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

[rudyrabbit]

@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

[kleje007]

@rudyrabbit 

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

[rudyrabbit]

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.

[rudyrabbit]

@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.

[kleje007]

@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.

[rudyrabbit]

@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.

[rudyrabbit]

@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.

[kleje007]

@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.

[kleje007]

@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.

[GeorgeM777]

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

[rudyrabbit]

@kleje007 

To the best of my knowledge, $0.01 looks correct.

[joachim451]

Did anyone else use Charles Schwab to buy and hold GBTC and ETHE? They don't even report these small transactions at all. Can I make a CSV myself and import it somehow?

Since I didn't sell any assets in my Schwab account, I didn't even get a 1099-B. From the few folks I've talked to there and at TurboTax, the consensus is I don't have to report, but I don't believe that is true.

I own iShares Gold Trust stock (symbol = IAU) through Robinhood and they are good about putting the monthly transactions on their 1099-B's, which is also less stressful to calculate (monthly, 0.25% exp ratio vs. weekly, 1.7% or whatever Grayscale's is)

[rudyrabbit]

@joachim451 

If it wasn't reported by Schwab, personally I wouldn't worry about it, as long as you don't take the expense deduction as well.  I've owned GBTC for 5 years and this is the first time anything was reported. 

Disclaimer: I'm just a dude on the Internet.

[scoaste]

If multiple purchases were made (all luckily prior to the proceeds date), would then:

B=Total Bitcoin Per Share for all dates you purchased GBTC

CxD=Total cost basis for all purchases ?

Also, what is the Principal payment Cost Basis Factor from my 1099-B used for?  I was thinking perhaps that factor X Total cost basis would be the adjusted cost basis?

And lastly, shouldn't the box 1d proceeds be a negative amount to reflect it was an expense?

I am so confused...

[jeepers11]

When is Turbo Tax going to step in and put something in one of the many Updates that we download?

Turbo Tax, please help us.