Q: In your previous coverage of SPDR Gold Trust (NYSE: GLD), you’ve stated that it’s taxed as a collectible. But I’ve also read that it’s taxed like any other equity investment. Which is correct?

A: Before we offer our answer, we’re required to note that you should always consult with a tax professional in regard to your particular situation.

Much of the confusion over SPDR Gold Trust’s tax status arises because of its legal structure. Most exchange-traded funds (ETF) are structured just like ordinary open-ended mutual funds; long-term capital gains are capped at 15 percent and short-term capital gains are taxed at ordinary income rates.

Because SPDR Gold Trust owns the physical commodity, it’s structured as a grantor trust. According to SPDR Gold Trust’s own tax reporting statement, “Shareholders generally will be treated, for US federal income tax purposes, as if they directly owned a pro rata share of the underlying assets held in the Trust.” That means Uncle Sam treats the investment as if you actually owned physical gold bullion, which is subject to the higher collectibles tax rate.

Current tax law caps the maximum long-term capital gains rate on collectibles at 28 percent. That’s the rate you should be paying if you sell shares of SPDR Gold Trust that you’ve owned for at least one year. If you’ve owned shares for less than one year, you’ll pay for any short-term capital gains at your ordinary income tax rate.

There are two ways to avoid the collectibles tax rate when investing in gold ETFs. The first is to own those ETFs backed by physical gold within a tax-advantaged account such as an IRA. The second way is to invest in an ETF such as PowerShares DB Gold Fund (NYSE: DGL), which is structured as a partnership instead of a grantor trust. Because the ETF uses gold futures to track the price of gold, it’s not subject to the collectibles tax rate. But since it’s a partnership, investors receive a K-1 at reporting time instead of a 1099. While any accountant and most tax preparation software packages can handle a K-1 with ease, some investors find them intimidating.

Q: I’d prefer to invest in a mutual fund whose management invests in the fund alongside shareholders. Where can I learn this information?

A: When investors research a mutual fund to determine whether it’s suitable for their portfolio, one piece of especially instructive intelligence is whether a fund manager actually invests in his own fund. After all, a fund manager’s interests are far more likely to be aligned with those of a fund’s shareholders if he has significant assets invested alongside them. Morningstar has published studies showing that fund managers with substantial stakes in their own funds outperform the majority of their peers over the long term.

But this information can’t be found in a fund’s prospectus or annual report. Instead, management’s holdings in its own fund are disclosed in the statement of additional information (SAI), which can be found on most fund companies’ websites or by contacting the fund company directly. A fund must update its SAI each year as a supplement to its prospectus.

The SAI doesn’t report management’s holdings in exact dollar amounts. Rather, the Securities and Exchange Commission allows fund managers to report their holdings in fairly wide ranges. For example, the SAI for Conestoga Small Cap (CCASX), the fund profiled in this issue’s “Fund Favorites,” lists fund manager William Martindale as owning from $100,001 to $500,000 of the fund’s shares. That’s’ a reasonable investment for a fund manager to have in a fund pursuing a small-cap growth strategy.

There are instances, however, where it doesn’t make sense for a fund’s management to necessarily invest in their own fund. For example, it would be unreasonable to expect management to have significant assets invested in state-specific municipal bond funds or sector-specific funds. The same applies to fund managers who are either relatively young or who only recently assumed the helm of their fund.

There are instances, however, where it doesn’t make sense for a fund’s management to necessarily invest in their own fund. For example, it would be unreasonable to expect management to have significant assets invested in state-specific municipal bond funds or sector-specific funds. The same applies to fund managers who are either relatively young or who only recently assumed the helm of their fund.

The SAI also reports holdings data for members of a fund’s board of directors. A fund’s board is more likely to take its responsibility for oversight of a fund’s management seriously if it also has an ownership stake in the fund.