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Author: Admin | 2025-04-28
Platform called Coinbase Pro (formerly called GDAX) where you can trade your crypto-currencies for other crypto-currencies. Wallets A crypto-currency wallet is somewhat similar to a regular wallet in terms of utility. A crypto-currency wallet does not actually store crypto, but rather stores your crypto encryption keys, communicates with the blockchain, and allows you to monitor, send, and receive your crypto. Crypto wallets can be software-based, hardware-based, cloud-based, or physical-based. Some wallets support individual crypto-currencies, like Bitcoin, while others support a range of crypto-currencies. Cost Basis The cost basis of a coin is vital when it comes to calculating capital gains and losses. The cost basis of a coin refers to its original value. Here’s an example: You buy 1 BTC for $6,500. The cost basis for that 1 BTC would then be what you paid, $6,500. Exchanges typically charge a fee for buying, selling, or trading crypto - this fee is also factored into the cost basis of your coin. Consider the above example - if you paid $6,500 for 1 BTC and you were charged a $100 fee, your cost basis would be $6,600. Capital Gains & Capital Gains Tax The United States, and many other countries, classify Bitcoin and other crypto-currencies as capital assets – this means that any gains made are treated like capital gains. Bitcoin is classified as a decentralized virtual currency by the U.S. Treasury and as a commodity by the US Commodity Futures Trading Commission (CFTC). The IRS classifies Bitcoin as a property, which is the most relevant classification when it comes to figuring out your crypto-currency gains and losses. A capital gain, in simple terms, is a profit realized. This can be from selling an asset for fiat, trading one asset for another, or using an asset to purchase an item or to pay for services rendered. Please refer to the “Taxable Events” section for a more in-depth look at the types of events that can incur capital gains. A capital gains tax refers to the tax you owe on your realized gains. If you profit off utilizing your coins (i.e., trading, selling, etc.), those profits are taxed. Any losses you incur are weighed against your capital gains, which will reduce the amount of taxes owed. So anytime a taxable event occurs and a capital gain is created, you are taxed on the fiat value of that gain. A simple example: You buy
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