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New ETFs May Harbor Surprise Capital Gains

The rapid growth in the exchange-traded fund arena is increasing the complexity of capital gains taxes, writes the Wall Street Journal.

Last year, 18% of the ETFs tracked by Morningstar Inc. passed along capital gains to investors, or 95 ETFs in total. In 2006, that number was 6% and in 2005 it was 3%.

"ETFs are not immune" from capital gain, said Christine Hudacko, a spokeswoman for Barclays PLC. "We've got so many slices of the market," it is difficult to compensate for mergers and other corporate actions, she said.

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