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The ETF Tax Dodge Is Wall Street’s “Dirty Little Secret”

Typically, when you sell a stock for more than you paid, you owe tax on the gain. But thanks to a quirk in a Nixon-era tax law, funds can avoid that tax if they use the stock to pay off a withdrawing fund investor.

The first and largest ETF, State Street’s SPDR S&P 500 ETF, hasn’t reported a taxable gain in 22 years. In contrast, a traditional mutual fund run by Fidelity Investments that tracks the same index had a taxable gain in 10 of those years.

https://www.bloomberg.com/graphics/2019-etf-tax-dodge-lets-investors-save-big/?srnd=premium

https://www.law.cornell.edu/uscode/text/26/852

Looks like special laws for the fund manager! Also I don't understand the transaction cost structure of doing this!

Just who gets what for doing this?

Lot of smoke and mirrors
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