Understanding Cost Basis is Crucial for Crypto Tax Compliance
Calculating the cost basis of your crypto assets is essential for accurate tax reporting.
When you sell or dispose of cryptocurrency, you need to know your cost basis to calculate your gain or loss. Your cost basis is the original amount you paid for the cryptocurrency, plus any additional costs you incurred, such as transaction fees or mining expenses. If you sell or dispose of your cryptocurrency for a higher price than your cost basis, you will have a capital gain. If you sell or dispose of your cryptocurrency for a lower price than your cost basis, you will have a capital loss.
The identification of in-scope crypto assets requires a detailed understanding of the specific nature of the crypto.
Not all crypto assets are created equal. Some crypto assets are considered securities, while others are considered commodities. The classification of a crypto asset will determine how it is taxed. For example, if a crypto asset is considered a security, it will be subject to capital gains tax when it is sold. If a crypto asset is considered a commodity, it will be subject to ordinary income tax when it is sold.
Useful life to a cryptocurrency for the purposes of IAS 38 but this cannot be done under FRS 102.
IAS 38 is an accounting standard that governs the accounting for intangible assets. Under IAS 38, intangible assets are amortized over their useful life. However, FRS 102, the UK accounting standard, does not allow for the amortization of intangible assets. This means that cryptocurrencies cannot be amortized under FRS 102.
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