CGT follow up 30 day rule

torrence

Taxation principle question.

In the context of crypto investments (e.g. BTC, ETH or any) so for this example let’s call the crypto coin “CC”. When buying or selling crypto on platforms it’s not unusual to put in a buy order for 5 CC, and the platform match all sellers to buy at best. Prices change constantly and sellers may be selling whole or fractions of CC. As a result you end up buying 5 CC as follows:

1.0 @ 1,000.00
1.2 @ 1.000.03

0.6 @ 1.000.06

1.7@ 1.000.07

0.3 @ 1,000.07

0.1 @ 1,000.07

0.1 @ 1,000.08

Then let's say you buy 5 more a day, week, or month later:

3.0 @ 1,000.00

1.8 @ 1.000.02

0.2 @ 1.000.04

You now hold 10 CC purchased at between 1,000.00 and 1,000.08.

You then sell 3 CC and realise the following price (again you may place a sell order for 3 CC but the order is likely to be split among buyers at whatever is the market price at that moment):

1.0 @ 1,050.00

0.2 @ 1,050.06

1.8 @ 1,050.07

It is not practical to attempt to sell each separate fraction of CC to correspond with each fractional purchase. So what is the correct approach to assign a cost price to the 3 CC sold to calculate the capital gain?

When something is fungible such as CC are there any rules such as treating the order of sale to be the same as the order acquired (i.e. longest held is sold first?)

Any help, or even a working calculation for the above example would be appreciated!

eskbanker

I'm not an accountant but am not aware of any special treatment for assets of this type, so would expect that the usual rules apply, i.e. you need to calculate the weighted average unit purchase cost and deduct this from the proceeds of each sale to give the gain. Regardless of fungibility, in CGT calculations there's no concept of FIFO or anything similar that requires purchases to be recognised individually or correlated to sales, it's all about a homogeneous pot that has the same average value.

dont_look_now

If BTC are treated like shares (and why not?), then presumably the same day rule and the 30 day rule apply, and after that (as eskbanker says) the pooled cost.

So ...

Bundle all purchases on the same day together as one big purchase.

Bundle all sales on the same day together as one big sale.

Then go through the (bundled-together) sales, in chronological order ...

The same day rule: If there is any purchase on the same day as the sale, then match the sale with that purchase. If the purchase and sale are for different number of BTC, then the remainder of the bigger purchase/sale is not yet matched (and you use a proportion of the costs/proceeds in the match).

The 30 day rule: If you haven't matched the whole sale yet, then next look for any purchases in the following 30 days, taking those days in chronological order, and skipping any purchases already matched (viz. to sales on earlier days). Match with the whole remaining purchase, unless it's bigger than the remaining sale to be matched, in which case match with part of the purchase.

The default (pooled cost): If you still haven't matched the whole sale, then match (the rest of it — which will be all of it, if the same day and 30 day rules didn't apply) against a pool which consists of all purchases on days earlier than the sale except those already matched (to sales on earlier days) under the same day rule or the 30 day rule.

torrence

I understand eskbanker "pooled cost" idea but I'm not sure I understand the 30 day approach.
So as per my opening post example:
The first 5 purchased total cost total 5000.227 = average 1000.0454 
The next 5 purchased cost total 5000.044 = average 1000.0088

Total 10 all purchased cost 10000.271 = average 1000.0271

So at any time later if I sell 3 for a total of 3150.13 is the CGT cost calculation 3150.13 minus:

a) 3 x 1000.0454 (3000.1362)

or

b) 3 x 1000.0088 (3000.0264)

or

c) 3 x 1000.0271 (3000.0813)

?

dont_look_now

It's c), because that is the pooled cost.

The 30 day rule only comes into it if you buy more of the same coin after you start selling it. And the same day rule only comes into it if you buy and sell on the same day.

So, unless you complicate matters by buying more of the same coin after you start selling it (or buying and selling it on the same day), then you only need to consider the pooled cost. But if you do those things, it does become more complicated.

torrence

Not sure now about the 30 day rule!
If you buy over a period of months or years, you sum the total cost and total units to give an aggregate buy price per unit. This price is then used to calculate the gain per unit sold. That seems simple.

But if you need to rebalance your portfolio you have to buy again. So if you are buying and selling, say 2, 3 or 4 times a year (crypto is volatile so this could happen), how does this 30 day rule work?

E.g. you buy some CC and hold it for 2 years, then buy some more, then a week later buy more (so thats 3 buy orders, 2 years apart and 1 week apart). Then you sell some, and a week later buy some. Is the first sale calculated by the default aggregate buy price method, but the second sell is calculated by the 30 day method? Which method then applies going forward with future sales? And can anyone give a calcluation example? It looks like there is some carry forward maths and can be remainders left over.
Thanks!