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Retirement tax questions
I think the person who answered above did not understand your question.
You could adjust your cost basis of all the shares you own to zero, but then you are paying tax on the entire proceeds. If you don't care, go for it. I prefer to pay what I owe, not more than owed. 😉
There is an answer just below here (permalink is not copying for some reason) that provides a short cut (does the calculation, but then you have to know what to do with the numbers). Look at the table generated by the program and read the explanation below and you'll know how to report the answers on your return:
The web based program links for GLD/SLV (not my program and author doesn't state his/her credentials so user beware, but the numbers I checked for the first few months of one lot were correct) are here...
Here's the explanation:
If you want to know what you actually owe, I restated what I did for the special case of the TD Ameritrade 1099 tables with Cost Basis Factors (CBFs). The method below is from scratch without the use of the CBFs. Schwab told me today they don't provide them, despite buying TD Ameritrade.
Click the link to the ETF (GLD or SLV) you are dealing with at the base of this post and read my explanation as you look at the FIRST TABLE (2nd tab at bottom of Excel file). They provide and example on the SECOND TABLE (Click 3rd tab at bottom of Excel file).
What you get at the end of this for EACH Lot of GLD or SLV:
1. Cost basis of gold/silver sold for that lot for the number of times fees were charged (once a month) added together.
2. Proceeds of gold/silver sold for that lot, also once a month, added together.
3. At the end of the year, you adjust the Cost Basis of the original purchase by the amount in step 1.
4. At the end of the year you adjust the gold/silver held by the amount sold. Yes, you track the amount of metal you actually own in the trust. That allows you to do the cost basis calculation for the next tax year.
5. You report the capital gains or losses, long and short term, depending on the dates on the lot purchases (Step 2 minus Step 1 above). Any gains within a year would be short term, while over a year would be long term (one year plus one or more days).
There are TWO major things (THING ONE and THING TWO below) you have to track/report and I lay out each step.
THING ONE: Crazy but true... You are required to report the capital loss or gain involved in each monthly sale of the ETF (it's the proceeds minus the cost basis of the gold (GLD) or silver (for SLV) sold to pay the fees. It's crazy yes, but that's the law. If you have an error of up to about $10 in your return, they probably won't care per one CPA I've spoken to, but I report every dollar just to avoid the hassle.
STEPS for THING ONE (Cap Gain/Loss Calcs.):
1. The calculation of the cost basis of gold/silver sold is noted below. Once you have that number, you subtract (the proceeds per share X Number of shares) to get the total proceeds in dollars. (See the links below to get the gold/silver sold per share and proceeds per share in dollars at the end of each month)
2. Find out if you have a gain or loss: Proceeds MINUS Cost Basis of gold/silver sold = Capital Gain or Loss, Long Term or short vs. the date of you original buy.
You have to report long and short term gains/losses separately in Schedule D.
Per the spreadsheet instructions (This is from the SLV file, but would be the same for GLD): "Shareholders with several purchases should calculate gain, loss and adjusted basis separately for each purchased lot and then sum up the results of each lot to arrive at the net reportable gain or loss." You can lump all the cost basis amounts together and all the proceeds together but you have to do it for each lot separately. Otherwise you may be lumping long term and short term gains.
THING TWO (Cost Basis Calculation and Carry Forward to Next Year for Each Lot [see addendum at bottom]):
For EACH LOT you buy you can lump the proceeds from the sales together to get a total for the entire year and subtract the sum of all the cost basis amounts to get a net gain/loss and then count that net as a Long term or short term gain/loss.
The second part is that you have to reduce your ORIGINAL cost basis for each lot (total you paid for GLD or SLV) by the amount of gold/silver sold. That INCREASES your eventual tax due, because the net asset value goes down every time they sell gold/silver to pay the fees for you. Reducing cost basis increases any gain reported.
STEPS:
1. You calculate the amount of metal you bought originally using the tax info from the website (shares times the metal amount each share represented on that exact day; it's in the table they provide). (This is doing it from scratch vs. using the cost basis factor shown in the TD Ameritrade 1099; see my earlier post on that above)
2. You calculate the amount of metal sold for the fees for the given month. (shares times the oz per share they sold for fees shown in the table at the END OF EVERY MONTH).
3. You then calculate the FRACTION of your Original Cost Basis the metal in ounces sold for fees represents and multiply that by the ORIGINAL COST BASIS of your shares. (Metal sold for fees/Metal owned prior to fees) X Original Cost Basis = Cost Basis of that sold for fees). That's how much you then reduce your cost basis by and it's ALSO the cost basis of shares sold (See above where you subtract that from the proceeds to tell if you had a gain or loss).
4. Original Cost Basis - Cost Basis adjustment in step #3 = New Cost Basis that becomes your new cost basis for the following year.
You can report:
1. Short term gains together (use Various for times bought and sold)
2. Long term gains together (same as above).
3. Adjust the cost basis of your position and the ounces of silver and gold you still hold by the amount sold.
You have fewer ounces of metal left and a lower cost basis every month, but you can use the total per year for each lot. You have to track that year to year for any lots that you will eventually want to report separately. What you cannot do it mix long term and short term gain lots.
Note that that INCREASES your tax due when you sell; it doesn't lower it as I believe you seem to think. Is it crazy the SEC did not work this out with the brokers and the ETF managers to make this easier? Yes! It's crazy they want us to do this, but the above is the way you do it.
You can find an actual example for GLD and SLV on the iShares website (links below; click on the 2021 Gross Proceeds File. I also shared the way to use the TD Ameritrade "Cost Basis Factors" (in their 1099) in my prior post above.
GLD: https://www.ishares.com/us/literature/tax-information/ishares-gold-tax-data-12-31-21.xls
SLV https://www.ishares.com/us/literature/tax-information/slv-trust-letter-2010.pdf
Don't be confused when they say "no tax is owed by the trust." You owe it, they don't. Here is the clearer statement [The ETF (GLD/SLV)] is a "grantor trust for U.S. federal income tax purposes. As a result, the Trust itself is not subject to U.S. federal income tax. Instead, the Trust’s income and expenses “flow through” to the Shareholders. " It flows to us! Not the way it should be, but the way it is.
If that helps those without the TD Ameritrade CBFs, please let me know. 😉 The spreadsheet without the TD data is harder to reproduce here than it was for my prior post, because the TD Am. summary eliminates a lot of the calculations. They tell you the proceeds and cost basis factor, so it makes it much simpler.
