Question

Tyler purchased cryptocurrency as an investment .How is his basis in the assets determined?

A. Fair Market value on the date of purchase minus expenses

B. Fair market value on the date of purchase minus expenses of purchase

C. Purchase price of asset minus expenses of purchase

D. Purchase price of asset plus expenses of purchase

Answer 1

Solution: The correct option is "D" i.e Purchase price of asset plus expenses of purchase

When it comes to cryptocurrency assets, it is important for cryptocurrency owners to properly track basis. Basis is generally defined as the price the taxpayer paid for the cryptocurrency asset for acquiring it as well as any expenses incurred in relation to the acquisition. For crypto assets, the cost basis includes the purchase price plus all other costs associated with purchasing the cryptocurrency. Other costs typically include things like transaction fees and brokerage commissions from the exchanges you purchase crypto from. So to calculate your cost basis we should take into account the following:

(Purchase Price of Crypto + Other fees) / Quantity of Holding = Cost Basis