Tax authorities will tax individuals based on the capital gains from an investment. Generally, the Gain equals the difference between what you bought the coin at and what you sold the coin at. If you buy and sell many coins over time, this can get complicated.

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 fraction being taxed.

Choosing between First In, First Out (FIFO) and Last In, First Out (LIFO) treatments can affect cost basis.

Link to IRS -The cost basis for capital gains and losses

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