IRS, Treasury Officials Discuss ETF Tax Issues at Wall Street Conference

In July, at a meeting of the Wall Street Tax Association, IRS and Treasury officials discussed transactions involving ETFs, particularly the tax treatment of those transactions that take advantage of section 852(b)(6) of the Internal Revenue Code (IRC). Section 852(b)(6) allows a fund to distribute assets in-kind without the recognition of a gain. A K&L Gates client alert highlights a few areas where Treasury and the IRS have seen section 852(b)(6) used including section 351 IRC exchanges that permit investors to transfer appreciated securities into a newly formed corporation or ETF without immediately paying capital gains taxes. Other areas where section 852(b)(6) is used include tiered ETF structures, crypto ETFs, and ETFs that utilize options strategies. During the discussion, Treasury and IRS officials encouraged industry participants to provide input about these transactions.

Click here to read a client alert from K&L Gates the IRS and Treasury comments.