Tax declaration of virtual currencies - units lost in transfers between wallets

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Vieira
Posts: 5
Joined: Sun Apr 24, 2022 5:12 pm

Tax declaration of virtual currencies - units lost in transfers between wallets

Post by Vieira » Sun Feb 19, 2023 4:59 pm

Hello,

I'm unsure how to declare the units associated with fees when transferring between wallet and broker. Let me give you an example:

Day 1: I buy 2 Eth from the exchange for 2000 €/unt.
Day 2: I move the 2 Eth from the exchange to my wallet. (Only 1.999 arrives. A network fee of 0.001 eth is charged)
Day 3: I move 1.999 Eth back to the exchange. (Only 1.998 arrives. Network fee is 0.001 eth again)
Day 4: I sell 1 Eth for 1500 €/unt. Keeping 0.998 Eth. (Taxable event)
Day 5: I sell 0.998 Eth for 1400 €/unt. (Taxable event)

According to FIFO principle of declaration I should declare like:
Event 1: Sold 1Eth on day 4. Purchased on day 1. (loss of 500 €)
Event 2: Sold 0.998Eth on day 5. Purchased on day 1. (loss of -592.8 €)

But 0.002 remain undeclared. I guess there are a few options:
  • I could declare them as a cost, by multiplying the units by the exchange price at the time of each transfer.
  • The transfers are considered a use of virtual currency, like when you buy a product or service with eth. In this case the fees are taxable event in of themselves. This seems unlikely, as it is similar to "loosing" units of a stock that you can't sell anymore, when it is in practice a loss for owner of the asset.
Note that these fees are not directly associated with the act of purchase or selling, but occur while I own the units.

I will call Vero and ask them directly. I can post their answer there after.

Another aspect is that these calculations are not too complicated and I feel I can do them myself, but there are always these details that later may turn out to be different than what was interpreted. Should I get an accountant to do this?

Thanks!



Tax declaration of virtual currencies - units lost in transfers between wallets

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Vieira
Posts: 5
Joined: Sun Apr 24, 2022 5:12 pm

Re: Tax declaration of virtual currencies - units lost in transfers between wallets

Post by Vieira » Mon Feb 20, 2023 2:04 pm

I called Vero and asked about this. In summary the lady informed that the units lost in transaction fees can be deducted from the transaction declared, based on the asset's price at the time of transaction. I then asked about the units mismatch between purchase and sale, if it was not important. I'm not sure if she fully understood the issue, but she said it was ok to report 2 eth purchase and 1.998 sale, with the missing units as deduction.

I will declare like this using vero's virtual currency FIFO calculator, but in my own tracking I will mark everything in more detail for future reference.


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