7961 / What special tax rules apply to futures ETFs?

Futures ETFs trade in commodities, stocks, Treasury bonds, and currencies. For example, PowerShares DB Agriculture (AMEX:DBA) invests in futures contracts of agricultural commodities - corn, wheat, soybeans, and sugar - not the underlying commodities. Gains and losses on the futures within the ETF are treated as 60 percent long-term capital gain (or loss) and 40 percent short-term capital gain (or loss) regardless of how long the contracts were held by the ETF. Further, ETFs that trade futures follow mark-to-market rules at year-end. This means that any unrealized gains at the end of the year are taxed as though they were sold.