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?

[Bodie7]

Tagteam quoted:

"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

Wouldn't this mean we own the asset for tax purposes?

[JohnB5677]

Yes, you do have a position in cryptocurrency.

This sounds much like a RIET.  It is an entity that owns property.  As that property is  traded, profit or loss is created.  it is then distributed throughout the owners through a K-1.

Grayscale should work similarly. 

Grayscale should provide a K-1 to all of it's members reflecting the state of the trust and the profit or loss that it generated. 

[fanfare]

If G has an interest in B and you have an interest in G,

you don't have an interest in B, you have an interest in G

That's the difference between contracts, and Aristotle.

[dspringer44]

I wish this question was directly answered by GBTC or the IRS since it's a little more complicated than it seems. And frankly - I think there are a lot of people who have invested in GBTC, not to mention while easier than this, a lot of companies now are starting to include crypto on their balance sheets. 

Based on some of the answers and what I know, I'm leaning towards answering "yes" since GBTC owners are essentially a group (the trust) owning BTC. But in my case, it's in an IRA - which should mean it's non-taxable at this time. I am not a tax professional - use this information at your personal peril.

[Anonymous_]

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@JohnB5677 wrote:

Grayscale should provide a K-1 to all of it's members......

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Grantor trusts do not issue K-1s.

[Anonymous_]

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@dspringer44 wrote:

Based on some of the answers and what I know, I'm leaning towards answering "yes" since GBTC owners are essentially a group (the trust) owning BTC.

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I agree and simply do not view GBTC any differently than GLD ( the SPDR Gold Trust); you own the underlying asset since the entity in which you are investing is a grantor trust (i.e., disregarded for federal income tax purposes).

[fanfare]

@Anonymous_ 

If I buy GLD, you say I own gold?

I don't think so. That's the whole point of GLD, i.e. to not own gold.

[Anonymous_]

@fanfare Two things:

1) The GLD ETF is set up as a grantor trust and holds the physical commodity; and

2) The IRS considers holdings in GLD as a collectible. 

[that_time_of_year]

I found this helpful:

https://www.taxpayeradvocate.irs.gov/news/nta-blog-wait-when-did-this-virtual-currency-question-appe...

[o0joshua0o]

I own shares of GBTC, and have never sold any, yet I received a 1099-B from TD Ameritrade, which reports as proceeds the fractional sales of underlying Bitcoin that they use to pay for administrative expenses.

[RobertB4444]

@o0joshua0o  You have sold them.  It's just when you sold them what you spent the money on was paying TD Ameritrade fees.  So they have to send you a 1099-B.  

In future you can arrange to have TD Ameritrade take their fees out of your checking account instead of the cryptocurrency account that they are managing for you.

[Sdc2022]

That’s what I am trying to understand. Grayscale did not report the cost basis for each of those fractional sales- just the proceeds amount. I am supposed to supply the cost basis on each sale entry however. How do you handle this?

[Bodie7]

Fidelity Investments shows all of the fees charged by Greyscale (and my cost basis) when I downloaded the 1099 into TurboTax. 

Sometimes they take awhile to include it on the printed copy. Check the online version if you have Fidelity. I'm not sure what other brokers provide.

[JMiller13]

I'm in the same boat and I don't understand what Turbo Tax wants me to input. It's asking for Date Acquired and Cost or other basis, but I don't have all that info and I've got a massive list of these in the 

UNDETERMINED TERM TRANSACTIONS FOR NON COVERED TAX LOTS 1099-B

Any ideas on how do I file this @RobertB4444 ?

[RobertB4444]

Yes, @JMiller13, I do have ideas on how you file this!  You may not like all of them.

First, you're going to have to figure out the term for these transactions - long or short.  Long is a year and a day or more, short less than that.  How are you going to figure that out?  No idea.  You have to refer to what the transactions are for and try to figure out when you bought them.  Your broker should be able to help.  If they can't you might think about shifting your wallet to a different broker.

Next is figuring out your cost basis.  What you paid for all of these fractional pieces.  If you don't know and your broker doesn't know then I would suggest entering zero.  The total amount is only the fees that were paid, right?  So its not a ton of money.  You know how much you have invested in your wallet?  Well the rest of your crypto just got slightly more valuable.  

Now tell the system that you have a 1099-B to enter but don't import it - enter the summary totals.  Divide the long term and short term that you figured out earlier and then you don't have to worry about the purchase date.  Once you're through with the summary totals you'll be prompted to attach your 1099-B and you can do that.

Told you you wouldn't like all of it.