In 2017, many have invested in Bitcoin Investment Trust (Ticker: GBTC) because it is easier to trade in and out of in terms of liquidity.
As such, one might expect all of their tax considerations to be reported on their broker statement, Form 1099-B, similar to trading stocks on the stock market.
But like with all crypto, there is more than meets the eye, even for a "crypto stock" such as GBTC.
GBTC Shareholders - Don't Miss This!
The term "Shareholder" is used below for simplicity in referring to the owners of the trust
- GBTC claims it is treated as a Grantor Trust for U.S. tax purposes. Every time GBTC buys/sells cryptocurrency, the shareholders are treated as making these purchases directly for tax purposes, even though expenses don't come out of shareholder's pockets, and income is not necessarily distributed to shareholders.
For example, a 1% shareholder of the trust is treated as buying/selling 1% of the Trust's assets under the grantor rules.
- In 2016, the Trust released a tax information statement which is intended to assist shareholders with reporting tax consequences of their grantor trust holding on their tax return.
Link at the bottom of this email, a similar statement expected for 2017. It's possible more information was mailed directly to owners related to 2016 taxes, but I was not an owner in any point in 2016 and thus cannot verify this.
- Per the tax statement, GBTC/brokers did not need to file a Form 1099B to report the buying/selling in 2016 because the trust did not make distributions to shareholders and it claims it only paid out deminimis expenses.
As explained below, it is possible there is a different set of circumstances in 2017.
- Contact your tax advisor because this is gets complicated quick - there is a 6-step process in the letter.
- For investors that sold their holding in GBTC in 2017, it is possible the sale could be reported on a broker statement 1099-B (I have not yet verified this point but it makes logical sense).
- GBTC issued a distribution of cash proceeds from the sale of Bitcoin Cash in 2017.
Cash was issued to shareholders of record in late 2017, so presumably (not yet verified) this is reported on either a 1099-B or the trust statement
- GBTC began a 90-day window of selling Bitcoin Gold received in the 2017 hard fork, in December of 2017.
Even though cash was not distributed to shareholders, this is potential taxable income, so presumably (not yet verified) this will also be reported on form 1099-B or the trust statement.
- GBTC declared abandonment of the Bitcoin Diamond hard fork currency.
- Takeaway - My recommendation is don't rush to file 2017 taxes without making sure all the considerations of holding GBTC in 2017 are accounted for.
The actual GBTC statement/1099-B's could end up different than I have discussed due to the significant new activities in 2017 (addressing forks etc.)
Detailed Analysis (Old)
More information below: https://steemit.com/money/@cryptotax/bitcoin-investment-trust-gbtc-tax-structure-ctb-off-topic
Disclaimer: This series contains general discussion of U.S.
taxes in a developing and unclear area of tax law. As always, you should consult your own tax advisor in your jurisdiction to determine your specific situation as this is not personal advice; and consider any future guidance by the Congress/IRS after the date of this article. Under Circular 230 to the extent it applies, this article cannot be used or relied on to avoid any tax or penalties in the U.S., its States or any other jurisdictions.
Bitcoin Investment Trust (GBTC) - Investing in Cryptocurrency - Bitcoin IRA Stock Market
This post/book does not create a client relationship between the author and the reader. This is not a recommendation to invest in GBTC or any other cryptocurrency.
Author holds a position in GBTC (and trades in/out of the position occasionally)