Commodities ETFs Can Be Confusing at Tax Time | Page 2 of 2 | ETF Trends

If someone bought 1,000 shares of a commodity ETF for a total of $25,030 in March and sold the shares in April for $25,850, then the net gain is $820.

The K-1 shows interest income of $107 (this was interested earned in the fund for the time period the investor owned the fund); it also shows an income loss of $76 (this was a loss within the fund during the period); and it shows other deductions of $16.  So the total, $15, represents what happened in the fund during the time the investor owned the fund.  This $15 is accounted for in the K-1.

What isn’t accounted for is the short-term gain (remember it was held for about a month) of $805 ($820-$15).  This is what needs to be accounted for on your tax returns.

Use the tax package that the fund company provides.  It should include a Schedule K-1, ownership schedule and sales schedule.  The sales schedule is a worksheet that uses numbers from the K-1 and ownership schedule to determine your capital gain or loss.  It also tells you exactly what number should be placed in what column on Schedule D.

If you find K-1s too confusing, most of the underlying indexes are also available in exchange traded note (ETN) form, which report on a 1099.

Disclosure: We are not accountants, this is not tax advice and this information shouldn’t be used in the preparation of your taxes. For specific direction and advice, contact your accountant.