The GBTC shares referenced in your 1099-B may have been sold to cover trust expenses. The Trust holds no assets other than BTC tokens. Accordingly, when expenses are incurred, Trust assets (i.e., BTC tokens) are sold to cover the expenses. The 2021 Grantor Trust Tax Information at page 15 describes what a shareholder needs to do given that Trust assets were sold in 2021 to cover expenses. The steps are summarized below:
- Step 1, we discuss how a Shareholder would determine his or her stake in the Trust (i.e., how many BTC tokens they own).
- Step 2, we discuss how much of his or her stake is sold throughout the year to cover expenses (and how many BTC tokens they still own).
- Step 3, we determine the Shareholder’s basis in the BTC tokens sold by the Trust. Gain or loss from this sale is determined in relation to the basis of the assets sold.
- Step 4, we determine the gain or loss from the sale of the assets and where the gain or loss is reported on the Shareholder’s tax return.
- Step 5, we calculate the Shareholder’s portion of the Trust’s expenses.
- Step 6, we determine the Shareholder’s new balance of BTC tokens at the end of the year and his or her new cost basis in the BTC tokens.
The Grantor Trust Tax Information also provides an example of how the above steps can be applied to a Shareholder who purchased GBTC during the year and held such investment for the entire year.
The 2021 Grantor Trust Tax Information can be obtained from the Grayscale website at https://grayscale.com/products/grayscale-bitcoin-trust/ At the top of the webpage, select Click here for 2021 Tax Information and you will have access to the Grantor Trust Tax Information for 2021.
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