CoinTracker calculates the cost basis for NFT transactions using recognized cryptocurrencies like ETH or MATIC. However, in some cases, it may not be able to determine the cost basis or price, triggering a missing price history notification.
What to do if CoinTracker can't determine NFT cost basis
When trading NFTs or receiving them via airdrops without payment, you'll need to manually determine the NFT's value. This requires using the market approach similar to real estate valuation. Here are the steps and considerations for this method:
- Timing: Calculate the cost basis and income when you received the NFT, not when you update your records.
- Comparability: Consider similar NFTs within the same or similar collections.
- Reliability: One marketplace could be significantly higher than another. Make sure the source you’re using is reliable.
- Availability: Sometimes, this information isn’t readily available or hard to find. Blockchain data (Etherscan), marketplaces (e.g., OpenSea, Magic Eden, Blur, or X2Y2), or other sources (e.g., Rarity Sniper or LooksRare) are places you can go to to get the information you need.
Examples
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 ($80). Using the market approach, John recognizes $80 as ordinary income and sets the NFT's cost basis at $80. If he sells the NFT the next day for $100, he realizes a short-term gain of $20. If John doesn’t use the market approach and sets the cost basis to $0, his short-term gain is $100 when he sells the NFT for $100.
Scenario 2: Jane receives a CryptoPunk as part of her compensation. She can establish her income and cost basis by comparing sales of similar CryptoPunks around the time she received it.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional. Please see our full disclaimer.