cost-basis-methods

A methodology for when the same batch of assets alternates between active trading (buy/sell decisions) and passive state changes (like rebasing or exchange-rate accumulation) during the holding period — splitting the entire holding period into independent segments at each active trade's timing, applying the corresponding calculation logic to each, avoiding lumping two different types of change together.

When the same batch of assets gets split into two or more portions due to a partial transfer, partial sale, or partial allocation (such as a proportional <a href="https://crypto-bible.com/en/glossary/tokenomics/airdrop/" target="_blank" rel="noopener">Airdrop</a> distribution), each portion carries its own independent, proportionally allocated cost basis, and going forward, these portions' holding history and taxable events need to be tracked separately — they can no longer be treated as a single whole.

When realized capital losses in a given year exceed the capital gains available to offset, most major jurisdictions allow the excess to be carried forward into future years to continue offsetting tax, so a harvested loss doesn't go to waste just because there wasn't enough gain to absorb it that year.

FIFO, LIFO, and HIFO — the three cost basis calculation methods — mainly differ in the resulting tax amount under low-frequency trading, but under high-frequency trading, the choice of method also becomes a question of whether it can actually be executed in real time — some methods require explicitly specifying which batch's cost basis to use at the moment of the trade, and if the trading speed outpaces what a system or person can specify in real time, that method may simply be impossible to implement in practice.

When the same batch of crypto assets is transferred from one platform (exchange or wallet) to another, since the transfer itself doesn't constitute a disposition event, the original cost basis should carry over unchanged — it can't be reset to zero or re-established at the market price upon arrival at the new platform.

Three different methods for determining which specific batch of crypto is treated as sold, and therefore what cost basis applies when calculating capital gain or loss — the same sale can produce a very different taxable amount depending on which method is used.

The act of first minting a piece of digital content into an NFT objectively involves two independent cost sources at once — the <a href="https://crypto-bible.com/en/glossary/onchain-data/gas-fee/" target="_blank" rel="noopener">Gas Fee</a> paid to the blockchain network, and any additional fee a minting platform charges. These two fees together constitute this NFT's original cost basis, not just one of them, and the moment minting completes is when this asset's cost basis starts being calculated — not something that only begins once a subsequent transaction happens.