Grayscale Bitcoin Trust spun off Grayscale Bitcoin Mini Trust effective July 31,2024 in a transaction meant to be tax-free to GBTC shareholders. Grayscale Bitcoin Mini Trust began normal trading on July 31, 2024. GBTC shareholders received 1 share of BTC for each share of GBTC owned.
This action is a simple spinoff transaction in the accounting software. It is structured to be a non-taxable event for GBTC shareholders according to the shareholder prospectus. The cost basis allocation information is calculated from the average of the opening and closing prices of BTC and GBTC on the spinoff completion date, July 31, 2024. This method to determine fair market value of the post spinoff companies is commonly used. A link to IRS Form 8937 was not available at the time these instructions were written.
Detailed information on this spinoff can be found in the SEC filing on the EDGAR site at https://www.sec.gov/Archives/edgar/data/2015034/000119312524188943/d785023d424b3.htm
The SEC filing indicate GBTC will retain 90% of its pre-spinoff bitcoin. Using the average of the opening and closing prices of BTC and GBTC on July 31, 2024 also gave a Remaining basis percentage of 90%. This value will be used in these instructions.
NOTE:
The SEC filing for this transaction included many warnings that the IRS may not agree with the interpretation of tax law used by the company. This transaction may need to be edited to reflect changes in status due to IRS action.
The cost basis allocation is dependent on the prices used for both Grayscale Bitcoin Mini Trust and Grayscale Bitcoin Trust in the cost basis allocation calculations. In our experience brokers tend to use the prices found in the guidance companies post on their websites including IRS form 8937. If available, our instructions will use the guidance in form 8937. If your broker does not use that guidance, or form 8937 is not publicly available, the cost basis of the companies involved as recorded in your accounting records and in your broker’s records may not match. This is not cause for concern. This is just due to the inexact nature of the tax code in this regard. Partnership tax returns have specific areas to reconcile these usually small differences. ICLUBcentral tax printer software automatically fills in these adjustments in the normal operation of the software using the data imported from your accounting records and that you enter from your 1099.
The structure of the trust means BTC shareholders are treated as individually holding a pro rata share of the bitcoin held by the trust. When the trust sells bitcoin to pay expenses, shareholders are treated as selling a portion of their bitcoin and may realize gain or loss when the trust pays expenses. In addition. myICLUB does not support bitcoin investments and holding shares of BTC is treated the same as holding bitcoin for tax purposes.
The Spinoff Entry
Go to Accounting > Securities > Record spinoff of securities in myICLUB.com. If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.myiclub.com/faq/article.aspx?id=54
Here is the information you need to complete the spinoff.
Save the transaction and the spinoff has been entered.
