If you are like me and like to trade commodities like gold, silver, and oil (I have traded IAU, UCO, and SLV), you will simply need to do a lot more paperwork while filing your income tax return with the Internal Revenue Service (IRS). Even if you do your taxes using TurboTax, which pulled all my documents from the TD Ameritrade account, I was still stumped when it came time to complete the form related to these trades. So this is how it works. Unlike other equities that are simple buy/sell, the commodities are tricky. Basically, the owner, iShares, of this exchange traded fund (ETF) sells a tiny portion of your holding to cover their costs, and that is why you will see that each month there are trades that you have not made. In my case, the actual quantity was zero shares and the total proceeds were just $22.
So how to calculate the cost basis? I suggest that you plug the data in a spreadsheet. In first column, list the 12 months. In the second column, against each month, add the value of your holding for that month (this you will find in your monthly statement that should have been mailed to you or you should have in your online account). In the third column, enter for the respective month, the entry in the Additional Information column on your Proceeds from Broker and Barter Exchange Transactions form 1099-B. This is the so-called cost basis factor. Now create a formula, and multiply the value with this factor. You will see that the number you get is very close to the proceeds, but for a few months it can vary as well. In other words, you will now have the cost basis and that is what you enter (make sure that you enter the data against the correct month because while I expected them to be listed chronologically, Turbotax for some reason had them randomized). The Turbotax software will calculate the gain and loss, as long as you provide the date of purchase to figure out the short or long term holding tax rate. (Note: I must emphasize that this is not meant to be tax advice, I am not an accountant, but this is problem that I faced while filing my taxes and found the Turbo Tax software to be not helpful at all. I did some research and this is what I came up with, so use it at your own risk.)
So how to calculate the cost basis? I suggest that you plug the data in a spreadsheet. In first column, list the 12 months. In the second column, against each month, add the value of your holding for that month (this you will find in your monthly statement that should have been mailed to you or you should have in your online account). In the third column, enter for the respective month, the entry in the Additional Information column on your Proceeds from Broker and Barter Exchange Transactions form 1099-B. This is the so-called cost basis factor. Now create a formula, and multiply the value with this factor. You will see that the number you get is very close to the proceeds, but for a few months it can vary as well. In other words, you will now have the cost basis and that is what you enter (make sure that you enter the data against the correct month because while I expected them to be listed chronologically, Turbotax for some reason had them randomized). The Turbotax software will calculate the gain and loss, as long as you provide the date of purchase to figure out the short or long term holding tax rate. (Note: I must emphasize that this is not meant to be tax advice, I am not an accountant, but this is problem that I faced while filing my taxes and found the Turbo Tax software to be not helpful at all. I did some research and this is what I came up with, so use it at your own risk.)