Company: EUO
Filing Date: 2025-02-13
Form Type: S-3
Source: 0001193125-25-026201
Chunk: 118

Company: ProShares Trust II
Filing Date: 2025-02-13
Form: S-3
Chunk 118
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 elects to pay tax on such capital gain or dividend income at ordinary income rates. A U.S. Shareholder’s distributive share of certain interest paid or accrued by a Fund, or certain entities in which the Fund invests may be treated as “business interest,” which is subject to separate limitations on deductibility. Under Section 709(b) of the Code, amounts paid or incurred to organize a partnership may, at the election of the partnership, be treated as deferred expenses, which are allowed as a deduction ratably over a period of not less than 180 months. Each Fund has elected to treat such expenses as ratably deductible over 180 months, beginning with the month the Fund is considered to have started its investment activities for federal tax purposes. A non-corporate U.S. Shareholder’s allocable share of such organizational expenses would constitute miscellaneous itemized deductions, which are not deductible for taxable years beginning before January 1, 2026. Expenditures in connection with the issuance and marketing of Shares (so-called “syndication fees”) are not eligible for the 180-month amortization provision and are not deductible. Prospective shareholders are urged to consult their own tax advisors with regard to these and other limitations on the ability to deduct losses or expenses with respect to an investment in a Fund. Transferor/Transferee Allocations In general, a Fund’s taxable income and losses are determined monthly as described under “Monthly Allocation and Revaluation Conventions.” As a result, a shareholder transferring its Shares may be allocated income, gain, loss and deduction realized after the date of transfer. Section 706 of the Code generally requires that items of partnership income and deductions be allocated between transferors and transferees of partnership interests on a daily basis. It is possible that transfers of Shares could be considered to occur for U.S. federal income tax purposes when the transfer is completed without regard to a Fund’s convention for allocating income and deductions. In that event, a Fund’s allocation method might be considered a monthly convention that does not literally comply with that requirement. If the IRS treats transfers of Shares as occurring throughout each month and a monthly convention is not allowed by the Regulations (or only applies to transfers of less than all of a shareholder’s Shares), or if the IRS otherwise does not accept a Fund’s convention, the IRS may contend that taxable income or losses of a Fund must be reallocated among the shareholders. If such a contention were sustained, the shareholders’ respective tax liabilities would be adjusted to the possible detriment