Describe the problem:
I tried to sync my coinbase pro wallet to see capital gains so far and the result was quite surprising.It looks like I lost a lot more than I thought. I had a closer look at the transactions and the profit report and it seems like the cost basis is responsible for these loss.
I don’t entirely understand what the cost basis is but when I buy something at X price and sell it at X+Y I don’t think it’s normal that I end up with a negative profit.
In this example I buy 4463XRP for 1000£ (1000XRP would be equal to 224£). I then sell 1000XRP for 230£ which is almost no profit when we substract the fees but somehow the tool says that I lost 134£.
The cost basis seems way off on all the XRP transactions only. I have a few others with normal profit or loss report.
Can someone explain to me what is going on ? Is it normal ?
Which exchange/wallet is this regarding?
Coinbase Pro.
How did you import data into this wallet?
Account sync.
What have you tried to fix this so far?
Nothing, I don’t know what I can do.
It says the cost basis for the 1000 XRP was 364.08 so it would be a loss. Also if you look at the transaction id of the sell it is 3662066 which happens before 3662067 the buy side. Most likely you bought XRP earlier at a higher price. The sell of a token is FIFO First In First Out. So it would sell from what you bought first if you bought XRP earlier than the transaction you show on the buy side here.
Thanks for answer. I checked, the buy happened 2 days before the sell and this example was my first transaction on XRP.
All my XRP transactions have big losses even when sold at a higher price that I bought them for.
I read about how cost basis is calculated and if I understand it correctly, for the example above, the cost basis should have been 224£ for the 1000XRP sold and not 364£ as I only bought the currency once before this sell transaction and the cost basis should be equal to the price I paid at that time for 1000XRP.
I tried to delete all my XRP transactions and readd them one by one to see how the profit would evolve and I found something really interesting. If I only have the Buy/Sell transactions I showed previously, then the profit is in the green as expected but the more I add my next transactions the more loss I see and it is because the price of XRP was rising and I kept on buying and selling so slightly higher each time.
It is extremely weird as future transactions influence the profit of old transactions.
If I remove my last XRP buy transaction which was at the highest price I paid for - and I’m still holding onto them - then my last sell transaction shows the total profit I made with XRP since the beginning. So in the end it is not profit per transaction and only the last one matter (per currency ?).
Which means I’m in a negative capital gains because I’m still holding onto my XRP. It this normal ? Does that also mean that I can avoid paying taxes on a positive gains of previous transactions if I reinsert myself again into the same market at a higher price ? And even go as far as report a loss to reduce my taxes on the total yearly income ? Or is it a bug ?
If you are using the Share Pool cost basis method then this is being caused due to the Bed and Breakfasting rule. You can look at the Cost analysis tab which shows more info about this.
I have another off topic question - to see the cost analysis I need to upgrade my plan. If I upgrade it now, is it only valid until the end of 2020 and I will have to upgrade it again in 2021 or is it for a year starting now ?
