For the cryptocurrency question on 1040: I own shares in a tracking stock GBTC, can I answer 'no' since I have never directly purchased or sold any cryptocurrency?

[Anonymous_]

You might want to pose this question to your financial advisor or broker but, according to the Grayscale tax information statement, GBTC is a grantor trust and:

Shareholders generally will be treated, for U.S. federal income tax purposes, as if they directly owned a pro rata share of the underlying assets held in the Trust.

See https://grayscale.co/wp-content/uploads/2019/02/GBTC-Tax-Info-Letter-2018.pdf

[Critter-3]

Answering yes or no doesn't affect your tax return  UNTIL  you sell the crypto currency.  

[Rick19744]

GBTC stands for Grayscale Bitcoin Trust.  This is a publicly traded company that trades Bitcoin.

From their webpage:

Grayscale Investments®, the world’s largest digital currency asset manager and sponsor of Grayscale® Bitcoin Trust* (OTCQX: GBTC) (the “Trust”),

I believe you need to mark the response "yes".  Don't mess with the crypto world. This is a high level audit focus of the IRS.  

[CaneFan]

Thanks for your response Rick.

[CaneFan]

Thanks for your response tagteam. Makes sense.

[CaneFan]

Thanks for your response Critter.

[mjkst27]

I bought and sold GBTC ONLY in IRA accounts in 2020. Do you think I should I check "yes" for the "virtual currency" box? (understand this forum is not tax advice)  

[CaneFan]

I never found a definitive answer to this question. I believe the 1040 question is asking about a direct purchase of cryptocurrency (because that is not tracked or reported by the seller). Conversely, a purchase on a stock exchange is reported and their is full transparency (in the 1099 that is issued). So, even if you answer 'no' your 1099 will report the transaction.  

[Cynthiad66]

YES.  So "At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"
YES – if you made any kind of cryptocurrency disposal or bought or received any cryptocurrency

[STAN S]

GBTC isnt a virtual currency though. Its a company that buys and stores crypto. So you are buying the company's stock. Not crypto directly. This is a tricky question that needs clarification.

[DianeW777]

@mjkst27 The answer to the question being asked for you is 'No'.  You did not purchase cryptocurrency or virtual currency.  You purchased shares of a company that deals in this currency and is traded on the open stock market. Grayscale Bitcoin Trust (GBTC symbol), is a trust that buys and sells Bitcoin.  

The direct purchase of Bitcoin or other cryptocurrency would require the answer to be 'Yes'.  You are not in the position of buying and selling virtual currency if your only purchase is in the stock of the company/trust of Grayscale.

[STAN S]

Thank you for the reply. I hope you are right. This question is new and very vague. Im just concerned about answering it wrong. 

[Bodie7]

I had the same question also, but when the GBTC trust sells bitcoin to cover their expenses, Fidelity shows these expenses on my 1099-B (even if I have not sold anything). These expenses are reported to the IRS with box D checked. Thus I thought it is safer to say yes, since the IRS already has the expense data that was passed though to me.  They should give more guidance on how to answer this question regarding trusts/etfs.

[DianeW777]

If you are showing gross proceeds on Form 1099-B and this is from the company GBTC, this is sales of their stock, not virtual currency that they are trading as a company.

If you own only GBTC stock and you are not personally trading in virtual currency then you should answer 'No".