When a token changes names, it's really important that we represent that name change in TaxBit. We use the name of the token to keep track of the asset's price. If the name change is not represented, your gains and losses for the new assets may be incorrectly calculated.
At this time, the IRS hasn't released clear guidance on exactly how to handle this situation, so how you represent that in your taxes is up to your discretion. Luckily, we're here to help you make an informed decision.
We've identified two options for our users in this situation. You can either record a sale of the old token and a subsequent buy of the new token, or you can record a trade of the old token for the new token.
In both cases, you'll want to manually add those transactions using the same date that the token name changed. If needed, you can reference our guide on adding manual transactions, found HERE.
Note: Make sure that when you add a transaction, you add it under the same source you were holding the asset when the name change happened. I.e. If your token was on BlockFi when it changed names, all transactions related to the name change must have BlockFi as the source.
1. Add a sale transaction where you sell ALL your holdings of token A for the same amount of money as your cost basis (to ensure you don't record any gains or losses).
2. Add a buy transaction for the new token using the amount in FIAT you sold the old token for in part one (this will ensure the cost basis get's passed on correctly).
1. Add a trade where the old asset is being traded directly for the new asset. While this method is pretty straightforward, you will end up potentially incurring gains or losses if the value of the the old token has changed since you received it.
Which method should I use?
As mentioned, the IRS hasn't given clear guidance on how to handle token name changes. As such, it's up to the individual user to decide how they want to represent them in their taxes. The big difference between the two methods is whether or not there will be gains/losses associated with that switch or not.
If you're still not sure how to record your token conversion on TaxBit, send us an email at firstname.lastname@example.org! You can also reach out to use via live chat, and any of us would be happy to help.