Is Exchange Traded Notes (ETN) Dead?
Back in November I studied Exchange Traded Notes (ETNs), a new genre of product with apparently better tax treatment than its much popular cousin Exchange Traded Funds (ETFs) with ETFs. The innovation of Barclays, ETNs are debt notes 1) issued by financial companies like Barclays, Goldman Sachs and Deutsche Bank and alike, 2) tracking a certain index like currency and commodities, 3) that can be traded in the stock exchange just like ETFs, and 4) being promoted with preferred tax treatment — that is, there is no required distribution so that investors only have to pay tax when they finally dispose the ETNs.
Unfortunately, the preferred tax treatment is a claim by the issuing banks, and hadn’t been confirmed by IRS … until now.
According to MarketWatch, the IRS recently denied favorable tax treatment of most ETNs on the market:
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