Disclaimer: CoinTracker is provided for informational purposes only. This service is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional. The information on CoinTracker is subject to change without notice. All information is provided "as is." CoinTracker disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Please see our full disclaimer.
By default, cost basis tracking for FIFO, LIFO, and HIFO happens universally. That means, there is one queue for each coin across every wallet that you have connected on CoinTracker. For example one queue for bitcoin, one queue for ether, etc. In the case of FIFO, the first BTC acquired is the first BTC disposed — doesn't matter if the first BTC you purchased is in Wallet A and the first BTC you sell is in Wallet B.
We now have an advanced feature in the settings that allows you to change the cost basis tracking (for FIFO, LIFO, and HIFO) to be per-wallet instead of universal. This means that there is a separate queue for each coin-wallet pair. For example one queue for bitcoin on Wallet A, one queue for bitcoin on Wallet B, etc. In the case of FIFO the first BTC acquired on Wallet A is going to be the first BTC disposed on Wallet A, even if there are other bitcoin disposals in Wallet B.
Here is an example:
Let's assume you are using FIFO (first-in first-out) accounting. Here is how the scenario would play out for universal tracking vs. per-wallet tracking.
- 1 BTC sold on April 2, 2017 corresponds to the 1 BTC purchased on May 1, 2012. Capital gain is long term ($1,000 - $100) = $900 long term capital gain
- 2 BTC sold on May 30, 2017 correspond to two of the three BTC purchased on May 10, 2016. Capital gain is long term 2* ($2,000 - $500) = $3,000
- Total Long Term Capital Gain = $3,900
- Total Short Term Capital Gain = $0
- 2 BTC transferred on May 31, 2016, by FIFO rules, are the one BTC purchased on May 1, 2012, and one of the three BTC purchased on May 10, 2016
- 1 BTC sold on April 2, 2017 corresponds to one of the remaining 2 BTC purchased on May 10, 2016. Capital gain is short term ($1,000 - $500) = $500 short term capital gain
- 2 BTC sold on May 30, 2017 correspond to the two BTC transferred on May 31, 2016. Capital gain is long term ($2,000 - $100) + ($2,000 - $500) = $3,400
- Total Long Term Capital Gain = $3,400
- Total Short Term Capital Gain = $500
Note: this is an advanced feature. The simplest and most conservative option is to leave this setting on universal, which is where it is by default. If you are unsure about this setting, do not change it without speaking to a tax professional as this may have significant impacts on your capital gains (and therefore tax owed).