I think you, me, and MikeP90s are all coming to the same conclusion. The previous mentioned equation was close, but didn't get to the actual cost basis. It's also extremely frustrating that the few resources out there don't seem to help much with how this is being reported on our 1099s. The Wealthfront calculator is only really useful for when you sell GBTC or ETHE. The Grayscale tax document is helpful, but it calculates your cost basis for all transactions together, which doesn't help when you're trying to do it for each individual tiny transaction throughout the year. What I ended up doing was the method mentioned in the Grayscale document, but using it for each individual transaction with the much smaller amounts.
What I ended up doing in excel is below:
1. Use the Bitcoin per share on the day you bought the shares from the Grayscale document to figure out how many of the Grayscale Bitcoins you "own" through your shares (do this for each time you bought or sold and follow FIFO/LIFO/whatever) to figure out how many Bitcoins and how much total investment you have when each of these dumb "transactions" occurred.
2. Use the "Number of BTC Sold per share" from the Grayscale document on each day that one of the transactions occurred and multiple that by your number of shares at that time to figure out how many of "your" Bitcoins were sold by Grayscale for each transaction.
3. Take what you got from step 2 and use it in this equation: (step 2 number/total Grayscale Bitcoins owned) * cost of the shares when you purchased. Do this for each time you had purchased GBTC since the cost of the shares and the Bitcoin owned from each purchase is different. Add them all up for each transaction and that's your total cost basis.
I did a quick calculation using my method and yours and got pretty much the same number, so I think we're doing the same thing in 2 different ways (your using the shares and price whereas I'm using the BTC and corresponding price, but the BTC/share is converting it so the units all match up).
If you want to have even more fun with all of this, I think we are technically supposed to reduce our cost basis with each individual transaction since technically our Bitcoins are being "sold" each time and we have less for the next transaction... but I don't have the brain power to do all of that right now.
I know some people are saying they are lumping all the transactions together or just saying it's all a wash, but I'm going to painstakingly input the cost basis for each transaction, because each is listed on my 1099 and I don't want to look like I'm hiding something, especially when it comes to anything crypto related. Obviously in this strange scenario, to each their own, but that's what I'm doing.
