Wall Street Journal, Extreme Tax Frustration: Commodity ETFs Can Wreak Havoc on Your Tax Bill:

Commodities are hot, but exchange-traded funds and other vehicles that hold them are causing massive tax headaches for investors. … This is the dark side of investors’ current rush into the trendiest investment strategy around: exchange-traded funds and other hot “alternative investments” such as exchange-traded notes and master limited partnerships, specializing in commodities like oil, currencies and gold. …

[ETFs] carry potential tax traps. Among them: soaring tax preparation bills, odd tax rates, unexpected filings and tax on some assets in tax-sheltered individual retirement accounts. … Even though ETFs trade like stocks and provide diversification like a fund, they often are structured very differently from the stocks and mutual funds many investors grew up with. Mutual funds generally aren’t allowed to hold commodities directly, so the firms offering ETFs have turned to less familiar vehicles, such as partnerships, trusts or corporations. … ETF tax complications have become so notorious, says Chief Investment Officer William Koehler of ETF Portfolio Partners Inc. in Leawood, Kan., that some investors are insisting on selling funds generating K-1 forms even if they made money and want to hold the same underlying assets. Instead they are asking for ETFs that don’t generate tax headaches. Mr. Koehler and his partners have a nickname for these clients: “K-1 and done.”