Gold ETF (IAU) cost basis adjustment for expenses

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DataDriver
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Joined: Sun Mar 12, 2023 4:52 pm

Gold ETF (IAU) cost basis adjustment for expenses

Post by DataDriver »

I have been following the guidance from iShares on the tax treatment of the monthly expenses for my investment in IAU (iShares gold ETF). This guidance and all the information needed for 2022 were released by iShares in the "Gross Proceeds File" (https://www.ishares.com/us/literature/t ... -2022.xlsx). The expenses are paid by selling a small amount of gold every month. Part of the proceeds from each monthly sale are capital gain or loss which is reported on form 8949 and the rest of proceeds are the cost of the gold sold which is used to adjust the cost basis. The Gross Proceeds File provides all the information needed to make these calculations for 2022 and provides an example. The net effect of these calculations is that the cost basis of my IAU has been very gradually decreasing. I have kept track of this for several years in a spreadsheet.

I had seen in other threads on this topic that there is an online calculator that can do these capital gain and cost basis adjustment calculations for gold ETFs, so I decided to give it a try to check my calculations and see if I could simplify my life. I punched my numbers into the calculator for IAU (https://www.costbasistools.com/gold/IAU.php) and discovered to my surprise that it was showing that my cost basis was gradually increasing, not decreasing as the monthly expenses were paid. The calculator is reducing the cost basis by the cost of the gold sold each month to cover expenses, but is then adding back in the entire monthly expense as a non-deductible investment expense. There is also a footnote at the bottom of the page which says: "After 2018, investment expenses are no longer deductible but non-deductible amounts can be added back to basis".

Is it really acceptable to add the non-deductible expenses back to the basis for a gold ETF?
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