OK, cool. It would be a headache for tax/accounting purposes, but it should be possible to create a spreadsheet for tracking the disposals. I wonder if we're meant to use the FIFO rule when attributing costs to these shares?
The fact that they are reinvested throws up other questions. Are they treated as new shares bought at a potentially different price? If so, can we reduce the value (on paper) of the ETF holding by the amount of the distribution for CGT purposes? (Otherwise we would be paying CGT a second time on a portion of the holding when we sell, it seems.)
From my quick Googling it seems that capital distributions are more common amongst Canadian ETFs that US ones.