A cost basis model is an accounting method used to determine the original value of an asset for tax purposes. In digital assets, this model tracks the purchase price and any associated fees, establishing the investor’s initial investment. It is essential for calculating capital gains or losses when an asset is sold or exchanged. Various methodologies exist, such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO).
Context
The cost basis model is a significant regulatory and financial topic in crypto news, particularly concerning taxation of digital assets. Discussions often revolve around how different jurisdictions define and require the calculation of cost basis for cryptocurrency transactions. News reports frequently highlight challenges investors face in accurately tracking their cost basis across various platforms and the implications for compliance with tax authorities.
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