Active equity ETFs

[gcgang]

I invested in some mutual funds for my daughter many years ago in a UTMA. She’s now of age and filing her own tax return.

She has minimal income this year, so I was thinking of having her realize some of the gains on those tax inefficient, higher expense funds.

Choices considered for reinvestment are BRKB, an S&P etf, or an active ETF managed by the same manager that would map her current holdings.

When I try to research how active ETFs are taxed, 95% of the results are promos for fund managers.

I’ve come to understand how an AP assists in redeeming or issuing new ETF shares without incurring tax. What I haven’t been able to find is how the active ETF is taxed (or not) when they sell something in the ETF.

For example, if a fund bot NVDA a couple years ago and decided to sell it this year, a mutual fund would pass on the net gains to shareholders. Is the active ETF subject to different rules or would they also generate a tax liability for shareholders?

Or can the active ETF avoid those taxes by shifting the NVDA to the AP? I can’t believe that would be allowed, as the IRS would be deprived of their fair share.

 

[OldShooter]

... For example, if a fund bot NVDA a couple years ago and decided to sell it this year, a mutual fund would pass on the net gains to shareholders. Is the active ETF subject to different rules or would they also generate a tax liability for shareholders? ,,,

Err ... an ETF is a mutual fund.

 

[gcgang]

And a donut with no holes is a Danish.

Below explains the difference between mutual funds and ETFs, again saying they’re more tax efficient, but I’m not able to find something that says the actively managed ETF does or does not have a different tax treatment when they decide to get out of a holding at a gain.

The Difference Between An ETF And A Mutual Fund: Key Things To Know

If you’re building your investment portfolio and wondering about the difference between an ETF and a mutual fund, read this.

www.investors.com