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 accurate gain/loss information for that asset type.

Who gets a gain/loss statement?

Any US customer that has sold assets on the Gemini exchange in 2024. Gain/loss statements are available for both retail and institutional customers. At this time gain/loss statements are not available for OTC customers. Customers are requested to select a cost basis method (see FAQ: “What are the cost basis methods and which one should I use?” for more information) to apply to dispositions made on the Gemini exchange. If a cost basis method is not selected, a default method of FIFO will be applied. If assets obtained off of the Gemini exchange are transferred in and sold, the purchase price and acquisition date of those assets will need to be provided in order to create an accurate gain/loss statement.

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 your 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.

A single selected cost basis method will be applied to all sales historically and prospectively. This feature will be enhanced for additional flexibility in future periods.

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.

How does Gemini calculate my gains and losses?

For determination of gain/loss calculations, the Tax Center will allow users to select a cost basis method to apply to all sales in an account. 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

- Cost basis method set by the user will dictate which assets are disposed of during the 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). 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 a user does not input cost basis information for transferred assets and does not select the default assumptions then the gain/loss statement will only show proceeds for the sale of the transferred assets rather than the gain or loss.

If I move assets 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 another 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 the date 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 the date 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 2024 gain/loss statements will not be filed with the US Internal Revenue Service. Gemini will be required to issue Forms 1099-DA to our customers and the IRS reporting proceeds for sales or exchanges of digital assets starting in 2025 (and cost basis for certain of those sales in 2026) based on the final 6045 Regulations issued in June of 2024.

What is a tax Gain/Loss Statement?

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