Hello!

As everyone probably knows, spot bitcoin ETFs were approved by the SEC on 10 Jan 2024 and are expected to begin trading on Thursday, 11 Jan 2024. While many probably do not care, there could be potential implications due to the tax treatment of income generated by the trust.

These new ETFs could generate what is known as Unrelated Business Taxable Income (UBTI). Per Blackrock's registration statement, they state "A U.S. Tax-Exempt Shareholder may recognize [UBTI in]... an investment in Shares." It's not just Blackrock, but they all mention it.

If your 401k plan has a "brokerage window" where you can purchase ETFs, some employers/plans block securities that are known to generate UBTI. Those securities issue an IRS Form 1065 (Schedule K-1) rather than a 1099 commonly see which causes more administrative work for those filing taxes for the retirement plan.

A brokerage IRA? Many custodians including Fidelity will file a Form 990-T with the IRS to report any UBTI earned from those investments. If the custodian concludes taxes are owed, they will deduct the amount from your IRA to pay the IRS. This could result in more work for you.

For non-retirement brokerage accounts, you could receive a K-1 in late Q1 2025. If you use tax software or can follow instructions, you'll have no problem!

As with every investment, do your own research. As these are registered products, read the disclosure documents that are publicly available via the SEC's website (EDGAR). Understand the fees you will pay owning shares and potential tax consequences.

Check the Table of Contents for "Tax" info as well as risks. For 401ks, also check the "ERISA" section or use CTRL+F to find those terms.

If you don't want to deal with any of that, just stack sats!