Tax Documents & Information

Return of capital (ROC) exists when an ETF distributes cash in excess of tax requirements. 

Example: For an option strategy, this is usually because short premium is being distributed in full and those contracts are eventually bought back at a loss.

Why it matters: Return of capital is generally not taxed when you receive it. However, it reduces your cost basis — the original value of your investment — which means you may owe more in taxes when you eventually sell. If you hold the investment for at least a year, you may be eligible to apply the lower long-term capital gains rate. In short, you're not avoiding taxes, just deferring them.

ROC is typically reported under Box 3 (non-dividend distributions) of the 1099-DIV form (rev. January 2024).

For Kurv ETFs, ROC is calculated on a fiscal year basis (5/31) and not on a calendar year basis.

Form 1099 is an IRS tax form that reports income you received from your investments over the course of the calendar year and capital gains over the one-year period ending in October 31. If you invest through a regular brokerage account, you'll typically receive one automatically.

Common types of 1099s:

• 1099-DIV — reports dividends received from stocks or ETFs
• 1099-INT — reports interest earned from bonds or savings
• 1099-B — reports gains or losses from selling investments

How it works:

1. You invest
2. You generate returns, income or capital gains or losses — through dividends, interest, or selling an investment
3. Your 1099 tells you exactly how much you made from each source
4. You report that amount on your tax return

Good news for Kurv ETF investors: All Kurv ETFs issue 1099s — not K-1s. K-1s often take more time to generate and can delay tax filings. This means simpler tax reporting with no need for a partnership tax form.

A 19a-1 notice is a disclosure sent to shareholders when a fund's distribution comes from a source other than net investment income. It provides a breakdown of the distribution by source, with categories such as net investment income and return of capital.

This is required under Section 19(a) of the Investment Company Act of 1940.

The amounts and sources of distributions reported in this notice are estimates on a book basis, are not being provided for tax reporting purposes and may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law) and return of capital. The actual amounts and sources for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. The figures are estimates and are not intended for tax reporting purposes. As a result, shareholders should not use the information provided in this notice for tax reporting purposes.

Why might you receive a 19a-1 notice? 

19a-1 notices are only required if at least a portion of a distribution is return of capital. No section 19 notices are required for net investment income and/or short-term capital gain.

How is it different from a 1099?

• 19a-1 notices are informational estimates, sent throughout the year.
• 1099-DIV forms are official tax documents used for your tax return, sent before the tax filing deadline in the first quarter of the year.

Why can it be confusing? 

For example, you receive a distribution and the 19a-1 notice estimates that a portion is categorized as return of capital. However, when tax season arrives, your 1099-DIV may classify that same portion differently.

Things to note:

• Timing: 19a-1 notices are delivered monthly as each ETF makes a distribution payment. They are required by regulation but remain estimates, as tax calculations cannot be completed until the calendar year is finished.
• Don't add up your notices: You cannot simply total your 19a-1 notices throughout the year — wait for your year-end 1099 to get the full picture of your distribution's tax characteristics.

More questions? While we're unable to speak with individual investors due to regulatory restrictions, please have your financial advisor reach out to us directly. You should also consult your tax professional.

Form 8937 is an IRS form filed by a fund to report any corporate actions that affect the cost basis, such as distributions like return of capital. It provides investors with the information needed to accurately adjust their cost basis for tax purposes.

Form 8937 is available when the audited annual report is completed. For Kurv ETFs, forms are available no more than two months after May 31, the fiscal year end.

A tax insert is additional tax information provided as supplemental information to assist you with the preparation of your income tax returns. Please consult your tax advisor for the specific application of any items relating to the preparation of your tax returns.

Certain states do not tax their residents on income from an ETF that is earned from U.S. Government Obligations. For the Kurv ETF, the tax inserts show the percentage of total ordinary income dividends shown in Box 1 of your tax form that were attributable to interest earned from direct U.S. Government Obligations.

Depending on your state’s personal income tax laws, you may be entitled to declare a portion of your ordinary income dividends (Box 1) as tax-exempt income on your state personal income tax return. However, some states do not allow the “pass through” of this exempt-interest income unless the percentage earned from U.S. Government Obligations exceeds certain thresholds or unless other requirements are met. Please consult your tax advisor or state authorities if you have any questions regarding the percentage of income you can exclude when calculating your state income tax.