Beginner here.
For the most part, I’ve used Kraken to buy crypto and then sent it to my Trezor wallet for greater security. When it came time to sell any crypto, I’ll send it back to kraken to sell. With the old ‘universal basis’ coin ledger was able to calculate the correct capital gain.
This year I sent a lot of my crypto from Trezor wallet to kraken to sell. I sold a lot of my crypto and coin ledger is calculating a lot of these sells with ‘missed cost basis’ and this is inflating my cost basis.
So now I’m thinking Kraken will also inflate my capital gains in their 1099DA issued next year.
Is there a solution to this? How can I correct the cost basis problem? Thank you all in advance for your time and help.
Justin from Summ here (formerly Crypto Tax Calculator).
It sounds like a reconciliation issue, which is actually a good thing because it’s fixable, I won’t go into the details, but universal cost tracking limits visibility over issues stemming from unreconciled transactions in your data, and the new “per wallet” system will bubble these up much quicker.
My advice is to: 1. Add ALL your transaction data for all wallets/exchanges, even wallets you no longer use 2. Review all incoming transactions to ensure it doesn’t just show as a standalone deposit into your account. In your software, unless a crypto deposit is tagged as income (like an airdrop or reward), then the deposit is unreconciled. If it’s a transfer, you need to make sure the reciprocal outgoing transaction is merged with the deposit so it forms a transfer.
Lastly, no, this will not impact the 1099-DA as Coinledger is completely separate from Kraken. Kraken won’t use Coinledger data to prepare the DA.
Additionally, there are softwares out there who walk you through how to handle some of these data issues. Not sure if Coinledger does this but I always suggest trying a few out to see which works best for you.
Thank you so much Justin for your quick and helpful reply.
I will take your advice and take those steps, thank you. 🙏
Happy to help! An analogy I like to give…
Crypto tax is kind of like a jigsaw puzzle. Each transaction/wallet is like a piece of the puzzle. Sometimes, you might have all the pieces at the table (all data loaded into the software), but for whatever reason Coinledger hasn’t snapped each piece together yet. So you need to go through and make sure everything is snapped together by confirming all transfers show as transfers and you aren’t missing any data.
Hope that helps!
Summ is a great product!
This isn’t your exchange inflating gains. It’s a missing cost basis problem under the new rules.
What’s happening:
When you sell on an exchange, the exchange (and the IRS) clearly see:
date of sale sales proceeds
What they usually do not know is your cost basis if the crypto came from a hardware wallet.
So when you:
buy on an exchange move to a hardware wallet send back later and sell
the sale shows up with proceeds but no basis, which makes gains look inflated.
How to fix it
Import all wallets and exchanges into a crypto tax tool Mark wallet - exchange movements as internal transfers Attach the original purchase lots to the sale Make sure each sale has a date acquired, date sold, proceeds, and cost basis
Do not rely only on exchange tax forms. They report sales proceeds. You are responsible for proving cost basis.
Thank you for that info and reply.
As Justin said, this is simply reconciliation issue. When you are transcending your asset, software is not able to recognise that as transfer rather than sell. Just review each transaction one by one make sure cost basis is accurate and you will be good to goo
The same limitation applies to Kraken’s 1099-DA. For coins that come from self-custody wallets, Kraken is generally only able to report gross proceeds, not accurate cost basis. If they report a basis at all, it’s often shown as unknown or zero. That does not mean you owe tax on the full sale amount. It just means the broker doesn’t have enough information.
The fix is on the reporting side, not the exchange side. You need to make sure all original buys are correctly imported into CoinLedger and that transfers between Kraken and your Trezor are treated as non-taxable transfers. Once the full transaction history is connected, the correct cost basis usually falls into place. If it still doesn’t, you can manually assign the basis using your historical records.
Thank you for this valuable information. Very helpful. 🙏
This usually comes down to transfers not being linked to the original buys or missing history, which makes sells appear to have no cost basis.
Once your Kraken ↔ Trezor transfers are matched and the full purchase history is present, the inflated gains typically disappear
Thank your for your reply and that info. 🙏