Missing Cost Basis Warnings
Missing Cost Basis Warnings happen when you haven't shown CoinLedger how you originally purchased or otherwise acquired a certain cryptocurrency.
When this is the case, there is no way for CoinLedger to know what your cost basis in that cryptocurrency is.
These warnings are almost always caused by missing data. It's likely that you haven't imported all of your necessary transaction history needed for calculating your taxes.
What is Cost Basis?
Costs basis represents the original value of an asset for tax purposes. It is used to determine your capital gains/losses incurred whenever you dispose of your crypto (trade or sell).
Put another way, cost basis typically represents how much money you put into purchasing your crypto (i.e. how much it cost you).
If you bought 1 Litecoin for $250, your cost basis is $250 per Litecoin.
If you later trade this Litecoin when it is worth $300, you subtract your cost basis from the $300 to arrive at your $50 capital gain from the trade. This is how crypto tax calculations are done at a high level. More info here.
Why Do Missing Cost Basis Warnings Happen?
CoinLedger works by importing all of your buys, sells, trades, and crypto related transactions across all of your cryptocurrency platforms.
The application normalizes all of this data and sorts it chronologically.
When CoinLedger detects that you are selling or trading a cryptocurrency that it does not have record of you ever acquiring, it flags the transaction as a Missing Cost Basis (as you are missing your cost basis for this sale/trade of the particular cryptocurrency).
Consider the following transaction history:
1/1/2020 - User purchases 0.5 BTC on Coinbase for $10,000
3/1/2020 - User transfers his 0.5 BTC to Gemini where he sells it for $20,000
1. Only importing data from one exchange
Let's use the example of the user above. Pretend that this user only imported his Gemini trading history into CoinLedger and ignored his other data.
In this case, CoinLedger will only have data on a 0.5 BTC deposit into the Gemini account along with a sell transaction of BTC for USD at $20,000.
This would trigger a Missing Cost Basis Warning as the user has not shown our platform how he originally acquired that 0.5 BTC.
To CoinLedger, it looks like this 0.5 BTC just magically appeared in the users' Gemini wallet. Without the original purchase transaction data from Coinbase, the user's true $10,000 cost basis in his 0.5 BTC will be missing.
2. The fix: importing all data
If the user imports all of his data from both Coinbase and Gemini, CoinLedger will be able to see that the user originally purchased this 0.5 BTC for $10,000 prior to selling it on Gemini.
When the user then sells this BTC on Gemini, CoinLedger will be able to accurately calculate his correct capital gain using the cost basis applied from the original Coinbase purchase: $20,000 - $10,000 = $10,000.
The below image showcases a clear example of how missing cost basis warnings work.
In the image, the user has imported history from two platforms, BlockFi and KuCoin.
You can see that on 8/19/2020, a missing cost basis warning is being triggered from a trade of 1001 USDC for 2.46 ETH.
You can also clearly see that before this date, there is no record of the user ever acquiring 1001 USDC. They only acquired 25 USDC. There is no record of the original USDC acquisition.
How did the user originally acquire this 1001 USDC that they are trading for 2.46 ETH? Did they purchase it on another exchange besides BlockFi and KuCoin? Was it gifted to them from a friend? Clearly there is some missing data here which is leading to this missing cost basis warning.
You can also review your missing basis trades in detail in Step 4 by clicking on the Missing Basis Reconciliation tab. It also lists the Potential Report Impact of the missing basis.
Here we can see the USDC-ETH trade on 8/19/2020 from the previous example. In Step 3 it only flags the first instance of an insufficient balance of USDC. Under the Missing Basis Reconciliation view it details every single trade with missing basis for USDC for that tax year.
Can You Run Your Tax Report With a Missing Cost Basis?
CoinLedger will still run your tax report in spite of Missing Cost Basis Warnings. In many circumstances, Missing Cost Basis Warnings will not have any significant effect on your gains and losses. Our platform treats this missing data with a zero cost basis—the most conservative approach.
Learn how your Missing Cost Basis Warnings will effect your tax report in this article here.
How Do I Fix A Missing Cost Basis Warning?
As mentioned above, your Missing Cost Basis Warning is likely resulting from missing data. To fix your warning, you simply need to import or classify whatever data is missing.
To assist with this, CoinLedger has a helpful tool in resolving MCB warnings called the Missing Cost Basis Troubleshooting Tab. Learn more about it HERE.
Below are the most common causes for missing data that we see.
Other Common Causes of Missing Cost Basis Warnings:
You didn't import the historical data from ALL of the exchanges or platforms that you bought, traded, earned, or transacted crypto on
You didn't include your data from ALL of the years that you have transacted with crypto
You have imported duplicate data and need to delete your imports and re-import only once for each exchange
You didn't include the crypto you received from mining, staking, interest earned, or other forms of income (Learn how here)
You interacted with a smart-contract or dApp that CoinLedger does not yet natively support and there are Uncategorized trades that need to be further classified (Learn how here)
You didn't include crypto a friend sent you as a gift as an incoming transaction
You traded on both Coinbase and Coinbase Pro but did not upload both exchanges
You purchased or sold crypto directly from your self-custodied wallet provider but did not import those buys/sells (Learn more here)
You imported data from an exchange like Binance.US which has known data limitations. Learn more here.
Some exchanges like Binance.US only import one side of fiat buys, which means you might have to edit a deposit to reflect your cost basis. Learn more here.
You bridged from one blockchain to another and need to merge two transactions within CoinLedger to show our app how you acquired an asset with a missing basis. Learn more here.
In all of these above cases, you can fix your Missing Cost Basis Warnings by either importing or classifying your missing data.
NOTE: Uploading transfers, withdrawals, or deposits to our software WILL NOT resolve a missing cost basis warning. Only adding information on your acquisition of an asset-like purchase information, or a record of you receiving that asset as income from staking, mining or interest-will solve missing cost basis warnings. Find more about why here.
Frequently Asked Questions
Do I need to upload transfers/deposits and withdrawals to resolve these?
No. Uploading a transfer from one wallet to another, or uploading a deposit or withdrawal, will NOT resolve a missing cost basis warning. Only importing purchase or acquisition information for the asset that was flagged with the warning will resolve the missing data. For example, if a fiat sell for 1000 USDC was flagged in your account, you would only be able to resolve this warning by uploading the original purchase (or cost basis) of this 1000 USDC.
I’ve uploaded all of my information, why do I still have a missing cost basis warning? If you’ve uploaded all your information for all years of trading, but still have a missing cost basis, it is possible you have duplicate transactions imported from one of your crypto exchanges. It also possible that your crypto exchange does not import all of their complete transaction data, and you’ll need to get in touch with our Support Team to identify and get around these limitations. Also, remember to click on the missing cost basis warning itself under the “review” stage to see the potential report impact of your warnings. It is possible that your warning may have an insignificant (or even $0) impact on your potential gains and losses, and therefore it can safely be ignored.
I have data for the missing cost basis, how do I add it?
If you have a cost basis for one of your flagged transactions that you would like to add manually, you can add this to our software using our Universal Manual Import Template. Be sure to include the date, timestamp, price, and the assets you traded/received in this transaction.
I have duplicate transactions, does this matter? How do I get rid of them?
Yes! Duplicate transactions can cause missing cost basis warnings and other software errors. This usually occurs because you have imported multiple API’s or files containing the same information from one exchange. This can also occur if you mix an API import with a file import. You can resolve this by creating a new import for this exchange in Step 1 Import of our software, and then importing with JUST ONE API or JUST ONE file. Then, if everything imports successfully, you can delete the older, original imports, and your duplicates should be resolved.
Why doesn’t your software automatically know my cost basis?
Our system can only calculate profits and losses based off of the information that you have imported. Like any software, we’re not able to generate fully accurate calculations based off of inaccurate or incomplete data. If you leave out information, our software will not be able to calculate the gain or loss on your trades. This is why it’s critically important to import ALL of your crypto transactions for ALL years you have traded.
Still stuck? Think there is a different problem? Please reach out to our team here on Intercom. We are happy to help!