Capital Gains Tax on sale of portion of crypto holdings

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99thFloor

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Edited to correct CAT to CGT -Brendan



There seems to be no guidance on capital gains tax liabilities on crypto sales beyond the basic - "it is treated the same as any other investment/asset".

I understand that proceeds minus costs minus annual CGT exemption = amount taxable at 33%. But that assumes you acquired 1 indivisible asset and are selling 100% of it.

I can't find any explanation for what the liability would be in a case where you are selling only a portion of holdings acquired in several different purchases, all in different crypto amounts, and all at different prices per crypto.

Let's say the total value is 100K and you paid 10K in total for it, but in several purchases of different amounts.

You want to get a return of 10K to get your outlay back. If you sell a portion for 10K does that mean there is 0 CGT, but any further disposal in the future will be taxed at 33%?

OR, do you have to assign a fraction of the total cost to the amount being sold? If that is the case, how would you calculate it?
 
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What Brendan said — the general rule is first in, first out ("FIFO")

To extend his example, if you had sold 15 BTC rather than 5, you would be treated as having sold the 10 BTC that you bought for €10 each, plus 5 of the BTC that you bought for €50 each, giving you a total acquisition cost of (10 x €10) + (5 x €50) = €350.

Subtract that from your disposal proceeds, subtract the annual €1,270 (if this is your first disposal for the year) and the result is your chargeable gain.

(If you buy and then sell the the same asset within a 4-week period, a LIFO rule applies rather than a FIFO rule — i.e. you're treated as selling the asset that you just bought. But that's not the usual case.)
 
I would have to disagree that the FIFO rule is used for Crypto trades

My understanding is that the only reference to FIFO in Revenue documentation relates to the sale of shares
FIFO is a special treatment that applies to shares

Cryptocurrency is not shares AFAIK
It is very similar to shares in that each individual unit is the exact same as another individual unit of that specific currency, but they are not shares

The Revenue guidance states "Therefore, no special tax rules for crypto-asset transactions are required"

So although FIFO workings would be far simpler in terms of calculations and indeed record keeping, IMO the Part Disposal rules apply here, as indicated by T McGibney above
 
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As far as I am aware Crypto is not classed a security as it is not traded in markets that are regulated by a Central Bank

I'm open to correction here but that is my understanding
 
Thanks, all.

In the meantime I rang Revenue, and they didn't really answer my question about how to calculate the cost of a portion, simply heard the words "capital gains" and said I would need to submit a CG1 which would explain everything. Having looked at the CG1, and also at the Part Disposal Rules link, I think I need to get professional assistance.
 
99thFloor said:
I think I need to get professional assistance.
Click to expand...

I don't really think that a routine matter like this should require professional assistance.

People buy and sell crypto every day.

Revenue should issue clear guidelines on what rules apply.

I suspect that it won't matter much which approach you use. And it should matter less in the long-term.

So pick one to use and make a note of it on your return.

Is there a "Crypto Society of Ireland"? If so, they should pay for professional advice and then send it to their members.

Or one of the Crypto Exchanges should do it.
 
Brendan Burgess said:
I don't really think that a routine matter like this should require professional assistance.
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That depends on the significance of the sums involved Brendan.

If someone has a gain of €100,000 on a crypto sale, and paying north of €30,000 tax on foot of that, it's crucial to apply whatever tax treatment is appropriate.

That becomes less important if the gain is a small fraction of that.
 
Just wondering - is the cost of very specific advice like this something that can be offset against the tax payable?
 
DB74 said:
As far as I am aware Crypto is not classed a security as it is not traded in markets that are regulated by a Central Bank

I'm open to correction here but that is my understanding
Click to expand...
"Security" is not exhaustively defined in the CGT legislation, but it's certainly not limited to to quoted or traded securities. Under Taxes Consolidation Act 1997 s. 585 "security" includes (but is not limited to) loan stock issued by any government, public authority or company. Many of these are not listed or quoted anywhere.

In general usage in the world of finance, any tradeable financial asset is a security; I think there's a good argument that that would extend to cryptocurrency.

But it doesn't matter. The FIFO rule is applied by TCA s. 580, and it expressly applies to
  • shares
  • securities
  • "any assets . . . where the assets are of a nature to be dealt in without identifying the particular assets disposed of or acquired" (s. 580(4))
Even if cryptocoins are not "securities", they are certainly assets that are dealt with without identifying the particular assets disposed of or acquired. All currency is of that nature — if I lend you a fiver I expect €5 back tomorrow, but I don't expect the same fiver — and cryptocurrency is too. So the FIFO rule does apply to crypto.

(Which is what you would expect. Why wouldn't it apply to crypto? The reasons why it makes sense to apply it to shares and securities apply equally in relation to crypto.)
Corola said:
The Revenue documentation refers to "marketable shares and securities", not just shares.

https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-19/19-04-03.pdf
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The document you link to does mention assets dealt in without identifying the particular assets disposed of or acquired — see para 3.1. They're also mentioned in the first paragraph of this document: https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-19/19-04-01.pdf
kickstart said:
Just wondering - is the cost of very specific advice like this something that can be offset against the tax payable?
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No. The CGT regime is pretty restrictive about what can be claimed as an expense of acquisition or disposal.

(If you were carrying on a trade of dealing in crypto and your profits of that trade were being subjected to income tax, I think the cost of advice on your tax obligations arising in connection with the trade would be deductible.)
 
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Brendan Burgess said:
I don't really think that a routine matter like this should require professional assistance.
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What is routine for some people is complex for others.

And it's not as if their getting a clear cut answer here. So pay someone who definitely knows the answer. It'll cut down on spending a lot of time researching the solution and at least then you know that it is done properly.
 
Just to clarify

Routine matters like CGT on the sale of an investment property, the sale of shares or the sale of crypto should be clear and should not require professional advice.

From this thread, it seems that there are different ways to interpret the taxation of crypto. That should not be the case. Revenue should make it very clear how capital gains and losses on crypto are treated.

I don't see the point of professional advice. Depends on whom you pick you might be told that they are securities or that they are not securities.

So my suggestions stands.
Brendan Burgess said:
So pick one to use and make a note of it on your return.
Click to expand...
 
As @TomEdison has clarified quite comprehensively, crypto assets (regardless of what specific label you want to put on them) are fungible assets of a type covered by section 580.

There's no ambiguity whatsoever, other than wishful thinking, as to whether FIFO applies.
 
Thanks Torbeldnam

Just to clarify.

The FIFO rules apply.

It's fairly straightforward for most people.

And they would not need specialist tax advice?

Brendan
 
Based on this conclusion, which I came to from all your thoughtful inputs here and the Koinly guide linked above (which I read yesterday), I'll try to wing it with the form using FIFO (I tracked down all the purchase amounts/prices).
 
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