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.