While you're working on getting all of your data into your TaxBit account, you may come across an "Unknown Gains" message, or a small yellow "i" next to some transactions. This article will explain what that means, and how to resolve it (spoiler, it means you have missing cost basis).
Crypto is a capital asset, and capital assets are not taxed when you purchase them, but rather when you dispose of them (selling your asset or trading it for another asset). You're taxed on any gain in value your asset/crypto realized during the time that you held it. I.e., if you buy 1 Bitcoin on Jan 1st for $1,000, and sell it on Feb 1st for $2,500, you're taxed on the $1,500 gain in value your Bitcoin realized while you were the owner.
Imagine a scenario where you bought that 1 Bitcoin on Coinbase > Transferred it to Binance > Sold it on Binance. While you're setting up your TaxBit account, you only connect your Binance. We'll have record of you selling 1 Bitcoin, but we don't have record of when you bought it. You would likely see "Unknown Gains" on that sale of 1 Bitcoin, until you connected your Coinbase, and we were able to access record of when you purchased that Bitcoin.
Included in this article you will find:
- How to know if you are missing cost basis
- Identifying Missing Cost Basis
- Resolving Missing cost basis
How do I know if I am missing Cost Basis?
Whenever a transaction is missing cost basis, it will be displayed in your account with a small yellow i symbol:
All cost basis missing -
When you see Unknown Gains this means that based on your current cost basis pool (the available assets that have not been disposed of already from transactions where you obtained an asset) we do not know how much any of the disposed asset was purchased for. If you generate your tax forms with unknown gains transactions still in your TaxBit account, these transactions will not be included on your form 8949.
Partial cost basis missing -
If you see the i symbol next to a gain or a loss, then it means we are missing some of the cost basis. This means that your cost basis pool provides enough data to identify how much you paid for a portion of the asset that was disposed of, but not the entirety of it. If you generate your tax forms with a partial cost basis transaction, then your form will reflect the partial cost basis as the entirety of the cost basis. This can create the appearance of larger gains, or smaller losses than what actually happened.
Identifying Missing Cost Basis
If you would like to determine exactly how much of a particular transaction’s cost basis is missing, you can do so by clicking on the transaction, and using the + sign to expand the cost basis history.
- This is a summary of the transaction, you can see exactly what was sent (on the left), and what was received (on the right).
- This is the total value of what was sent, at the moment the transaction took place
- This section summarizes what assets have an established cost basis. You can see the amount of the asset obtained, and the value of it at the moment it was obtained.
- This section shows what assets are missing their cost basis.
Resolving Missing Cost basis
In order to resolve missing cost basis, you will need to locate the transaction where the asset was obtained, and record that in your TaxBit account. Once the cost basis is added into your TaxBit account, your gains and losses will be recalculated to reflect this. The yellow i symbol will no longer appear next to the transaction once the entirety of the cost basis has been made available in your transaction history.
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