A question about fees, when those fees are paid in crypto.
Lets say we're talking about some random coin ZZZ.
Lets say I buy $100 or ZZZ @ $1, and the exchange charged $1 for that. (Transaction "A)"So, we have 100 ZZZ with a cost base of $101
Now say I transfer that ZZZ off the exchange into my own wallet. Since this is not an ownership change, no CGT.Also let's say ZZZ has gone up to $2Transfer 100 ZZZ, fee charged 1 ZZZ (Transaction "B")
How do I account for that? Is it a cost base adjustment - i.e. adjust the units and cost base.I now have 99 ZZZ with a cost base of $103
And now I wait a while (so I can't use the personal use thing) and pay someone for goods or services using ZZZ. Let's say ZZZ has now gone up to $3 - a great investment. Say I need to pay the vendor $60Transfer on the blockchain 20 ZZZ @ $3 plus fee of 1 ZZZ = $3 (Transaction "C").Or look at it as a sale of 21 ZZZ for $63, paying a fee of $3. The fee can go against the cost base.The cost base on the 21 ZZZ (from above) is 21/99 * $103 = $21.85 + $3 fee = $24.85My capital gain is therefore $63 - $24.85 = $38.15
Remaining, I have 78 ZZZ with a cost base of 78/99 * $103 = $81.15
Is this a reasonable way to work it out? My main issue is the adjustment to the cost base where you have paid fees - I'm not sure if that's the proper way to do it.
The only other way I can think about it is to treat the payment of fees as a sale. So, if we go back to the example:
Transaction B1 - Sell 1 ZZZ for $2, fee of $2 charged.The cost base of the 1 ZZZ is $1.01 (from Transaction "A"). The fee gets added to the cost base, so $3.01. The proceeds are $2, so a capital loss of $1.01 is carried forward.
Remaining we have 99 ZZZ with a cost base of $99.99 (99/100 * $101)
Transaction B2 - Transfer off exchange to wallet - basically this has no consequences because it's not a CGT event.
Transaction C:Transfer on the blockchain 20 ZZZ @ $3 plus fee of 1 ZZZ = $3It as a sale of 21 ZZZ for $63, paying a fee of $3. The fee can go against the cost base.The cost base on the 21 ZZZ is 21/99 * $99.99 = $21.21 + $3 fee = $24.21My capital gain is therefore $63 - $24.21 = $38.79But then we add in the capital loss from before: $38.79 - $1.01 = $37.78
Remaining, I have 78 ZZZ with a cost base of 78/99 * $101 = $78.78
It's all about that transfer between wallets and how to account for a fee that is charged in ZZZ.
I could also go on about how to account for a coin swap on an exchange. I've used Coinspot, and the fee is charged in the destination crypto. I think similar issues arise.
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