What is a tax gain/loss statement?

A gain/loss statement is a factual statement based on customer input (accounting method, transfer cost basis and holding period information, if applicable) that will provide information regarding gains or losses from assets sold on the exchange during a calendar year. If assets purchased on another platform were transferred into the Gemini exchange account, and there were dispositions (sales) of that type of asset during the year, we will require the customer to provide cost basis information for the transferred assets in order to provide gain/loss information for that asset type.

How do I get a gain/loss statement?

In the Tax Center, you will need to:

1. Provide the cost-basis method
2. Provide acquisition details (such as the acquisition cost and acquisition date) for assets transferred into you account, if any of that asset type has been disposed of during the calendar year
3. Download the Gain/loss statement

What are the cost-basis methods and which one should I use?

Three cost basis methods of dispositions are available to select within Tax Center:

Highest-In First-Out (HIFO)

Sells the most expensive digital assets first, regardless of purchase date.
Aims to maximize losses and minimize gains for tax purposes.
May prioritize short-term gains over long-term gains, which can impact your tax liability due to different tax rates for short-term and long-term capital gains.

First-In First-Out (FIFO)

Sells the oldest digital assets first, based on acquisition date.
Doesn’t consider potential gains or losses.
Can result in a mix of short-term and long-term capital gains or losses, depending on the holding period of the assets sold.

Last-In First-Out (LIFO)

Sells the most recently acquired digital assets first.
Likely to recognize short-term gains or losses over long-term, which may result in a higher tax liability due to the typically higher tax rates for short-term capital gains.

Keep in mind that short-term capital gains (assets held for one year or less) are taxed at your ordinary income tax rate, while long-term capital gains (assets held for more than one year) are typically taxed at a lower rate. The choice of cost basis method can significantly impact your tax liability, so it’s essential to consider your investment strategy and consult a tax professional for personalized advice.

For prior years, selecting the method that was actually applied for the filing of your US tax return will keep your current year report accurate as this will ensure the inventory of assets considered available for sale in your account for current dispositions is correct.

All sales will be calculated by the chosen method. Users can select one cost basis method per year for prior years. Users will be able to set a method to be applied to their first sale or transfer on the exchange.

For 2024 and beyond users will be able to update their method at any time. The selected method will be applied to sales that occur in the future. Users will not be able to retroactively adjust prior year sales once they are set. This information should be verified before it is entered into the system.

Gemini cannot advise which cost basis method should be used, or the consequences of changing a method once selected. Please consult your tax advisor to confirm which method has been used in the past and which should be used prospectively.

Your selected cost basis method not only applies to sales, but it will also impact transfers. To keep the assets that are preferred for sale available in the account, the method that is used to account for transfers will be the opposite of the chosen cost basis method.

For example, if an account holder selects HIFO for disposing of assets, the assets that are selected for transfer will be based on a “Lowest-In First-Out” method so that the highest cost assets will remain in the account and available for sale.

How does Gemini calculate my gains and losses?

For determination of gain/loss calculations, Tax Center will allow users to select a cost basis method for each year, starting with the earliest transfer or asset sale that occurred within the user’s account on the exchange. Please note that your selection should reflect the dispositions as they were reported in your prior year tax returns so that the inventory of assets available for sale in the current year can be reflected properly.

Gains or losses can only be calculated for accounts that have a recognition event- that is, an asset held in the account that was sold on the exchange. A number of different factors will be considered in the determination of gains or losses for a specific tax year, including:

Cost basis method selected by the user for current and prior years.

- Cost basis method set by the user for the current year will dictate which assets are disposed of during the year.
- Prior year cost basis method selection will be used to identify the assets considered available for sale in the account for the current year.

Information input by the user providing cost basis and holding period of assets transferred into the account

- If a user has transferred assets into the account from another exchange or wallet, information will be requested to identify the cost basis and holding period of the transferred assets. Without that information, Gemini cannot determine the gain/loss or preferred disposition order of transferred assets. Gemini is not responsible for the validity or verification of the information provided by a user on the acquisition date or price of an asset.
- Assets received in the account from activities on the exchange (Earn, Staking, credit card rewards)

- Earn and Staking: Assets acquired via Staking or Earn programs are considered income. This calculation is made by identifying the daily asset allocation multiplied by the current USD price of the asset at the time of allocation. This is the cost basis of the asset and matches the amount issued on the Form 1099-MISC for income (if the user earned over $600 in a calendar year). For Earn income, that calculation was done on a daily basis for accrued rewards. Staking is calculated in a similar way with the exception of ETH. ETH staking rewards were not available to customers until after the Shanghai upgrade. On the date they were made available for redemption from the Ethereum blockchain (for Gemini users, April 25, 2023), all accrued ETH staking rewards were considered “constructively received” and were valued at the USD volume-weighted average price (“VWAP”) of ETH on that day ($1,835.78). After that date, ETH staking rewards are calculated as a daily allocation.
- Credit card rewards are not considered income, but rather a reduction in the purchase price of goods or services acquired in the process of earning the rewards. As such, the cost basis of credit card rewards earned by using the Gemini credit card is zero. If assets rewarded via the credit card program are sold, the entire purchase price is considered a gain and will be reported as such on the gain/loss statement.
- Bonuses, referral rewards, and prizes: For assets acquired via contests or rewards on the exchange the cost basis is determined to be the value of the asset at the time it entered the user’s account.

3. In the absence of user-provided information for the cost basis and holding period of transferred assets, the user can produce a gain/loss statement with default assumptions. If the user chooses to generate a gain/loss statement without entering these required inputs, Gemini will use the price of the asset on the transfer date as the cost basis of the asset and the date of transfer as the acquisition date. The user will be able to identify transferred assets that were assigned this default information and adjust at a later time, within the Transferred assets section of the Tax Center. This may be useful for users who acquired assets close to the time they were transferred onto the exchange to estimate a general gain/loss position but should not be relied upon for purposes of determining an actual tax gain or loss. Gemini calculates gains or losses on sales occurring on the Gemini platform, only considering the assets held in a user’s Gemini account. Gemini does not apply the selected cost basis method to a customer’s total portfolio (assets held on other exchanges or wallets).

If I move assets purchased into my Gemini account, how does that impact my gain/loss calculation?

If you transferred assets into your Gemini account and the same asset class has dispositions, these transferred assets will impact your gain/loss calculator and therefore, you will need to provide cost basis and acquisition date for the transferred assets for Gemini to calculate the gain/loss. This is true whether you purchased those assets on the Gemini exchange, or some other exchange. Gemini is not able to obtain this information otherwise at this time.

Cost basis information provided by users will be captured/displayed for the benefit of users to determine their own tax obligations and/or to consult with a tax professional. This data is provided by users directly, and Gemini cannot guarantee the reliability of this information. Cost basis of assets not purchased on the Gemini exchange will not be reported to the IRS by Gemini until some later date when a reliable mechanism for determining the cost basis of transferred assets is determined and US tax regulations have been updated to provide the appropriate guidance and process.

Once cost basis information is entered, you will see an average cost for your transferred assets. This number is the weighted average cost of the transferred assets. For example, if a transfer included 4 tokens, 3 of which cost $10,000, and one cost $2,000 the “Avg cost” shown would be $8,000. This average is for informational purposes and not used in our gain/loss calculations for sales. Sales will be ordered by the customer’s selected cost basis method of FIFO, HIFO, or LIFO.

How do I enter cost basis for a transfer (from a different account or wallet held by the user) vs gift vs. payment

The cost basis of assets transferred from the user’s account on a different platform or wallet is the purchase price of that asset. The user will also be able to enter the acquisition date so Gemini can identify whether gains or losses from the sale of that asset are short or long term and apply the correct cost basis method if the method is based on holding period (FIFO or LIFO).
The cost basis of a gift may be zero. Please consult your tax advisor to ensure that this applies to your gifted asset. If the gifted asset is an inheritance, specific rules will apply. The holding period will be identified as when the user first acquired the asset.
The cost basis of an asset that is received as a payment from a third party is the cash value of the asset when received or the fair market value of the good or service the payment was received in exchange for (if the value of the asset cannot otherwise be determined). The holding period will be identified as when the user first acquired the asset.

Is the information reported on the gain/loss statement sent to the IRS?

The information that our users receive on their 2023 gain/loss statements will not be filed with the US Internal Revenue Service.

Gemini is awaiting finalized regulations to require reporting on dispositions of crypto assets to both account holders and the IRS. Draft regulations were released in September 2023 reflecting a February 2026 deadline for reporting dispositions occurring in 2025. Final regulations are expected to be released in 2024, which may or may not update this deadline. Until that time, information on gain/loss statements issued for informational purposes to clients will not be filed with the IRS.

What is a Gain/Loss Statement?

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