Because of their tax structure, the income and expenses of these ETFs flow through to shareholders. Small sales of the physically backed precious metals (such as gold bullion) occur in order to pay monthly expenses. These sales are then passed on to the shareholders. As a result, shareholders of these ETFs may have small sales reported on the 1099-B throughout the year. These are often recorded as “principal” or “return of capital” by the broker. Because these pass-through sales are technically sales of precious metal, they are taxed at the “collectibles” long-term capital gains rate, currently 28%.
To learn more, please see information posted by our partners at Green Trader Tax: Tax Treatment of Precious Metals.
The small sales of the precious metal are not imported into TradeLog software. Rather, they are handled separately for Schedule D reporting. Please see the IRS instructions for line 18 of Schedule D and the 28% Rate Gains Worksheet.
In addition, there may be adjustments that should be made to the cost basis of shares owned in the ETF. Shareholders should refer to tax guidance provided by the respective fund and/or tax advisor.
Links to popular precious metal ETF tax documents:
Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Cogenta Computing, Inc. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.