Long-term capital gain taxes on ETFs?
Generally speaking, each year, mutual funds distribute to their shareholders the dividends that are earned by the stocks that they hold and also the net capital gains that they make when they sell stocks that they hold. If they did not do so, the money would be income to the fund and the fund would have to pay taxes on the amount not distributed.  (On the other hand, net capital losses are held by the fund and carried forward  to later years to offset future capital gains).  You pay taxes on the amounts of the distributions declared by the fund. Whether the fund sold a particular stock for a loss or a gain (and if so, how much) is not the issue; what the fund declares as its distribution is. This is why it is not a good idea to buy a mutual fund just before it makes a distribution; your share price drops by the per-share amount of the distribution, and you have to pay taxes on the distribution. Generally, ETFs and mutual funds don't pay taxes (although there are some cases where they do, and some countries where it is a common case). What happens is, the fund reports the portion of the gain attributed to each investor, and the investor pays the tax. In the US, this is reported to you on 1099-DIV as capital gains distribution, and can be either short term (as in the scenario you described), long term, or a mix of both. It doesn't mean you actually get a distribution, though, but if you don't - it reduces your basis.
"As I recall from the documentation presented to me, any gain over the strike price from an ISO stock option counts as a long term capital gain (for tax purposes) if it's held from 2 years from the date of grant and 1 year from the date of exercise. If you're planning to take advantage of that tax treatment, exercising your options now will start that 1-year countdown clock now as well, and grant you a little more flexibility with regards to when you can sell in the future. Of course, no one's renewed the ""Bush tax cuts"" yet, so the long-term capital gains rate is going up, and eventually it seems they'll want to charge you Medicare on those gains as well (because they can... ), soo, the benefit of this tax treatment is being reduced... lovely time to be investing, innnit?" Here's how capital gains are totaled: Long and Short Term. Capital gains and losses are either long-term or   short-term. It depends on how long the taxpayer holds the property. If   the taxpayer holds it for one year or less, the gain or loss is   short-term. Net Capital Gain.  If a taxpayer’s long-term gains are more than their   long-term losses, the difference between the two is a net long-term   capital gain. If the net long-term capital gain is more than the net   short-term capital loss, the taxpayer has a net capital gain. So your net long-term gains (from all investments, through all brokers) are offset by any net short-term loss.  Short term gains are taxed separately at a higher rate. I'm trying to avoid realizing a long term capital gain, but at the same time trade the stock. If you close in the next year, one of two things will happen - either the stock will go down, and you'll have short-term gains on the short, or the stock will go up, and you'll have short-term losses on the short that will offset the gains on the stock.  So I don;t see how it reduces your tax liability.  At best it defers it. The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account. In a taxable account you're going to owe taxes when you sell the shares for a gain. You're also going to owe taxes on any distributions you receive from the holdings in the account; these distributions can happen one or more times a year. Vanguard has a writeup on mutual fund taxation.  Note: for a fund like you linked, you will owe taxes annually, regardless of whether you sell it. The underlying assets will pay dividends and those are distributed to you either in cash, or more beneficially as additional shares of the mutual fund (look into dividend reinvestment.) Taking VFIAX's distributions as an example, if you bought 1 share of the fund on March 19, 2017, on March 20th you would have been given $1.005 that would be taxable. You'd owe taxes on that even if you didn't sell your share during the year. Your last paragraph is based on a false premise. The mutual fund does report to you at the end of the year the short and long term capital gains, along with dividends on a 1099-DIV. You get to pay taxes on those transactions, that's why it's advantageous to hold low turnover mutual funds in taxable accounts. I agree, one should not let the tax tail wag the investing dog.  The only question should be whether he'd buy the stock at today's price. If he wishes to own it long term, he keeps it. To take the loss this year, he'd have to sell soon, and can't buy it back for 30 days. If, for whatever reason, the stock comes back a bit, he's going to buy in higher.  To be clear, the story changes for ETFs or mutual funds. You can buy a fund to replace one you're selling, capture the loss, and easily not run afoul of wash sale rules. Your tax efficient reasoning is solid for where you want to distribute your assets. ETFs are often more tax efficient than their equivalent mutual funds but the exact differences would depend on the comparison between the fund and ETF you were considering. The one exception to this rule is Vanguard funds and ETFs which have the exact same tax-efficiency because ETFs are a share class of the corresponding mutual fund. For a long term gain you must hold the stock a year and a day, so, the long term hold period will fall into 2015 regardless. This is the only tax related issue that occurs to me, did you have something else in mind?  Welcome to Money.SE. To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways.   Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had.  The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income.   Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell).  The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario.  The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment.  All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain.  (All this ignores AMT considerations, which you likely are not subject to.) "This answer is about the USA. Each time you sell a security (a stock or a bond) or some other asset, you are expected to pay tax on the net gain. It doesn't matter whether you use a broker or mutual fund to make the sale. You still owe the tax. Net capital gain is defined this way: Gross sale prices less (broker fees for selling + cost of buying the asset) The cost of buying the asset is called the ""basis price.""  You, or your broker, needs to keep track of the basis price for each share. This is easy when you're just getting started investing. It stays easy if you're careful about your record keeping.  You owe the capital gains tax whenever you sell an asset, whether or not you reinvest the proceeds in something else. If your capital gains are modest, you can pay all the taxes at the end of the year. If they are larger -- for example if they exceed your wage earnings -- you should pay quarterly estimated tax. The tax authorities ding you for a penalty if you wait to pay five- or six-figure tax bills without paying quarterly estimates.  You pay NET capital gains tax. If one asset loses money and another makes money, you pay on your gains minus your losses. If you have more losses than gains in a particular year, you can carry forward up to $3,000 (I think). You can't carry forward tens of thousands in capital losses.  Long term and short term gains are treated separately. IRS Schedule B has places to plug in all those numbers, and the tax programs (Turbo etc) do too. Dividend payments are also taxable when they are paid. Those aren't capital gains. They go on Schedule D along with interest payments. The same is true for a mutual fund. If the fund has Ford shares in it, and Ford pays $0.70 per share in March, that's a dividend payment. If the fund managers decide to sell Ford and buy Tesla in June,  the selling of Ford shares will be a cap-gains taxable event for you.  The good news: the mutual fund managers send you a statement sometime in February or March of each year telling what you should put on your tax forms.  This is great. They add it all up for you. They give you a nice consolidated tax statement covering everything: dividends, their buying and selling activity on your behalf, and any selling they did when you withdrew money from the fund for any purpose.   Some investment accounts like 401(k) accounts are tax free. You don't pay any tax on those accounts -- capital gains, dividends, interest -- until you withdraw the money to live on after you retire. Then that money is taxed as if it were wage income. If you want an easy and fairly reliable way to invest, and don't want to do a lot of tax-form scrambling, choose a couple of different mutual funds, put money into them, and leave it there. They'll send you consolidated tax statements once a year. Download them into your tax program and you're done. You mentioned ""riding out bad times in cash.""  No, no, NOT a good idea. That investment strategy almost guarantees you will sell when the market is going down and buy when it's going up. That's ""sell low, buy high."" It's a loser. Not even Warren Buffett can call the top of the market and the bottom.  Ned Johnson (Fidelity's founder) DEFINITELY can't." Capital gains tax is an income tax upon your profit from selling investments. Long-term capital gains (investments you have held for more than a year) are taxed significantly less than short-term gains. It doesn't limit how many shares you can sell; it does discourage selling them too quickly after buying.  You can balance losses against gains to reduce the tax due. You can look for tax-advantaged investments (the obvious one being a 401k plan, IRA, or equivalent, though those generally require leaving the money invested until retirement). But in the US, most investments other than the house you are living in (which some of us argue isn't really an investment) are subject to capital gains tax, period. I believe the answer to your question boils down to a discussion of tax strategies and personal situation, both now and in the future.  As a result, it's pretty hard to give a concrete example to the question as asked right now. For example, if your tax rate now is likely to be higher than your tax rate at retirement (it is for most people), than putting the higher growth ETF in a retirement fund makes some sense.  But even then, there are other considerations. However, if the opposite is true (which could happen if your income is growing so fast that your retirement income looks like it will be higher than your current income), than you might want the flexibility of holding all your ETFs in your non-tax advantaged brokerage account so that IF you do incur capital gains they are paid at prevailing, presumably lower tax rates.   (I assume you meant a brokerage account rather than a savings account since you usually can't hold ETFs in a savings account.) I also want to mention that a holding in a corp account isn't necessarily taxed twice.  It depends on the corporation type and the type of distribution.  For example, S corps pay no federal income tax themselves. Instead the owners pay taxes when money is distributed to them as personal income.  Which means you could trickle out the earnings from an holdings there such that it keeps you under any given federal tax bracket (assuming it's your only personal income.)   This might come in handy when retired for example.   Also, distribution of the holdings as dividends would incur cap gains tax rates rather than personal income tax rates. One thing I would definitely say: any holdings in a Roth account (IRA, 401k) will have no future taxes on earnings or distributions (unless the gov't changes its mind.)  Thus, putting your highest total return ETF there would always be the right move. "The tax comes when you close the position. If the option expires worthless it's as if you bought it back for $0. There's a short-term capital gain for the difference between your short-sale price and your buyback price on the option. I believe the capital gain is always short-term because short sales are treated as short-term even if you hold them open more than one year. If the option is exercised (calling away your stock) then you add the premium to your sale price on the stock and then compute the capital gain. So in this case you can end up treating the premium as a long-term capital gain. See IRS pub 550 http://www.irs.gov/publications/p550/ch04.html#en_US_2010_publink100010619 Search for ""Writers of puts and calls""" Fidelity has a good explanation of Restricted Stock Awards: For grants that pay in actual shares, the employee’s tax holding period begins at the time of vesting, and the employee’s tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income. Upon a later sale of the shares, assuming the employee holds the shares as a capital asset, the employee would recognize capital gain income or loss; whether such capital gain would be a short- or long-term gain would depend on the time between the beginning of the holding period at vesting and the date of the subsequent sale. Consult your tax adviser regarding the income tax consequences to you. So, you would count from vesting for long-term capital gains purposes.  Also note the point to include the amount of income you were considered to have earned as a result of the original vesting [market value then - amount you paid].  (And of course, you reported that as income in 2015/2016, right?) So if you had 300 shares of Stock ABC granted you in 2014 for a price of $5/share, and in 2015 100 of those shares vested at FMV $8/share, and in 2016 100 of those shares vested, current FMV $10/share, you had $300 in income in 2015 and $500 of income in 2016 from this.   Then in 2017 you sold 200 shares for $15/share: "You cannot get ""your investment"" out and ""leave only the capital gains"" until they become taxable at the long-term rate. When you sell some shares after holding them for less than a year, you have capital gains on which you will have to pay taxes at the short-term capital gains rate (that is, at the same rate as ordinary income).  As an example, if you bought 100 shares at $70 for a net investment of $7000, and sell 70 of them at $100 after five months to get your ""initial investment back"", you will have short-term capital gains of $30 per share on the 70 shares that you sold and so you have to pay tax on that $30x70=$2100. The other $4900 = $7000-$2100 is ""tax-free"" since it is just your purchase price of the 70 shares being returned to you.  So after paying the tax on your short-term capital gains, you really don't have your  ""initial investment back""; you have something less. The capital gains on  the 30 shares that you continue to hold will become (long-term capital gains) income to you only when you sell the shares after having held them for a full year or more: the gains on the shares sold after five months are taxable income in the year of sale." Not illegal. With respect to littleadv response, the printing of a check isn't illegal. I can order checks from cheap check printers, and they have no relationship to any bank, so long as they have my routing number and checking account number, they print.  Years ago (25+) I wrote my account details on a shirt in protest to owing the IRS money, and my bank cashed it. They charged a penalty of some nominal amount, $20 or so for 'non-standard check format' or something like that. But, in fact, stupid young person rants aside, you may write a check out by hand on a piece of paper and it should clear. The missing factor is the magnetic ink. But, I often see a regular check with a strip taped to the bottom when the mag strip fails, proving that bad ink will not prevent a check from clearing.  So long as the person trying to send you the funds isn't going to dispute the transaction (and the check is made out to you, so I suppose they couldn't even do that) this process should be simple. I see little to no risk so long as the image isn't intercepted along the way.