In the United States, exchange-traded funds can defer capital gains taxes of their investors by taking advantage of a legal loophole. To quantify the impact of this tax loophole on investor portfolios, we study a rank-dependent expected utility model. We develop an approximation formula for the...

The U.S. tax law equates the tax rate on dividends and long-term capital gains on stock owned by U.S. citizens and residents. However, the taxation of these two types of rewards in the hands of foreign portfolio investors remains dramatically different from each other, with the capital gain...