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Track wrapped crypto transactions

This article applies to US customers only.

  • Wrapped crypto are crypto tokens that maintain the same value across different blockchains. 
  • They bridge gaps between blockchains, allowing for greater functionality and efficient fund transfers, which are essential for decentralized financial (DeFi) applications. 

Using the wrap category

Here are scenarios to change the category of a trade transaction to wrap:

  • Tokenize a cryptocurrency, converting it into a wrapped version for specific blockchain networks and activities.
  • Unwrap a token, converting it back to its original form.

Set wrap transactions as non-taxable

You can choose to treat wrap transactions as non-taxable in your CoinTracker tax settings. We recommend consulting a tax professional before changing your tax settings, as tax implications can be complex and vary by country and other factors.

Note: This feature isn't available in all countries. Availability depends on local tax guidance and how wrap transactions are treated in your region.

  1. Navigate to the Settings page.
  2. Select the Tax tab.
  3. Toggle on Treat wrapping as non-taxable. 
  4. Select a start date.
  5. Select an end date (optional), then click Next.
  6. Review the details and click Confirm & save to finish.

You must choose an effective date for tax purposes. Transactions marked as wrap after this date won't be taxable. The default date is based on your country's tax year.

To turn this setting off, toggle the feature off.

When wrap transactions are treated as non-taxable

  • Transfer of cost basis: The cost basis of the outgoing crypto is transferred to the incoming crypto, retaining the original purchase details.
  • Acquisition dates:
    • Single-In-Single-Out (SISO) transactions: The acquisition date of the outgoing crypto is applied to the incoming crypto. 
    • Multiple-In-Multiple-Out (MIMO) transactions: The transaction date becomes the acquisition date for the incoming crypto.

Example: Single-In-Single-Out transactions

If ETH was bought on 1/1/22, then wrapped in WETH and received on 1/10/22:

  • The acquisition date for WETH on your 8949 tax form would be 1/1/22, not 1/10/22.

Later, if you traded 0.5 WETH for an NFT on 2/1/22:

  • The acquisition date for the 0.5 WETH would still be 1/1/22, not 1/10/22.

If you unwrapped 0.5 WETH for 0.5 ETH and sold the 0.5 ETH on 2/1/22:

  • The acquisition date for the 0.5 ETH would be 1/1/22.

Example: Multiple-In-Multiple-Out transactions

If 1 ETH and 1 cbETH were bought on 1/1/22 and wrapped into WETH and received on 1/10/22. Later, when WETH is unwrapped on 2/1/22 and 2 ETH is received and sold the same day:

  • The acquisition date for the 2 ETH will be 1/10/22, not 2/1/22.

Disclaimer: CoinTracker is provided for informational purposes and is not intended as tax, audit, accounting, investment, financial, or legal advice. For financial, tax, or legal advice, please consult your own professional. See our full disclaimer.

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