I am writing Sch D software and researching the proper way to report certain capital gains distributions from leveraged EFTs, for example TYH. These distributions are reported as "short term", see here. I confirmed by phone call with the fund manager that these are definitely short term gains. However, at the end of the year, the distributions appear in Box 2a of the 1099-DIV, which is reserved for long term capital gains distributions from mutual funds and REITs. According to IRS Pub 550, amounts in Box 2a would usually be reported in line 13 of the Sch D, which gets summed into long term capital gains, see here. Making things even more confusing, the IRS Sch D Instructions, under the heading Capital Gain Distributions, states that:
These distributions are paid by a mutual fund (or other regulated investment company) or real estate investment trust from its net realized long-term capital gains. Distributions of net realized short-term capital gains are not treated as capital gains. Instead, they are included on Form 1099-DIV as ordinary dividends.
Questions: Is the ETF incorrectly reporting these distributions as short term capital gains when it should be reporting them as dividends? If not, how should the recipient report these clearly short term gains to the IRS? Thanks in advance.