I have been holding this fund for about 2-3 years now with a modest investment. I am having a hard time determining my actual overall gains/losses due to the nature of the destributions, ROC, and lowered cost basis.
It appears that the majority of the (what was quarterly distributions) was ROC but I don't know really how to tell how much, if it wasn't all, was constructive vs destructive ROC. Since the NAV dips I assume at least some portion is destructive which is a red flag. My cost basis has kept going down every year and now it sits around $9.50 which now puts me in the black as far as capital gains if I sell. If this continues my cost basis could get to zero right? But that would just put me at a 100% tax liability on every share I own.
Can someone help me figure out an easy way to determine if I am even netting an overall gain. BTW I have DRIP in place on this since initial investment. The distributions look terrific up front and the tax shield is also great, but if I am literally paying them to give me my money back and take a fee then I need to get out.
The fund objective "The Fund seeks current income exempt from Federal income tax and capital appreciation through investment in dividend paying common stocks and through utilizing an options strategy". Distributions can take the form of income, long gain, short gain, and ROC. Since value generated by options trading is distributed as return of capital, I would not deem it "destructive" as it's simply a distribution method. For 2012, the income portion was all "qualified dividends" taxed at zero percent (if your taxable rate is below 25%). For those above 25%, the tax rate is 15%. To avoid paying capital gains tax, you can continue to increase your cost basis by buying new shares or reinvesting part of the dividend. If you do hit zero cost basis, distributions are taxed at your capital gains rate in the year you receive them.
Re: "Can someone help me figure out an easy way to determine if I am even netting an overall gain." Yes, that part is easy. You have been receiving a yield of around 10% part of which was income and part return of capital. Go to CEFconnect and put up the 1-year interactive chart for ETY. Notice that over 1-year, the price has kept pace with distributions starting at 9.63 and ending at 9.98. The bottom line then, your fund has maintained it's price while paying your ten percent.