Taxes in the USA and Fees

[Hoopster]

I searched all around the internet and there are some conflicting answers.

My questions are this:

1. Do I get to deduct the fees for acquiring the coin and the fees when I sell it, or just the fees when acquiring the coin?

2. Also how do I come up with the fees when they charge me by taking som of the coin itself for the fees and not USD?

Examples:

1. Let's say that I purchase a coin for $100.00 and the fees to acquire the coin are $1.00. My Cost basis would be $101.00 USD.
I then sell the coin for $200.00 and my fees are $2.00. wouldn't my total capital gains be: $97.00? since the total round trip was $3.00?

2. Some of my transactions show the fee was a percentage of the coin I purchased and some show they took USD for a fee. How can I come up with the capital gain on the coin they took out. Meaning do I need to go back and see how much I purchased the coin for at the time and then divide by the amount of coins they took out?

Any help would be appreciated.

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[figmentofmyass]

1. Do I get to deduct the fees for acquiring the coin and the fees when I sell it, or just the fees when acquiring the coin?

both, but technically you're not claiming a deduction, which generally means a separate line item.

what you do is:
1. add the fees charged when acquiring your coins to the purchase price. purchase price + acquisition cost = cost basis.
2. subtract the fees charged when selling your coins from the total sale price. sale price - selling costs = amount received from sale.
3. amount received from sale - cost basis = capital gains.

https://finance.zacks.com/stock-transaction-fees-taxdeductible-8284.html

2. Also how do I come up with the fees when they charge me by taking som of the coin itself for the fees and not USD?

when you buy coins and they deduct the fee in coins, your cost basis is literally just the total purchase price.

example: you buy 1 coin for $38k. they take 0.001 BTC in fees, which is 0.1%. you're cost basis is still $38k (for 0.999 BTC) because that's the original purchase price + fees paid.

1. Let's say that I purchase a coin for $100.00 and the fees to acquire the coin are $1.00. My Cost basis would be $101.00 USD.
I then sell the coin for $200.00 and my fees are $2.00. wouldn't my total capital gains be: $97.00? since the total round trip was $3.00?

-$100 + $1 = $101 cost basis, correct.
-$200 - $2 = $198 received from sale.
-$198 - $101 = $97. that's what i get as well.

2. Some of my transactions show the fee was a percentage of the coin I purchased and some show they took USD for a fee. How can I come up with the capital gain on the coin they took out.

that capital gain is not yours to report---you did not own it.

consider my example above. your position is for 0.999 BTC, not 1 BTC. the 0.001 BTC deducted as a fee belongs to the exchange, so you are not receiving any gains from it. the description of your property on form 8949 would be 0.999 BTC, and the cost basis would be $38k. when you sell at $40k and another 0.1% fee is deducted:

-$39960 - $40 = $39920 received from sale
-$39920 - $38000 = $1920 capital gains

exchange exports can make things seem a lot more complicated than they are. the key is to view each "position" (lot of coins held) as an all-inclusive dollar amount.

[xmready]

What happens if I deposit money into an exchange to trade, make a bunch of trades, and at the end of the tax year I am holding more BTC than dollars on the exchange? Since I went back and forth from BTC to USD multiple times, do I have to calculate capital gains on every trade even though I am holding mostly BTC at end of year?

[Hoopster]

Thanks for the example.

I just want to double check that my spreadsheet is correct.

Can you please look at this and tell me what you come up as far as capital gains?

I would really appreciate it.

         Price        Amount            Total               Fee        Fee Coin
Buy: 0.1555   570.6   88.72830000   0.5706   ADA

Sell: 0.1591   570           90.68700000       0.0907       USD
 

[figmentofmyass]

What happens if I deposit money into an exchange to trade, make a bunch of trades, and at the end of the tax year I am holding more BTC than dollars on the exchange? Since I went back and forth from BTC to USD multiple times, do I have to calculate capital gains on every trade even though I am holding mostly BTC at end of year?

yes, technically you need to report capital gain/loss for every time you sold BTC to USD.

even if you're holding 100% BTC now, that just means your current gains/losses are unrealized. that doesn't erase all the capital gains you made earlier in the year.

Thanks for the example.

I just want to double check that my spreadsheet is correct.

Can you please look at this and tell me what you come up as far as capital gains?

I would really appreciate it.

         Price        Amount            Total               Fee        Fee Coin
Buy: 0.1555   570.6   88.72830000   0.5706   ADA

Sell: 0.1591   570           90.68700000       0.0907       USD

cost basis = $88.7283
received from sale = $90.5963
capital gain = $1.87

*i am not a lawyer. this is not legal advice.

[Hoopster]

So you just do the math (subtraction) on the selling as the buying total is included even with the fee correct?

What happens if the sell coin is not USD and is the same like ADA?

[Hoopster]

What happens if I deposit money into an exchange to trade, make a bunch of trades, and at the end of the tax year I am holding more BTC than dollars on the exchange? Since I went back and forth from BTC to USD multiple times, do I have to calculate capital gains on every trade even though I am holding mostly BTC at end of year?

yes, technically you need to report capital gain/loss for every time you sold BTC to USD.

even if you're holding 100% BTC now, that just means your current gains/losses are unrealized. that doesn't erase all the capital gains you made earlier in the year.

Thanks for the example.

I just want to double check that my spreadsheet is correct.

Can you please look at this and tell me what you come up as far as capital gains?

I would really appreciate it.

         Price        Amount            Total               Fee        Fee Coin
Buy: 0.1555   570.6   88.72830000   0.5706   ADA

Sell: 0.1591   570           90.68700000       0.0907       USD

cost basis = $88.7283
received from sale = $90.5963
capital gain = $1.87

*i am not a lawyer. this is not legal advice.

Why wasn't the fee from when I bought it 0.5706 deducted from the $88.7283?

[figmentofmyass]

Why wasn't the fee from when I bought it 0.5706 deducted from the $88.7283?

because it was deducted from your ADA position. notice the discrepancy between the amount of ADA you bought and the amount you sold.

so you really bought 570 ADA for $88.7283---that's your actual cost basis, the price you originally paid. the fee is factored into the price.

So you just do the math (subtraction) on the selling as the buying total is included even with the fee correct?

in general, yes. exchanges charge fees on the currency you convert to, so when you buy ADA, your total price paid already includes the fees paid. the ADA gets deducted from your ADA balance, which doesn't affect the USD amount you paid. your cost basis is the USD amount you paid.

What happens if the sell coin is not USD and is the same like ADA?

like ADA/BTC? the same idea applies---when you convert to ADA, your fees are taken in ADA. when you convert to BTC, your fees are taken in BTC.

trading against BTC involves an extra step too. you need to calculate the fair market value (USD value) of your cost basis and sale proceeds, even though those are denominated in BTC. trading against USD or stablecoins is much easier for tax purposes.