Hi,
This is not Doug but I deal with a lot of tax issues for Club Accounting.
ETFs can be a pain if you do not pay attention to the type of investments they make.
Whether to avoid them altogether or not depends on the amount of time you want to put into researching them. Also, will you be purchasing for a personal account or for an investment club.
If for a club, I would recommend staying away from any ETF that buys and holds precious metals. Because of the different treatment of gains from these investments and the expenses of the fund the accounting software for clubs just does not support these types of ETFs.
Different problems arise for ETFs that are basically a group of REIT investments. REITs also have some special tax treatment which cause Extra Tax Frustration (I liked that!) and ETFs that only invest in REITs will pass along that extra work.
These are not the only types of ETFs that can cause tax headaches. However, there are many that are treated like a stock or mutual fund and have no extra tax issues. So like many things in investing you just need to do your research to be sure you are not getting one that will give you that extra frustration at tax time.

Russell Malley
StockCentral Community Leader