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Level 1
posted Mar 7, 2022 10:23:58 AM

GBTC and ETHE trusts on 1099B Proceeds from Broker and Barter Exchange Transactions

On my 1099-B from Vanguard the Bitcoin and Ethereum trusts GBTC and ETHE respectively, show proceeds and date sold of these shares, even though I didn't sale any of them, it shows multiple items with date sold and quantity 0.000, and proceeds. Date acquired shows as N/A, which it's the reason I got a warning from TurboTax.

Has anybody experienced this? And what is the right way to proceed?

It wants me to update the Box 1b. Date Acquired, Box 1e. Cost basis, and Box 2 Type of Gain or Loss

3 60 11701
24 Replies
Level 15
Mar 7, 2022 10:27:47 AM

If you didn't sell anything and the sales prices are all zeros  simply  remove the unwanted entries that were imported.  

Level 1
Mar 7, 2022 10:42:49 AM

I was thinking the same but the proceeds have a $ amount that's bigger than 0. So I didn't want to make a mistake since this is not a normal stock

 

Level 1
Mar 10, 2022 9:37:45 PM

I think part of the issue is is that the amount of shares that Grayscale sell is so small that it doesn't necessarily show up on the 1099B, resulting in the "Quantity" being listed as 0.000

 

What I set up tonight was a sheet that takes the product of, the closing price of GBTC on the respective date, the Cost Basis Factor on the respective date, and the number of shares I held on that date.   

 

So for example this would result in something that looks like this for 1/8/2021:

(Closing price that date)*(Cost Basis Factor that date)*(Number of Shares)=Cost Basis 

$44.42*0.[removed]*100 shares=~$1.68 

 

Whereas the amount on the 1099B would be $1.42.

 

So I feel like in this case for the blanks in 1b I would put whatever day I purchased this stock, and in 1e I would put $1.68.  The sales category would depend on the purchase date compared to the date that Grayscale sold the stock. 

 

I am firmly not a tax expert however and it would be great to have someone else weigh in on this.

Level 1
Mar 12, 2022 7:12:04 AM

I also have this issue and not sure what to do to fix it.  I agree with having an 'expert' chime in.

Level 1
Mar 13, 2022 11:09:16 AM

I also have 24 transaction on my 1099-b:

example:

QTY = 0

Proceeds: really small amount (with a total of $25.25)

Cost basis factor 0.00047.... (really small)

 

I was thinking of just adding a cost basis of 0.00 on each entry of the 1099-b

 

Expert advise would be appreciated!

Expert Alumni
Mar 14, 2022 12:10:23 PM

@ckreuter @jeepers11  @kleje007  You are all correct - the problem is all of these tiny numbers.  They confuse the TurboTax program since it is designed to round to the nearest dollar as the IRS requires.  If you have only a few transactions with this issue then you can manually adjust them.  If you have a LOT of transactions then you should just delete the imported 1099-B and enter summary totals for the different sections.  You can then attach a copy of the 1099-B in pdf format and submit the return that way.

Level 1
Mar 14, 2022 6:58:38 PM

@RobertB4444 

Thank you for your response.

 

So it's simple enough to determine the sum of the proceeds, but the matter of how to determine the cost basis is still elusive.  Would it be equal to the sum of the proceeds (1d) or something more complex like the calculations I did on my earlier post in this thread?

 

Thanks again!

Expert Alumni
Mar 15, 2022 9:48:16 AM

Yes, you are correct, it would be the sum of the basis from box 1e.

 

@kleje007

Level 1
Mar 15, 2022 10:14:54 AM

@JulieS 

 

There's the problem though, there are no values in the 1e column to sum for these particular sales.   

 

 

Expert Alumni
Mar 15, 2022 10:29:56 AM

Over to the right it says principal payment, so that means the basis is the same as the proceeds. 

 

In other words, these sales are a return of principal, you have to report them because there is a 1099-B, but you show no gain or loss. 

Level 1
Mar 16, 2022 1:28:14 PM

I spent hours on this because of GreyScale (GBTC) accounting. I finally saw a note on a back page of my Americatrade 1099. It basically said to get the basis, if not provided, multiply your adjusted cost basis (cost in my case) of the investment by the cost basis allocation factor. I had no way to get the value of the asset for each stupid date, so I used my original investment amount  Not exact but it seemed to work. The whole process was a total wast of my time. The sale of Bitcoin to pay internal expenses should involve the investor to this extent.

GLD has a similar problem.

Level 2
Mar 19, 2022 5:05:18 PM

@JulieS 

 

Not true. What is being reported is the sale of Bitcoin held in the trust to cover fund expenses. There will be a capital gain or loss depending on original cost basis. This particular trust type passes everything through to the holder.

Returning Member
Mar 20, 2022 2:52:30 PM

Ugh this is turning into a headache. I like others here have multiple transactions reported on my 1099B form from my brokerage (77 entries) for GBTC and I did not sell any shares. It appears there is not a consensus on how to account for this in Turbotax. Logic would tell me that if I did not sell anything I should not have to report the transactions as a sale. I would be comfortable adding up all the proceeds and simply paying tax on that amount but there is no easy way to even do that.

Returning Member
Mar 20, 2022 2:58:24 PM

Hi Julie,

 

So are you saying in Turbotax we should report the cost basis as the same amount as the proceeds to consider each transaction basically a wash?

Level 2
Mar 20, 2022 5:54:13 PM

@jerryrs 

 

Same boat as you, no actual trades just the reported "proceeds". I just bit the bullet and entered all the info. Took about an hour+ after I made a spreadsheet to calculate my cost on each individual entry. Saved an entire $7 in taxes.

 

You need this file to do the calculation, plus the pdf that covers the year(s) of your purchases:

 

https://grayscale.com/wp-content/uploads/2022/01/Grayscale-BTC-Annual-Reporting-12.31.21-Final.pdf

Level 1
Mar 20, 2022 6:08:32 PM

@rudyrabbit 

Something like this?  I used the closing cost of the stock for each day of the sale of GBTC.

 
 
 

Level 2
Mar 20, 2022 6:13:32 PM

Oh Boy this was so much fun.

To calculate your cost basis:

A=Proceed amount

B=Bitcoin Per Share on the date you purchased GBTC (as reported on the appropriate PDF from Grayscale)

C=Total $ amount of purchases

D=Total shares owned

 

A÷(BxCxD)=Cost

 

AND PLEASE NOTE THERE WAS A 91:1 SPLIT YOU MAY HAVE TO ADJUST FOR DEPENDING HOW LONG AGO YOU BOUGHT.

 

Level 2
Mar 20, 2022 6:17:07 PM

@kleje007 

 

No the closing price of GBTC doesn't come into play for any transactions that were not sales of your holdings, just the reported "proceeds" ones. I just posted an equation to calculate cost.

 

 

To explain what is going on here, is holders of the trust have to pay taxes on whatever the trust does inside. To pay expenses they sell some Bitcoin off, which will generate a capital gain or loss depending on when you acquired GBTC.

Level 1
Mar 20, 2022 6:35:09 PM

@rudyrabbit 

 

So the share price was 1.5x higher on the day that Grayscale sold compared to the day that I bought, but using the equation you provided the cost ends up being 70x less than what the proceeds are.  Did you see a similar pattern? 

 

If I ever buy into a Grayscale fund again it's going to be in a tax-deferred account, I know that much lol.

Level 2
Mar 20, 2022 6:53:04 PM

@kleje007 

Again the share price has nothing to do with these "surprise" proceed reportings. This is so the trust can pass off taxes due on sales of Bitcoin to cover operating expenses. These transactions are based on your original allocation of Trust Bitcoins and the price of Bitcoin on the sales days which are different from the market price of the Trust.

 

 

Level 2
Mar 20, 2022 7:01:32 PM

@kleje007 

 

I might be misunderstanding what you are saying. There is a loose relationship between the trust price and the value of the sold Bitcoins as there should be, but the Trust is trading at a large discount to NAV.

 

Your cost is really going to be based on when you purchased and that price. I've owned it for almost 5 years so I'm sitting on a gain of 500+% however the underlying Bitcoin gain is closer to 900%. If you bought it at the high point then you probably will have some capital losses on some or all the transactions.

Level 1
Mar 20, 2022 8:12:57 PM

@rudyrabbit 

 

For sure.  

 

So let's say I bought 50 shares for $1479.45 with 0.00095BTC/Share at time of purchase, and Grayscale sold $0.71 worth on 1/8/2021.

 

That would be $0.71/(0.00095*50*$1479.45)= $0.01  

 

Would $0.01 go in for the cost basis for that particular sale?  Or did I calculate something incorrectly?

 

Thanks for your input on this.

Level 1
Mar 20, 2022 8:14:03 PM

@rudyrabbit 

 

I gotcha.

 

So let's say I bought 50 shares for $1479.45 with 0.00095BTC/Share at time of purchase, and Grayscale sold $0.71 worth on 1/8/2021.

 

That would be $0.71/(0.00095*50*$1479.45)= $0.01  

 

Would $0.01 go in for the cost basis for that particular sale?  Or did I calculate something incorrectly?

 

Thanks for your input on this.

Expert Alumni
Mar 21, 2022 9:23:09 AM

In order to calculate your 2021 taxable gain or loss from the sale of BTC to cover GBTC Trust expenses, you need to obtain the 2021 Grantor Trust Tax Information document.  That document will provide examples and a step-by- step process on how to determine your cost basis and any taxable gain or loss based on the data you have in your 1099-B.  Unfortunately, while we could access the 2020 Grantor Tax Information document, we could not locate the 2021 version of such document because access was denied.  However, you as a Shareholder in the Trust may have access to such document.  

 

We encountered the same issue with the Greyscale Ethereum Trust in that we could not access the 2021 Grantor Trust Tax Information document.  However, the version of that document for 2020 does contain relevant information on how to determine gain/loss from the sale of ETH tokens to pay Trust expenses.  That relevant information is contained in the last two pages of that document.  

 

@jerryrs

 

@rudyrabbitt

 

@kleje007