SPDR Gold Shares, for example, holds gold bullion in a "grantor trust." As such, profits and losses aren't claimed by the trust but "flow through" to holders and are taxed at their income-tax rates.
There is a big difference at tax time: While holders of gold stocks in a mutual fund would pay tax on long-term capital gains (those held longer than a year) of 15%, long-term gains for Gold Shares holders are taxed at 28% because physical gold is a "collectible."
Tax advisers and preparers are worried. "Most investors in these products have no grasp of what they're getting into," says Robert Gordon, head of Twenty-First Securities Corp. in New York. "I doubt if the brokers selling Alerian MLP ETF [a basket of energy firms] are explaining that it is a corporation that owns parts of many partnerships that own oil assets and owes an extra layer of taxes."
If you own a publicly traded partnership, you may have to file a tax return in one or more states where you don't live if income generated in those states—say, from an oil well—is above a certain level. Even if the payout on one investment is below a state's threshold, the total from two or three may put you over the limit.