SPLX 2x SP500 ETN to minimize taxes?

[Sam Brazil]

There's a relatively new ETN that's 2x SP500, but that resets monthly instead of daily. From reading the fact sheet PDF it says that it pays no dividends and they're instead reinvested and reflected in the price of the index.

http://etracs.ubs.com/product/detail/in ... ymbol/SPLX

any dividends on the Index constituents, be they ordinary or “special”? dividends, are reinvested in the Index and reflected in the Index level

So it looks like if you used this at 12.5% of your PP, it would be the same effect as holding the S&P500 at 25%, but without any taxable events.

Also, because it resets monthly instead of daily like other leveraged ETFs, that would eliminate a lot of the decay problems, no?

There is credit issuer risk because it's an ETN, but this is counterbalanced by the fact it's only 12.5% of your portfolio instead of 25%.

I can't find the expense ratio, but whatever it is, it seems like it'd be way less than the taxes on S&P500 dividends.

This article is a bit old from 2007 but seems to verify that ETNs are eligible as tax shelters:

http://money.cnn.com/2007/11/25/news/co ... s.fortune/

I asked Lehman Brothers tax expert Robert Willens to check out this question for me. His finding? "You can't do better than this from a tax point of view. You defer taxation until you sell, and then it's at the capital gains rate.

I also found a 3x long treasury ETN:http://www.powersharesetns.com/portal/s ... ixedincome (LBND)...so you could do the same thing with that at 8.33% of your portfolio. You get further ETN credit risk mitigation at only 8.33% of the portfolio + two different ETN creditors if you use both LBND + SPLX. That only leaves gold and cash, so you'd pretty much have a limitless tax sheltered PP.

What am I missing? This seems like a good idea...

[Reub]

I owned an agricultural ETN a few years ago and they were not tracked by the tax people. I do not know if they are still slipping under the radar.

[Ad Orientem]

This undercuts efforts to minimize rebalancing. If you are reinvesting the dividends into the index you are likely to increase the frequency of those taxable events. That's why dividends are usually sent over to the cash allocation. Beyond which, I avoid new funds. As Craig used to say, let someone else be the guinea pig.