I think the basis stays with the fund, and the capital gains are due when the ETF holders sell their shares. The bank does not get hit with any capital gains d

I think the basis stays with the fund, and the capital gains are due when the ETF holders sell their shares. The bank does not get hit with any capital gains due to the lower basis of the fund. The bank has their own basis in the shares that they brought into the fund which when traded for the other shares may trigger its own separate capital gain. The shares the bank gets back at the end should have price equal to basis by that point I would think.