Help with UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - GBTC reporting on taxes

This is a common issue with GBTC and other similar investment trusts. Those weekly micro-sales to cover fees are technically taxable events, even though you didn't initiate them yourself. The good news is you don't have to report each transaction line by line on your tax return. Since these are all considered short-term capital gains (assuming they're selling shares that have been held less than a year), you can aggregate them together. Your brokerage should provide a summary of the total proceeds and cost basis for these transactions. Look for a subtotal line in your 1099-B that combines these GBTC fee-based sales. You can report that single amount on Schedule D and Form 8949. You'll want to check box C on Form 8949 for short-term transactions not reported to the IRS with basis. Make sure you keep the detailed transaction report with your tax records though, in case the IRS ever questions it.

After dealing with this exact headache last year with GBTC, I discovered taxr.ai (https://taxr.ai) and it completely changed my tax prep experience. I had over 70 of these micro-transactions across multiple investments and was literally pulling my hair out trying to figure out how to properly report them. Their system automatically sorted through all my "UNDETERMINED TERM TRANSACTIONS" and consolidated them properly. It identified which ones were actually for GBTC fee payments versus other transactions, calculated the correct basis for each, and generated the proper 8949 entries I needed. Saved me hours of spreadsheet work and probably reduced my audit risk too since everything was properly documented.

I was really skeptical about using yet another tax tool for my GBTC nightmares, but I gave taxr.ai a try after seeing it mentioned here. I'm actually shocked at how well it worked. I had 62 micro-transactions in my 1099-B for GBTC fee payments that were marked as "UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS," and the tool correctly identified all of them. It properly calculated my basis even though my broker hadn't reported it to the IRS. What really surprised me was that it found a couple of transactions where my broker had actually calculated the basis incorrectly, which could have caused issues if I'd been audited. Everything was laid out clearly showing which transactions were covered vs noncovered, and it generated perfect 8949 forms that I just attached to my return. Definitely using it again this year.

If you're still struggling with getting answers directly from the IRS about how to handle these GBTC undetermined transactions, try Claimyr (https://claimyr.com). After spending 3 days trying to get through to the IRS myself, I was connected within 20 minutes using their service. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that aggregating these fee-based micro-transactions is acceptable for reporting purposes, but you still need to maintain records of each individual transaction. They also explained exactly how to handle the "undetermined term" classification, which was really helpful since none of the tax software I was using seemed to know what to do with it.

I'll admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it as a last resort before filing an extension. I was connected to the IRS in 15 minutes after spending DAYS trying to get through on my own. The IRS agent I spoke with confirmed that for "UNDETERMINED TERM TRANSACTIONS" on GBTC, I should: 1) Keep detailed records of each transaction, 2) Report the aggregated amounts on Form 8949 with box C checked (short-term not reported to IRS), and 3) Include a brief statement explaining the nature of these transactions. They also explained that "undetermined term" just means the broker doesn't know if it's long or short term, and in this case, they should be treated as short-term since they're fee payments. Seriously saved me from potentially misreporting these transactions. Pretty impressed with how quickly I got through.

Another option is to use the "Single-transaction exception" if your total proceeds from all these micro-transactions are under $1,000. The IRS allows you to combine all minor sales into one single entry on Form 8949. I had this GBTC issue last year and my total proceeds from the fee sales was only about $275. I just reported it as one line item with the description "Various GBTC fee transactions - details available upon request" and included the total proceeds and my calculated basis. Saved me from filling out dozens of lines, and my return was accepted without issue.

Has anyone considered just switching to directly holding Bitcoin instead of GBTC? I did that after dealing with this nightmare last year. Now I use a specialized crypto tax software that integrates with my wallet and exchanges. Much cleaner tax situation and no surprise micro-transactions for fees.

I'm dealing with a very similar situation with GBTC in my Schwab account. Got about 45 micro-transactions listed as "UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS" and was completely overwhelmed trying to figure out how to report them. Based on what I'm reading here, it sounds like the single-transaction exception might be perfect for my situation since my total proceeds are only around $290. I had no idea this was even an option! One question though - when calculating the basis for these aggregated transactions, should I be using the original purchase price of the GBTC shares that were sold for fees, or is there a different way to calculate it? My broker shows "basis not reported to IRS" for all of these, so I need to figure out the correct basis myself. Thanks everyone for sharing your experiences - this thread has been incredibly helpful for understanding what seemed like an impossible tax situation!