, and their expected capital gains distributions, include:

  • iShares Core Total U.S. Bond Market ETF (NYSEArca: AGG), 35 to 44 basis points.
  • iShares Barclays GNMA Bond Fund (NYSEArca: GNMA), 53 to 65 basis points.
  • iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca: LQD), 0 to 1 basis point.
  • iShares Barclays MBS Bond Fund (NYSEArca: MBB), 19 to 23 basis points.
  • iShares Financials Sector Bond Fund (NYSEArca: MONY), 45 to 55 basis points.


Capital gains distributions for the ETFs will be deducted from the funds’ assets and set aside for payment on Dec. 3, with actual distributions being paid to shareholders on Dec. 7, the company said in the release.


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