Treasury Takes Aim at Wall Street Tax Trades in New Notice

Treasury issued Notice 2026‑62, directing the Internal Revenue Service to scrutinize prearranged exchange‑traded fund (ETF) conversions, tax‑aware trades, and other in‑kind redemptions that facilitate tax avoidance. The notice references Revenue Ruling 2026‑20 as the governing authority for these transactions and signals an intent to close loopholes exploited by structured ETF strategies.

Bloomberg.com reported the Treasury’s focus on Wall Street tax trades, while the Wall Street Journal highlighted the agency’s aim at tax‑avoiding investment strategies. Traders Union cited James Seyffart noting the IRS’s broad notice covering tax‑aware trades, and Current Federal Tax Developments provided an analysis of the tax treatment of ETF security transfers under the new guidance.

The analysis underscores that the guidance clarifies the tax treatment of ETF security transfers under the new rules. No specific enforcement actions have been detailed, but the Treasury’s move signals heightened regulatory attention on ETF conversion strategies for the sector.