Partnerships are "pass-through" entities. The income and expenses of each Fund "flow through" to its shareholders. (This differs from mutual funds and most ETFs registered under the Investment Company Act of 1940, which pass through taxable income and capital gains in the form of distributions reported on a Form 1099.) Each shareholder of Volatility, Commodity or Currency ProShares ETF is directly responsible for reporting his or her pro rata portion of income, gains, losses, deductions or other taxable events in the ETF for the calendar year.
While investors may incur trading profits or losses through buying and selling the Funds, they are also subject to tax on their portion of any income or gains passed through by the Trust. In addition to income and gains, each Fund can also pass through losses, which shareholders may use to reduce their personal taxes. The tax treatment of income, gains or losses depends on the Fund’s underlying positions. For example:
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The Funds will earn income from debt securities and overnight investments. An investor’s pro rata portion of that income will be taxed at the investor’s ordinary income tax rate.
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The Funds will invest in a range of derivative instruments, including futures and forward contracts. In general, open futures positions will be marked to market, with their gains and losses reportable as 60% long-term and 40% short- term. The reporting of gains and losses may vary depending on the specifics of a contract.
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Commodity and Currency ProShares also enter into swap agreements and non-currency forwards that generally produce capital gains/losses that are likely short-term in character.
Monthly financial statements in accordance with Generally Accepted Accounting Principles (GAAP) for each Fund will be posted on our website on each Fund’s Overview page. Be sure to consult your financial professional or a tax professional for advice as to your particular tax situation.