Theoretically, that fund should never go to zero because it will go down in ever shrinking amounts. They will just keep doing reverse-splits. You keep entertaining that thought.
You would never have to pay taxes unless your tax status or the law changes demanding mark-to-market at the end of the year. You would have the same open position accruing gains and losses forever regardless of splits. Merger or combinations will, most likely, be treated as an equivalent cost basis.
That's what I thought only it sounded too good to be true -- a loophole I suspect will get closed somehow in the future.
Poor place to come for tax advice. Tax treatment: Because UVXY and SVXY explicitly hold VIX futures the IRS counts them as partnerships that need K-1 forms filed for taxable accounts at tax time. ... These generally result in 60% long-term and 40% short-term gains/losses on the investor's tax return regardless of how long you held the shares.
"Thanks for chiming in. I guess I'll have to provide a refund." It's not the refund - it's the jail time. We'll start crowdfunding your defense now!
Your broker eventually loses the borrow for the UVXY shares and buys you in involuntarily and hands you a big tax bill unexpectedly. There are worse problems to have I suppose, but yes, you can delay taxes until you close the position.