I have been a long time holder of BTC and other crypto currencies… I have only ever bought and have never sold. I now have a scenario where I need to cash out some money for my family and although I would rather not sell my BTC, (esp right now while we are having a bit of a pull back) I need to do what’s right for my family and access some of the funds in my wallet.
Can someone please explain the best way to go about cashing the crypto out to minimize the tax impacts. I understand that I have to claim my earnings and report capital gains… My main question is if I had purchased on an exchange like Coinbase repeatedly over the last decade or so, but always transferred the bitcoin to a cold wallet… If I transfer it back on the exchange now to cash out, how does it know which bitcoin was bought at what price levels so I can accurately report capital gains? I see options for FIFO, HIFO, or LIFO but like, how does Coinbase know if it’s coming from a cold wallet and is then being sold? Does it just go off of my past account transactions?
Does anyone else have advice on what the best way to do this would be?
Also should I do this right now (pre 12/31) or wait till after the new year to give myself more time to prepare my tax filing for next year.
Any insight or tips are greatly appreciated!
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