I have noticed that when you receive a reward, that is, an amount of currency at zero cost, the average cost for that currency increases. If I put in more currency at zero cost, the average cost would decrease, wouldn’t it? Thanks!
Koinly uses the Fair Market Value as the Adjusted Cost Basis for rewards. That’s why you see an increase in the average cost. I am not sure whether Rewards count as a “gift” for tax purposes or not. I’m confused too.
@ConorIA’s answer is correct. Any coins you receive are given the Fair Market Value at the time of the transaction so you wont have a zero cost for them. However you can change the value of the transaction to zero if you prefer that. Rewards tag should be used for income from staking / minting / masternodes / affiliate bonuses etc and are shown on your income report. The Gift tag can only be used when you yourself gift coins to someone else. Receiving a gift from family/fried does not need to be tagged.
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Thanks @ConorIA and @koinly, but IMO, Koinly’s approach to rewards has two issues. It is correct to give the Fair Market Value to reward coins, since it is in fact an income, and it must appear as such for taxes. However, and given that the gains from the sale of cryptocurrencies are computed by the difference cost of sale - cost of purchase, with the current koinly approach the purchase cost applied to that reward is the Fair Market Value, when the cost purchase of the reward was zero. This distorts both the calculation of losses / gains for taxes, and the average purchase price, in order to calculate the gains / losses. May be?
I’m not a tax expert, but I think the way they do it is right.
You pay tax once on the “income”. (Using dollars for the sake of it …) When you recieve the coin, it is as through you’ve recieved dollars and then purchased coins in that exact amount.
If you were to set cost to zero, then when you dispose of the coin you’d be paying tax on the full price of the token, not just the gain or loss. So you’d be paying tax twice in the same amount.
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Thanks @ConorIA. I think you are right, and your approach that it is as if I receive dollars to buy tokens seems appropriate to me, and correct in the face of taxes.
In any case, it is a shame that Koinly @koinly does not have a place to report, not in terms of taxes, but to keep track of costs, the true cost of acquisition of the tokens, since these reward tokens had zero cost.
If you do not wish to report the coins as income then you can simply edit the transaction and change its market price to zero.