Technical Definition

Cost basis

Cost basis is the tax value assigned to an asset, generally based on acquisition cost and applicable adjustments, that is used when calculating gain or loss.

By Crypto University Editorial
Taxable eventFIFOForm 1099-DA

✦ Key Insight

Incorrect basis records can produce incorrect reported gains or losses and make tax filing more difficult.

✕ Common Misconceptions

Tax rules vary by jurisdiction and acquisition method. Do not assume every fee can always be added to basis.

Detailed Explanation

In the United States, basis is generally used to determine how much gain or loss results when an asset is disposed of. Digital asset basis depends on how the asset was acquired and applicable tax rules. The IRS provides specific guidance for digital assets.

In Practice

“A taxpayer buys crypto for $1,000 and later disposes of those units for $1,300. The basis is used when determining the taxable gain.”

Dig Deeper

FIFO

FIFO is an accounting identification method that treats the earliest acquired units of an asset as the first units disposed of when applicable rules require or permit that method.

Form 1099-DA

Form 1099-DA is a United States tax information form used by applicable brokers to report digital asset sales or dispositions to customers and the IRS.

Taxable event

A taxable event is a transaction or activity that creates a tax consequence under the rules of the relevant jurisdiction.

Capital Gain

A capital gain is the positive difference recognized when a capital asset is disposed of for more than its tax basis.