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Three new kinds of ETF appeared between 2024 and 2026, and all three are tax products first. Each one rests on the same right that makes an ordinary index ETF efficient, the right to hand out stock in kind without recognizing a gain, and on the absence of any IRS ruling about how far that right goes.
The box-spread fund
Interest as deferred 60/40 gain
- Holds offsetting index-option spreads that behave like a zero-coupon loan to the options market.
- Pays no distributions. The return arrives as share-price gain, taxed at sale.
- $14 billion by September 2026, with four imitators.
- Its own prospectus names the risk: a statute that turns gain from a "conversion transaction" into ordinary income, and counsel's view "not necessarily persuasive or binding on the IRS."
The no-dividend fund
Never receives a dividend
- Holds one S&P 500 ETF, sells it just before every ex-dividend date, buys another, and sheds the appreciated lots in kind.
- Saves about 35 basis points a year on a 1% yield at the top rate.
- $60 million, 306% turnover in six months, no full-year tax record yet.
- Its risk factors list "contrary IRS positions" on in-kind redemptions.
The buffer fund
A drawdown product with a tax label
- Options that cap the upside and absorb the first 10 to 15% of a loss over a set period.
- About $70 billion across 420 funds; no annual distributions, so gains defer to sale.
- 0.69% to 0.79% fees; the options are not 60/40 instruments.
- The tax profile is real but modest, and it is not why anyone buys the product.
What Treasury said
On July 21, 2026, at an industry tax seminar, a Treasury official named box-spread ETFs, Section 351 seedings, and “funds avoiding dividend income through ETF switching” as planning that looks “too good to be true.” He said “all the tools are under consideration,” including a designation that would force holders and advisers to disclose the transactions on their returns. As of mid-September 2026 no notice, regulation, or ruling had followed. The fund industry’s trade body had separately asked for formal guidance on Section 351 seedings.
Why this matters to people who own none of them
The in-kind rule is a single line of the tax code. A disclosure requirement aimed at the named funds would change nothing for an index ETF holder. A narrowing of the rule “generally,” which is the outcome the regulatory record suggests is likelier than a rule aimed at one ticker, would reach every ETF, and with it the 0.7% versus 1.9% gap that the whole wrappers topic rests on. That is the item on the watchlist, and it is there for holders of plain index funds, not for holders of the products above.
The household reading
The no-dividend fund is the only one of the three aimed at a cost an ordinary index investor actually pays, the dividend tax. It is small, new, and on the list. The box-spread fund has a defensible use for cash held in a taxable account, with the sharpest legal risk of the set. The buffer fund solves a risk problem, not a tax one.