What are capital gains and how can ZenLedger help?

Tax authorities will tax individuals based on the capital gains from an investment. Generally, the Gain or Loss equals the difference between the value of a coin at the time it was purchased minus the value when you sold or traded the coin. If you buy and sell many coins over time, this can get complicated. ZenLedger takes the mystery of cost basis away by stitching together your trading history and exporting based on the accounting method you select.

For any cryptocurrency being taxed, we find the appropriate incoming transaction and the find its fair market price in US dollars at the time it was bought, and use it as the cost basis for the taxable transaction.

Choosing between our supported accounting methods when running your reports affects cost basis. Consult a tax professional to determine which method you should use, and stick with it.  

Cost Basis Accounting in ZenLedger

First In, First Out (FIFO) - cost basis is based on OLDEST purchase first
Last In, First Out (LIFO) - cost basis is based on NEWEST purchase first
Highest in, First Out (HIFO) - cost basis is HIGHEST value purchase first

Examples of Taxable Events

  • Selling cryptocurrency for fiat currency such as USD
  • Paying for goods or services
  • Exchanging one cryptocurrency for another cryptocurrency
  • Receiving mined or forked cryptocurrencies

The following are not taxable events according to the IRS:

  • Buying cryptocurrency with fiat money and "HOLDing"
  • Donating cryptocurrency to a tax-exempt non-profit or charity
  • Making a gift of cryptocurrency to a third party within IRS allowable limits
  • Transferring cryptocurrency between wallets and exchanges ("self-transfer")

Can I get a more detailed guide to taxes on my cryptocurrency investments?

Our up-to-date 2019 Guide to cryptocurrency taxation, based on IRS guidance and reviewed by a CPA, can be found in this article.

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