I found some more information. This is from the LPL financial website. If you do a search and look for "Widely Held Fixed Investment Trust" you should find a link to a pdf on their website that is the "2013 Widely Held Fixed Investment Trust Guide". I have bolded some of the text from the guide below.
I just found I can post the link so you can read the whole thing if you want: Widely Held Fixed Investment Trust Guide
If take that link and add "[product key removed].pdf" to the end, you can read the document.
Commodity Trusts
A commodity trust represents interest in a trust that holds precious metals such as gold, silver, etc. Commodity trusts do not pay cash distributions. However, assets of the trust (such as gold, silver, etc.) are sold to cover expenses. LPL Financial will report proceeds for these sales and offsetting expenses. Some common commodity trusts are SPDR Gold Trust ETF (Ticker: GLD) and Ishares Silver Trust ETF (Ticker: SLV).
[Note that GBTC is just like these other commodity trusts, except it holds BTC.]
An excerpt from GLD’s prospectus on page 30 states:
United States Federal Tax Consequences
When the Trust sells gold, for example to pay expenses, a Shareholder generally will recognize gain or loss in an amount equal to the difference between (1) the Shareholder’s pro rata share of the amount realized by the Trust upon the sale and (2) the Shareholder’s tax basis for its pro rata share of the gold that was sold, which gain or loss will generally be long-term or short-term capital gain or loss, depending upon whether the Shareholder has held its Shares for more than one year. A Shareholder’s tax basis for its share of any gold sold by the Trust generally will be determined by multiplying the Shareholder’s total basis for its share of all of the gold held in the Trust immediately prior to the sale, by a fraction the numerator of which is the amount of gold sold, and the denominator of which is the total amount of the gold held in the Trust immediately prior to the sale. After any such sale, a Shareholder’s tax basis for its pro rata share of the gold remaining in the Trust will be equal to its tax basis for its share of the total amount of the gold held in the Trust immediately prior to the sale, less the portion of such basis allocable to its share of the gold that was sold.
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So based on what I read above, this sales to pay expenses are indeed capital gains/losses, not sales expenses, etc.
My main question now is whether, since I bought several lots of GBTC at different times, I can choose which from which lot I can "sell" the underlying bitcoin assets for the expenses in order to take them all from one particular lot, making it far simpler (and getting me to long term capital gains sooner).
