What is the proper way to adjust the cost basis for the SLV / GLD ETFs that are structured as trusts, and have monthly expenses that show up on your 1099-B?

[craftindo]

thank you so much Jack.

[Jack100000]

That does not answer his question.  See my answer below please.  It's much more complicated than you are saying.  FYI.  

[fanfare]

"This seems strange that we're expected to pay taxes on a gain when the money is going to fees,"

 On your behalf, you had liquidated a part of your holding to raise money for a fee. That gives you a capital gain or loss.

IRS doe not give a hoot that you used that capital gain to pay a fee.

If you hold these securities in tax-deferred accounts, you don't have to report any of this.

Once I discovered the reporting hassle for regular taxable accounts, I dumped all those securities.

[Jack100000]

See my answer that is posted just below here: https://ttlc.intuit.com/community/retirement/discussion/re-what-is-the-proper-way-to-adjust-the-cost...

[Jack100000]

See my answer posted below if you have not yet seen it.  You can check it with your accountant of course, but I  believe I'm correct...  https://ttlc.intuit.com/community/retirement/discussion/re-what-is-the-proper-way-to-adjust-the-cost...

[Jack100000]

That is a great point, even though the rule is twisted!  They should be able to handle all this BS within the ETF price itself IMO.  But I appreciate the response.  😉

[orogozaru]

After reading through all the comments, if one were to have held SLV or GLD in a taxable account and had these fees come in, is the easiest thing just to put the cost basis at 0, pay taxes on the small amount of fees?  All this math for just a few dollars doesn't seem worth it....

[JohnB5677]

Yes, that is a choice you can individually make.

• However, the transactions must be reported.
• The IRS will not reject a "0" basis.
• But some people will find comfort in having an accurate cost basis. 

@orogozaru

[mpaul1970]

Thank you, I would have been lost without this.

[Jack100000]

You are welcome!

[Jack100000]

Hi orogozaru, As others said, you have to report a capital gain, no matter the size.  They don't care if you don't report a loss as that is money in their account.  The IRS is very good at spotting any omissions of data like this on your return, because the data is all collected from the brokers, which is why not reporting a gain is a bad idea. 

To determine whether you have a loss or gain, you have to calculate the cost basis of the gold sold for ETF fees as I detailed previously.  Once you've done that, you then simply subtract the cost basis of the gold sold from the proceeds of each month's sale for fees and the difference is a gain if positive, and a loss if negative.  (All the details are in my post.)  And then you subtract the sum of all the cost basis amounts from the cost basis of your shares at the end of the prior tax year.

Once you set up the spreadsheet I posted, you can do the calculations quickly each year, and likely save yourself the cost of a tax program or more unless your investment was small.   If it makes you feel better about doing the work, take the tax savings and donate it to charity.  😉

[lms_sc]

Do we have to add this to turbotax if we didn't sell anything for the year?

[orogozaru]

Yes, you do.  Even though you might not have sold shares, the trust sold the underlying asset.

It is up to you whether you want to calculate the cost basis as not, there are links in the discussion if you wish to do so.  Otherwise, you can use a basis of 0 and pay the short term taxes on it.   Either way, it definitely needs to be included

[lms_sc]

But it is showing as gross proceeds (principal payment) and investment expense equal to it. So confused.

[GeorgeM777]

Because you have asked about cost basis for SLV and GLD, it is appropriate to reference publicly available documents filed by those entities that discuss cost basis and taxation for Shareholders.  Regarding SLV, the 2021 Annual Report provides the following with regard to initial cost basis:

"In the case of a Shareholder that purchases Shares for cash, its initial tax basis in it pro rata share of the assets held in the Trust at the time in acquires its Shares will be equal to its cost of acquiring the Shares."

The 2021 SLV Annual Report also provides the following with regard to its sales of silver and how such sales may affect a Shareholders tax basis:

"When the Trust sells silver, for example to pay expenses, a Shareholder 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 silver that was sold."

Below is a link to the 2021 Annual Report for SLV.  The above quoted material can be found at page 10.  There is much more tax related information on page 10 and 11 which you might find helpful.  The link will take you to the iShares page, and the link to the 2021 SLV Annual Report is on that page.

Regarding the GLD that you currently own, the Trust issued a 2021 Reporting Statement to shareholders of record.  Pages 11 and 12 of that Reporting Statement provide a Step-by-Step analysis of a hypothetical shareholder who purchased GLD during 2021 and held the shares for the remainder of the year.  The analysis explains how to calculate the shareholder's adjusted gold held and cost basis.  

Here is a link to the GLD 2021 Reporting Statement.

2021 GLD Reporting Statement

iShares

@lms_sc