Cost basis for the SLV / GLD / ETHE ETFs that are structured as trusts, and have monthly expenses that show up on your 1099-B?

[orogozaru]

SLV/GLD/ETHE ETFs have monthly fees that show up as non-covered transactions.  For taxable accounts investment accounts, these are supposed to be used to adjust the cost basis when you dispose of these ETFs.  In 2021, I did not sell any of these ETFs, but these fees are coming up as stock sale transactions in TurboTax when importing my 1099-B.  How am I supposed to deal with these for 2021, should I just delete these and just make a note of them for when I actually do sell these ETFs?

Thank you!

[JohnB5677]

No, do not delete them.  

Did the ETF units deplete in accordance with the monthly fee sales?

Investment management fees for exchange-traded funds (ETFs) and mutual funds are deducted by the ETF or fund company, and adjustments are made to the net asset value (NAV).

Investors usually don't see these fees on their statements because the fund company handles them in-house. 

However, it sounds like the fund managers in this case want cash.  Therefore, they sell units of the ETF to pay the fees.

[orogozaru]

Thanks for your response.  They did not deplete the units, that probably would have been a lot easier to deal with.  They are wanting us to adjust our cost basis when they sell units of SLV/GLD.  I believe I found the correct way to deal with it (link below)... it is rather lengthy, so i'm just planning to take a short term gain for these fees.

https://ttlc.intuit.com/community/retirement/discussion/re-what-is-the-proper-way-to-adjust-the-cost...

Long story short, will never hold these type of trusts again in a taxable account, not worth the trouble.

[Jack100000]

I'll stick to GLD in my comment.  I don't believe what you said is correct, so I agree with orogozoru.  They don't sell "Units of the trust."  They sell some of the gold held in the case of GLD.  They then tell you to adjust your share cost basis according to the results of those sales, and tell you to determine whether you have a capital gain or loss as explained here: https://ttlc.intuit.com/community/retirement/discussion/re-what-is-the-proper-way-to-adjust-the-cost...

BTW, they use the term "unit" interchangeably with "share" in their prospectus, but the rules on tracking sales for fees differ from non-trust ETFs like SPY etc. 

That has to reduce the NAV by the amount of the proceeds.  Anyone buying the exact same shares from me the next day would be buying shares representing less gold, and the cash goes into the manager's pocket, so the NAV must be lowered by the manager.  That means that when the investor lowers his/her cost basis, the NAV is falling too, so it washes out except for the capital gain/loss on the sale of gold from the trust.  If they take $10 of gold out of your shares to pay their fees, they must also reduce the NAV of the trust by that same amount of gold. 

This is essentially a double hit to the investor, which in a "normal ETF" (non-trust) would simply be deducted from the gains.  Seems ridiculous to penalize investors that way.

That also means orogozoru who questioned you previously has to do these calculations to lower his cost basis in GLD etc. which will increase the gain and the resulting tax when sold.  The IRS does not appreciate "guesses" unless you overpay your tax.  But the way to simplify it for orogozoru and others would be to 1. Take the entire sale total for the year (add up all the months) as a capital gain and pay extra tax. and 2. Subtract the entire sale amount, not adjusted for the cost basis, from the prior year's ending cost basis.  That would maximize the tax owed both on any capital gain if there was one and maximize taxes at the time of sale of GLD shares, but would reduce the effort.  Take your pick!  I prefer to pay the tax owed, but to each his/her own.  😉

[Jack100000]

See my reply above.  You still have to adjust the cost basis of your shares as I describe IMO (as a non-accountant).  You can do it the quick and dirty way I describe.  But you have to account for the sales by the GLD trust TWICE - cap gains and then adjusted basis upon sale of GLD. 

It is a rip off by the SEC or whoever set up these ridiculous rules.  You can hold DGP in a taxable account btw.  Not perfectly liquid, but I haven't had big problems with that. They don't recommend it for a long term hold of gold as with all 2X, 3X etc. instruments.  If you do hold it over a year, there is no 28% collectible tax however as it's a derivative.  If your tax rate is lower than 28% I assume it would save you taxes on short term trades too.  IMO.  Maybe the "Expert" can respond to those assertions?