Why is TT leading me to pay taxes on the monthly expenses for WHFITs like GBTC, GLD and SLV? They are expenses not gains. Why is cost basis not = to sell price?

[GeorgeM777]

For federal income tax purposes, it appears that you hold certain funds which are considered “grantor trusts”.  You’ll need to take a few extra steps to calculate your adjusted cost basis for these investments and then report them on your taxes. This is because the income from the trust is taxed to the grantor, and not the trust itself. In this structure, you’re treated as owning the underlying assets directly. So the income taxes from the trust “flow through” to you, the Shareholder. 

Because grantor trusts generally do not generate cash flow, they must sell a portion of their underlying assets to cover trust expenses. These sales will be reported by you on your tax return, and the cost basis for these sales will need to be computed for that purpose.  However, grantor trusts publish on their websites tax statements in which they disclose these asset sales, which you can use to compute your taxes. 

If you sold or redeemed an interest in a grantor trust during the tax year, the sales proceeds will be reported on your Form 1099-B. Because these funds are considered “non-covered”, you’ll need to keep track of and report the cost basis info on your Form 8949.  Non-covered cost basis means that your brokerage firm is NOT responsible for reporting cost basis information to the IRS, and they’ll only report the sales information. For non-covered securities, you’re responsible for reporting cost basis information to the IRS when you file your taxes. If you don’t report your cost basis, the IRS considers your securities to have been sold at a 100% capital gain, which can result in a higher tax liability.

@Robin-Hued 

[wistful]

I held GLD and SLV in 2021 and received a 1099B showing  monthly "distributions".  Under "Proceeds" the total of these was summarized.  Also under "RECONCILIATIONS, FEES, EXPENSES AND EXPENDITURES" on the summary was the same amount listed as "Fees and expenses - Other expenses."

So are they expenses or income? 

I have calculated the cost basis so I know the "income" actually received.

[RobertB4444]

Weirdly, they are both.

In order to pay these expenses you had to have a portion of your investment sold.  Since the fees that you paid are no longer deductible you sell these investments and then either make a profit or a loss on the sale.  The IRS charges tax on that sale and then you use the money to pay your fees.  

If the expenses were allowed to be deducted on your tax return then this would be a zero sum transaction.  But since they are not you have to pay taxes on it.

[packerpat31]

So how is it calculated for 2021?  Is there a formula or spreadsheet to use to do the calculation?

[wistful]

Replying to packerpat31

If you find a spreadsheet let me know.  I followed end note 16 on 1099B

[RobertB4444]

@packerpat31 and @wistful  There isn't a formula or spreadsheet.  

If your broker charges you a $100 fee and then they sell $100 worth of stock in order to pay that fee the amount that is taxable depends on how much you paid for that stock subtracted from how much you sold it for.

So in the case of that $100 if you bought that stock for $50 then that is a $50 profit and that is the amount that is taxable.

The amount of fees that you pay never enters in to the calculation.