Grayscale mulls over potential tax implications for spot Bitcoin ETFs - New Style Motorsport

The asset management firm declares that the Grayscale Bitcoin Trust falls under the grantor trust structure for tax considerations.

Grayscale is evaluating the possible tax consequences associated with spot Bitcoin

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exchange-traded funds (ETF) following inaccurate reports circulating about unfavorable tax implications.

In a series of posts on X (formerly Twitter), Grayscale clarified that retail investors of the Grayscale

Bitcoin Trust (GBTC) are not expected to incur tax implications when the fund sells Bitcoin to generate cash for meeting share redemptions.

As we work to obtain the appropriate regulatory approvals to uplist $GBTC to NYSE Arca, we’re

considering the potential tax implications for spot Bitcoin ETFs needing to sell $BTC holdings for cash to fulfill share redemptions.
Here’s why we’re talking about this now. (1/7)

— Grayscale (@Grayscale) December 15, 2023
Grayscale explained this is due to the GBTC being structured as a grantor trust, which means the entity

establishing the trust is the proprietor of the assets — in this case, the underlying Bitcoin — for income and tax purposes.

“Cash redemptions of grantor trusts are not taxable events for non-redeeming shareholders like retail

investors,” the post stated while explaining its difference from mutual funds:

“Unlike mutual funds and many other ETFs, substantially all spot commodity ETFs (e.g., gold) are

structured to be grantor trusts for tax purposes. We take the position that GBTC is properly treated as a grantor trust.”

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