This article is purely for informational purposes. Please note that CoinTracker migrated users in the US from the “universal” cost basis tracking method to the “per-wallet” cost basis tracking method. See more information about this change here.
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Cost basis is the total fair market value, or amount paid for, of an asset at the time you received it. When you sell or trade an asset, your original cost basis determines the capital gains or loss.
There are different ways to keep track of cost basis depending on your region-specific tax rules. The two most common tracking methods are “universal” and “per-wallet”:
- Universal: Under the “universal” tracking method, there is a single queue for each coin that aggregates across every wallet you have connected to CoinTracker. In other words, when you sell a coin from wallet A, the cost basis of the disposed asset may or may not come from walletA for accounting purposes.
- Per-wallet (also known as by-wallet): Under the “per-wallet” tracking method, there is a separate queue for each coin in each wallet you have connected to CoinTracker. In other words, when you sell a coin from wallet A, the cost basis of the disposed asset will onlycome from wallet A for accounting purposes.
Below is an example of these two tracking methods.
Here is how the scenario would play out for universal tracking vs. per-wallet tracking (for the purpose of this example, both cases use First In, First Out method (FIFO). For more on FIFO, see here.
Universal example
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1 BTC sold on April 2, 2017 is the 1 BTC purchased on May 1, 2012.
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Capital gain is long term ($1,000 - $100) = $900 long term capital gain
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2 BTC sold on May 30, 2017 are 2 (of the 3) BTC purchased on May 10, 2016.
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Capital gain is long term 2* ($2,000 - $500) = $3,000 long term capital gain
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Total Long Term Capital Gains = $3,900
Total Short Term Capital Gains = $0
Per wallet example
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2 BTC transferred on May 31, 2016, by FIFO rules, are the one BTC purchased on May 1, 2012, and one of the three BTC purchased on May 10, 2016
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1 BTC sold on April 2, 2017 corresponds to one of the remaining 2 BTC purchased on May 10, 2016.
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Capital gain is short term ($1,000 - $500) = $500 short term capital gain
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2 BTC sold on May 30, 2017 correspond to the two BTC transferred on May 31, 2016.
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Capital gain is long term ($2,000 - $100) + ($2,000 - $500) = $3,400
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Total Long Term Capital Gain = $3,400
Total Short Term Capital Gain = $500
Disclaimer: CoinTracker is provided for informational purposes only. This service is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional. The information on CoinTracker is subject to change without notice. All information is provided "as is." CoinTracker disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Please see our full disclaimer.