CoinTracker can calculate the cost basis for NFT transactions when using recognized cryptocurrencies like ETH or MATIC for purchases or minting. Nonetheless, there are instances where CoinTracker may be unable to determine the cost basis or price for an NFT, resulting in a "missing price history" notification.
What to Do When CoinTracker Can't Determine NFT Cost Basis
When trading one NFT for another or receiving an NFT through airdrops without payment, you'll need to manually determine the NFT's value. This often requires using the "market approach" similar to methods used in real estate to value properties. Below are steps and considerations for this approach:
How do I manually determine the value of an NFT?
Timing: Calculate the cost basis and income when you receive the NFT, not when you update your records.
Comparability: Consider identical NFTs, similar NFTs within the same collection, or similar collections.
Reliability: Is the source you are using reliable? One marketplace could be significantly higher than another.
Availability: Sometimes, this information isn’t readily available or hard to find. Blockchain data (Etherscan), marketplaces (OpenSea, Magic Eden, Blur, X2Y2), or other sources (ex., Rarity Sniper, LooksRare) are places you can go to to get the information you need.
Example Scenarios
Scenario 1: John is whitelisted for an NFT launch and receives an NFT without a mint fee. The public mint price was 0.05 ETH (equivalent to $80). Using the market approach, John recognizes $80 as ordinary income and sets his NFT's cost basis at $80. If John sells the NFT the next day for $100, he realizes a short-term gain of $20.
If John opts not to use the market approach, resulting in a $0 cost basis, and then sells the NFT for $100, his short-term gain is $100.
Scenario 2: Jane receives a CryptoPunk as part of her compensation. She can establish her income and cost basis by examining sales of similar CryptoPunks around the time of receipt.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.