ERC-20 Token Tax: Lots, Gas and Character

ERC-20 token tax is a separate ledger problem

ERC-20 token tax starts from a split that the financial-reporting ledger does not carry. An ERC-20 token is a balance recorded in a contract on the Ethereum blockchain, while ETH is the network's own currency and pays the fee, called gas, that every Ethereum transaction consumes. Those are two different assets, and tax treats them as two.

A financial-reporting ledger answers questions such as:

• What asset is recognised?
• What is its carrying amount?
• Where is the gain or loss presented?

A tax ledger asks different questions:

• Is the activity on income account or capital account?
• Which units were disposed of?
• What basis attaches to those units?
• Are fees part of basis, deductible, or separate disposals?
• Does moving tokens between wallets matter?
• What information reporting applies?

The answers diverge sharply. A token can be carried at fair value for financial reporting while retaining historical tax basis. A wallet transfer can produce no book disposal and still change how tax lots are identified. ETH spent on gas can create its own taxable disposal even when the token merely moved between the entity's own wallets. This is why a crypto subledger keeps book and tax attributes separately.

First principle: character comes before arithmetic

Before calculating a gain, determine the character of the activity. Across major tax systems, the difference between business activity and capital activity changes:

• which income category applies
• whether losses are restricted
• how inventory or basis is calculated
• what expenses are deductible
• how reporting works

There is no safe universal statement that "crypto gains are capital gains".

Canada

Business income versus capital gain

The Canada Revenue Agency states that gains and losses from crypto-asset dispositions may be on income account or capital account.

CRA looks at facts and circumstances, and names six indicators of business activity: frequency of transactions, period of ownership, knowledge of crypto-asset markets, time spent studying those markets, financing purchases by some form of debt, and advertising a willingness to buy crypto-assets. Those six are the list. "Level of organisation" and "intention" are not on it.

If the activity is a business, the full profit or loss enters business income. If it is capital, the capital-gain rules apply. The accountant documents the activity before building the lot calculation, because everything downstream depends on it.

Dispositions

CRA guidance identifies dispositions such as:

• selling crypto for government-issued currency
• exchanging one crypto-asset for another
• using crypto to buy goods or services
• transferring ownership by gift or donation

Transfers between wallets owned by the same taxpayer are not dispositions. A blockchain parser sees an outbound transfer and an inbound transfer, and the tax ledger has to recognise that beneficial ownership did not change.

Adjusted cost base: one pool, averaged

Canada does not identify individual fungible units at all, which is the structural difference from the United States. Income Tax Act subsection 47(1) deems a taxpayer who acquires property identical to property already held to have disposed of the earlier holding and reacquired every unit at the averaged cost. One pool per token contract, one pool per taxpayer rather than per wallet, and the adjusted cost base of every unit is the average. Specific identification of a chosen lot is not available.

Losses are then restricted. Income Tax Act section 54 defines a superficial loss as a loss where, "during the period that begins 30 days before and ends 30 days after the disposition, the taxpayer or a person affiliated with the taxpayer acquires a property ... that is, or is identical to, the particular property" and still owns it at the end of that period, and paragraph 40(2)(g)(i) deems such a loss nil. Because every unit of a given ERC-20 token is identical to every other, an ordinary rebuy inside that 61 day window triggers the rule easily.

No specific guidance identified applying either rule to crypto-assets. The word "identical" appears zero times across CRA's current crypto-asset guidance pages, and none of them mentions the superficial loss rule. The statute is the authority, not the guidance.

Valuation

CRA states that taxpayers should use a reasonable method to determine fair market value and apply it consistently, and where direct Canadian dollar pricing is unavailable the conversion path is documented. A valuation used for tax is not silently inherited from the financial-reporting valuation file where the tax rule calls for a different convention.

GST/HST and the virtual payment instrument test

CRA guidance states that when taxable property or services are supplied for crypto-assets, the GST/HST calculation uses the fair market value of the crypto-asset at the time of the transaction. A supply of the crypto-asset itself is a separate question, and the answer for a plain ERC-20 token is not the bitcoin answer. Excise Tax Act subsection 123(1) defines a virtual payment instrument as property that is a digital representation of value, functions as a medium of exchange and exists only at a digital address of a publicly distributed ledger, other than property that "confers a right, whether immediate or future and whether absolute or contingent, to be exchanged or redeemed for money or specific property or services". Supplying a virtual payment instrument is an exempt supply of a financial instrument. CRA states at paragraph 44 of GST/HST Memorandum 17-1 that "security tokens and utility tokens are other types of cryptoassets. These types of cryptoassets do not ordinarily meet the definition of a virtual payment instrument based on the exclusions in paragraphs (a) and (b) of that definition".

Where the token falls outside the definition, a supply of it is a taxable supply of intangible personal property and GST/HST applies. An accountant who assumes the bitcoin treatment for a utility token files a return that omits tax CRA says is collectible.

United States

Digital assets are property for federal tax purposes

Notice 2014-21 answers at A-1 that "for federal tax purposes, virtual currency is treated as property" and that "general tax principles applicable to property transactions apply to transactions using virtual currency". Rev. Rul. 2019-24 applies the same starting point to hard forks and airdrops.

A sale, exchange or other disposition therefore creates gain or loss, reported under the capital-gain rules where the asset is a capital asset and under other rules where the activity is a trade or business or the asset is inventory.

Basis is wallet or account specific

The account-by-account requirement is statutory and predates the digital-asset regulations. 26 U.S.C. 1012(c)(1) provides that "the conventions prescribed by regulations under this section shall be applied on an account by account basis" for a specified security, and section 80603 of the Infrastructure Investment and Jobs Act brought digital assets inside that definition with an applicable date of 1 January 2023. Treasury Regulation 1.1012-1(j) supplies the ordering and identification mechanics. It did not create the requirement, so a change of regulation would not restore an entity-wide pool.

Revenue Procedure 2024-28 provides a safe harbour under section 1012(c)(1) for allocating unused basis to wallets or accounts as of 1 January 2025. One route is closed: section 5.02(5)(a) required a global allocation method to be described in the books and records before 1 January 2025. The other can still be open. Section 5.02(4) requires a specific unit allocation to be completed before the earlier of the first sale, disposition or transfer of that type of digital asset on or after 1 January 2025 and the due date, including extensions, of the return for the year that includes 1 January 2025. An accountant who reads the safe harbour as a closed transition abandons relief that is in some cases still available.

So an entity cannot keep one global pool of tax lots across every wallet and assume it satisfies the current US rules. Wallet location matters.

Own-wallet transfers change future lot selection, and can change character

Moving tokens from one self-custodied wallet to another is not a taxable sale merely because the blockchain records a transfer. It does change which units and which basis remain in each wallet, and that changes the basis of a later sale.

Two features of the regulation decide how the register is built. First, which units move is itself a lot selection under Treas. Reg. 1.1012-1(j)(1) and (j)(2), not something that follows automatically from the transfer. Second, the receiving wallet's default ordering runs from the units' original acquisition dates, because the last sentence of paragraph (j)(1) states that "for purposes of the preceding sentence, the date any units were transferred into the taxpayer's wallet is disregarded". A register that stamps received units with the transfer date selects the wrong lot on every later sale out of that wallet.

Character in the United States also has two axes. Paragraph (j)(1) determines the basis and the holding period of the units treated as sold, disposed of or transferred, wallet by wallet, while disregarding the transfer-in date. A non-taxable own-wallet move can therefore leave different units in the operating wallet and turn what would have been a long-term gain, which 26 U.S.C. 1222(3) defines as gain on a capital asset "held for more than 1 year", into a short-term one.

The worked example quantifies the basis effect. Wrenfield Labs moves 1,200 LINK to its own cold address on 16 September 2025, carrying $17,541.60 of Lot A basis out of the operating wallet. When it sells 500 units on 19 November, entity-wide book FIFO takes all 500 from Lot A at $7,309.00, a book loss of $868.87. The per-wallet rule takes 94.02771300 units of Lot A and 405.97228700 of Lot B, a tax basis of $7,983.73 and a tax loss of $1,543.60. One transfer between two addresses the same company controls, with no journal entry and no taxable event, moved $674.73 of basis.

Identification must be made no later than the transaction

The regulation states a deadline and it is absolute. Treas. Reg. 1.1012-1(j)(2) provides that a specific identification of units not held in the custody of a broker "is made if, no later than the date and time of the sale, disposition, or transfer, the taxpayer identifies on its books and records the particular units to be sold, disposed of, or transferred by reference to any identifier" sufficient to identify them, and only if adequate records establish that the identified unit was removed from the wallet. It cannot be made afterwards, and if it is not made the regulation's default ordering makes the choice irreversibly. Because paragraph (j)(1) reaches a "transfer" as well as a sale, the deadline binds an own-wallet move too. Paragraph (j)(3)(ii) sets the same deadline for units held with a custodial broker.

There is temporary relief on the broker limb only. Notice 2025-7 created it at section 4.02, and Notice 2026-20 extends it for a further year, allowing an eligible taxpayer to identify on its own books and records, or by a standing order recorded before the units are disposed of, for a relief period "beginning on January 1, 2025, and ending on December 31, 2026". The notice says the relief "does not apply to digital asset units not held in the custody of a broker", so a holder of tokens in an unhosted wallet, meaning a wallet the holder controls directly with no broker in between, gets nothing from it. The relief lapses at the end of 2026.

Recording the chosen lot before the transaction is broadcast is this article's own recommended control, tighter than the rule. The rule is the date and time of the transaction. The control exists because a broadcast transaction cannot be recalled while the bookkeeping catches up.

Gas and transaction fees

Gas creates two questions. First, the treatment of the fee in relation to the primary transaction. Second, what happens to the ETH surrendered to pay it. The second is easy to overlook. Paying a fee with ETH is a disposal of ETH in exchange for a transaction-processing service, and that ETH has its own basis and its own gain or loss. The IRS digital assets page treats an own-wallet transfer as needing no "Yes" on the Form 1040 digital asset question "unless you paid a transaction fee with digital assets. This would be a digital asset transaction.", and the IRS digital asset FAQ answers at question 81 that an own-wallet transfer "is a non-taxable event, except to the extent of any digital assets you use, or are withheld, to pay for transaction services to effect the transfer". The Form 1040 instructions carry neither the parenthetical nor the corresponding "Yes" trigger, so the two IRS documents do not read the same way and the position taken is documented in the file.

For a token-for-token swap the treatment of the fee itself is fixed rather than open. Treas. Reg. 1.1012-1(h)(2)(ii)(B) allocates the total digital asset transaction costs paid to effect such an exchange "exclusively to the disposition of the transferred digital assets", and paragraph (h)(1)(iv) with (h)(3) sets the basis of the asset received at the fair market value used to compute the amount realised on the asset given up. Gas on a swap therefore reduces the gain on the asset surrendered and never enters the tax basis of the asset received, the opposite of the book answer that capitalises it into cost. Outside that fact pattern the category still depends on the transaction, so no universal "gas equals expense" rule should be coded.

Broker reporting, and why a corporation gets no Form 1099-DA

The Instructions for Form 1099-DA state that for "2026 and beyond" there is "mandatory reporting of gross proceeds for all digital assets, mandatory reporting of basis information for digital assets that are covered securities, and voluntary reporting of basis information for digital assets that are noncovered securities". The definition of a covered security is narrow: acquired after 2025 in an account for which the broker provided custodial services, and held there until the broker effects the disposition. Tokens bought on chain, held in an unhosted wallet and later deposited to an exchange are noncovered, so the form that arrives carries proceeds and no basis.

A corporate holder should not expect the form at all. Treas. Reg. 1.6045-1(c)(3)(i)(A) provides that "no return of information is required with respect to a sale effected for a customer that is an exempt recipient", and (c)(3)(i)(B)(1) makes "a corporation as defined in section 7701(a)(3), whether domestic or foreign" an exempt recipient, subject only to an S corporation carve-out. For a C corporation such as the worked example's entity, the company's own tax lot register is the only record of the sale, and the missing form is the regulation working as designed rather than a broker failure.

United Kingdom

What the Cryptoassets Manual is, and what it actually covers

The pages below come from HMRC's Cryptoassets Manual, which CRYPTO10000 describes as "written for HMRC staff but may also assist customers and their professional advisers in understanding HMRC's interpretation of the law". It is an interpretation, not the law, and two scope limits apply. CRYPTO22100 and CRYPTO22200 sit in the chapter for individuals within capital gains tax. And CRYPTO40000, the contents page of the businesses chapter, states that "this section deals specifically with the tax treatment of exchange tokens, for example, bitcoin". HMRC has published no page addressing a plain ERC-20 utility token held by a company, so the analysis below applies exchange-token guidance and TCGA 1992 by analogy.

HMRC starts with the nature of the activity

HMRC distinguishes investment from trading on the badges of trade, and sets the bar high. CRYPTO20250 states that "only in exceptional circumstances would HMRC expect individuals to buy and sell exchange tokens with such frequency, level of organisation and sophistication that the activity amounts to a financial trade in itself". For businesses, profits from relevant crypto activities enter trading profits where the activity amounts to a trade. For individuals holding exchange tokens as investments, capital gains tax treatment applies to disposals.

Pooling and matching, which differ by taxpayer

For fungible tokens dealt in without identifying particular units, HMRC applies the TCGA 1992 pooling principles at CRYPTO22200, and each type of token needs its own pool. The matching sequence then depends on which tax the holder pays, which is where a single lot engine goes wrong.

For an individual or a trustee within capital gains tax, TCGA 1992 section 105 matches same-day acquisitions, TCGA 1992 section 106A then matches acquisitions in the following 30 days, and only the residue reaches the section 104 pool.

That 30 day rule does not reach a company. Section 106A(1) reads: "This section has effect for the purposes of capital gains tax (but not corporation tax) where any securities are disposed of by any person." A company is matched under TCGA 1992 section 107, headed "Identification of securities etc: general rules for corporation tax", whose subsection (3) applies where "within a period of 10 days, a number of securities are acquired and subsequently a number of securities are disposed of". The corporate sequence is therefore same day, then a 10 day window, then the section 104 holding. HMRC's own pages describe that window as matching against acquisitions "within the previous nine days", which reconciles with the statute on inclusive counting from the day of acquisition. CRYPTO41350 applies the corporate pooling rule to tokens. An accountant who applies the individual's 30 day rule to a corporate client computes the wrong chargeable gain.

Crypto-to-crypto exchanges are disposals

HMRC lists "exchanging tokens for a different type of token" among the disposals for an individual, alongside selling tokens for money, using tokens to pay for goods or services, and giving tokens away, and CRYPTO41250 carries a materially identical list for companies. The absence of fiat currency does not defer the tax event.

Fees paid in tokens

HMRC's guidance is direct. CRYPTO22280 states: "If the transaction fee is satisfied in tokens then you need to consider that fee as one of the costs for the disposal of the tokens, but you also need to consider the fee as a disposal in its own right." The token given as a fee is disposed of at its market value, and its allowable cost comes out of the pool in the normal way. The accountant records both sides.

Transfers between wallets

A transfer between wallets owned by the same beneficial owner does not change beneficial ownership of the token, so there is no disposal of it. Records still have to preserve the continuity of the section 104 pool and prove that the transfer was internal rather than a disposal to another person.

European Union

There is no single EU income-tax system for crypto gains

The European Union has important crypto regulations and reporting rules, but member states retain their own substantive direct-tax systems. No EU-wide rate or uniform income-tax treatment for crypto gains exists, so the approach is to apply EU-wide rules where EU law actually harmonises the subject and the national law of the relevant member state for income and capital-gains tax.

VAT and the limits of Hedqvist

EU VAT law and Court of Justice case law affect transactions involving cryptoassets, and the result depends on the nature of the token and the transaction.

In Case C-264/14 Skatteverket v Hedqvist, judgment of the Fifth Chamber of 22 October 2015, the Court held that the exchange of traditional currency for units of bitcoin and back, for consideration equal to the dealer's margin, is a supply of services exempt from VAT under Article 135(1)(e) of Directive 2006/112/EC, and that Article 135(1)(d) and (f) do not apply. Article 135(1)(e) is the currency exemption in the consolidated VAT Directive.

The ratio rests twice on a condition an ERC-20 utility token does not obviously meet. At paragraph 49 the Court reasons about currencies that "have been accepted by the parties to a transaction as an alternative to legal tender and have no purpose other than to be a means of payment", and at paragraph 52 it records that "it is common ground that the 'bitcoin' virtual currency has no other purpose than to be a means of payment". A token carrying contractual rights to property or services, or one that exists to pay a specific network for a specific service, is not that, so the judgment should not be generalised automatically to every ERC-20 token.

MiCA is not a tax code

The Markets in Crypto-Assets Regulation creates a regulatory framework for crypto-asset issuers and service providers. It provides no unified accounting or income-tax treatment for token holders. A preparer uses MiCA where regulatory classification is relevant and does not cite it as authority for a basis rule it does not contain.

DAC8 harmonises reporting, not substantive tax rates

Council Directive (EU) 2023/2226, commonly called DAC8, extends tax-transparency and reporting rules to cryptoassets, and it already bites. Article 2(1) required member states to adopt and publish the implementing measures by 31 December 2025 and provides that "they shall apply those provisions from 1 January 2026", so reporting crypto-asset service providers are inside the regime for the 2026 calendar year. Its significance is information reporting and administrative cooperation, not one EU-wide rule for whether a holder's token gain is capital, business or ordinary income.

Gas is the same trap in every jurisdiction

Gas is where an ERC-20 token tax ledger fails, because one technical action contains at least two tax questions.

Take the 16 September move in the worked example: Wrenfield transfers 1,200 LINK from its operating address to its own cold address and pays 52,089 units of gas at 0.912 gwei, a gwei being one-billionth of an ETH. That is 0.000047505168 ETH, worth $0.21.

Token side

Both addresses belong to the same taxpayer, so the LINK transfer is not a disposal in any of the three income-tax systems above.

ETH side

The 0.000047505168 ETH has left the taxpayer in exchange for transaction-processing services. In the United States that is a disposition on the IRS pages quoted above. In the United Kingdom it follows from CRYPTO22100, which treats using tokens to pay for services as a disposal. The ETH carries its own basis, so a gain or loss falls out of it however small.

Fee side

Here the honest answer is that there is no answer. No specific guidance identified on the treatment of a network fee paid on a transfer that is not itself a disposal.

What was searched. In Canada, the word "gas" does not appear in CRA's current crypto-asset guidance pages, nor in Guide T4037, Guide T4002, GST/HST Notice 324 or GST/HST Memorandum 17-1, and "fee" appears on those pages only in mining and staking contexts. "Airdrop" returns zero across the CRA crypto-asset hub, its six subpages and the same guides and notices. In the United Kingdom, a whole-word search for "gas" returns zero hits across all 129 content pages of the Cryptoassets Manual, and CRYPTO22280 is framed around "the person disposing of the tokens", so on its face it does not reach a fee paid where there is no disposal of the primary token.

That gap is not an exemption and it is not a menu of options. The consequence is specific and it is bad for the holder: the ETH disposal is taxable, and in the United Kingdom there is no acquisition or disposal of the token to which the fee could attach as an incidental cost, so there is no corresponding relief anywhere. The position taken is documented as the entity's own analysis, with the search recorded.

A tax engine therefore needs at least three linked records:

primary token movement
fee asset disposal
tax treatment of the fee amount

Book basis and tax basis will diverge

Suppose a token is inside ASC 350-60. Financial reporting remeasures it to fair value every reporting period. US tax basis remains at tax cost until a realisation event. The result is a temporary difference, and the worked example makes it concrete. At 31 December 2025 Wrenfield Labs holds the same 1,777.579813 LINK and four measurements attach to those units:

The $26,944.60 is built as follows. Lot B's tax basis is the $16,012.23 fair value of the LINK received in the 9 May swap, with no gas added, because Treas. Reg. 1.1012-1(h)(1)(iv) and (h)(3) set basis at the fair market value used to compute the amount realised and (h)(2)(ii)(B) allocates the exchange's transaction costs exclusively to the ETH given up. That is $16.2800018423 per unit against Lot A's $14.6180017068. The 16 September move carries 1,200 units of Lot A, $17,541.60 of basis, to the cold wallet. The 21 October swap takes the next 400 units of Lot A, basis $5,847.20, against an amount realised of $7,192.63 after the $0.88 of gas, a gain of $1,345.43. The 19 November sale then exhausts the 94.02771300 Lot A units left in the operating wallet and takes 405.97228700 units of Lot B, a basis of $7,983.73 against $6,440.13 of proceeds, a loss of $1,543.60. What remains is 1,200 Lot A units in the cold wallet at $17,541.60 and 577.57981300 Lot B units in the operating wallet at $9,403.00, together $26,944.60.

Against that, the US GAAP book cost of the remaining LINK before year-end remeasurement is $27,619.82, a difference of $675.22. The internal wallet transfer accounts for $674.73 of it. The remaining $0.49 is the 9 May gas, which the book ledger capitalises into the cost of the tokens acquired and which Treas. Reg. 1.1012-1(h)(2)(ii)(B) allocates exclusively to the ETH given up, so it never reaches the LINK tax basis at all. Neither amount comes from a taxable sale, and neither can be reconstructed from the book cost column.

Every book amount is below the tax basis, so each framework begins with a deductible temporary difference. For a C corporation holding the token as a capital asset, the future deduction is a capital loss, and 26 U.S.C. 1211(a) allows a corporation's "losses from sales or exchanges of capital assets ... only to the extent of gains from such sales or exchanges". 26 U.S.C. 1212(a)(1) carries the excess back three years and forward five, treated as a short-term capital loss in each such year. Recoverability under ASC 740 therefore turns on forecast capital gains inside that window rather than on ordinary taxable income, which is usually what drives the valuation allowance on this particular deferred tax asset. Under IAS 12 the same restriction feeds the probable-future-taxable-profit test.

Crypto fair-value accounting does not eliminate deferred tax. It makes it more significant, and an ERC-20 token tax workpaper needs the tax lot register rather than the crypto asset's book cost column.

A tax-grade transaction schema

A useful ERC-20 token tax record includes:

Records should survive exchange failure

Each of these jurisdictions places the record-keeping obligation on the taxpayer, not on the exchange. 26 U.S.C. 6001 requires every person liable for any tax to "keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe", and 26 CFR 1.6001-1(a) sets out what that means in practice. Income Tax Act section 230 requires every person carrying on business in Canada to keep records and books of account. In the United Kingdom, section 12B of the Taxes Management Act 1970 requires an individual or trustee to keep "all such records as may be requisite for the purpose of enabling him to make and deliver a correct and complete return", and paragraph 21 of Schedule 18 to the Finance Act 1998 imposes the equivalent duty on a company, with preservation normally running to the sixth anniversary of the end of the return period.

So the file cannot depend on an exchange remaining operational years later. For material transactions, retain:

• downloadable statements
• trade confirmations
• wallet addresses
• transaction hashes
• raw blockchain data where practical
• valuation source and methodology
• invoices and contracts
• lot-selection evidence
• fee calculations
• custody records

The cross-border lesson

Canada, the United States and the United Kingdom all tax crypto activity, and none of them uses the same basis mechanics.

The table is deliberately high level, and taxpayer type and exact transaction facts change the answer.

An ERC-20 token tax engine designed around US wallet-specific identification cannot be reused for a UK individual subject to same-day matching, the 30 day rule and a section 104 pool, and a UK pooling engine is not a substitute for Canadian averaging under section 47(1). The data ingestion layer can be common. The legal calculation cannot.

blockchain + exchange evidence
          |
          v
normalised transaction events
          |
          +--> Canada tax rules
          +--> US tax rules
          +--> UK tax rules
          +--> local EU member-state rules

The tax takeaway

The tax ledger is not an afterthought appended to the book ledger. For plain fungible tokens, five controls prevent the most expensive errors:

1. Determine character before calculating gains.
2. Keep tax basis separate from book carrying amount.
3. Track the jurisdiction's actual lot or pooling rules, per wallet in the United States, per taxpayer in Canada, per pool in the United Kingdom.
4. Treat gas as both a fee question and a disposal of the fee asset, and record what was searched where no guidance exists.
5. Preserve evidence for internal wallet transfers so they are not misclassified as third-party disposals, and record the lot selection no later than the transaction.

The token may be technically fungible. Tax basis is not.

How Tokenbooks helps with ERC-20 tax lots and gas

Pooling scope is its own setting in Tokenbooks, per wallet or across the whole portfolio, and it is chosen independently of the lot method, so a per-wallet basis rule can be expressed directly rather than approximated. Four lot methods are implemented and selectable: first in first out, last in first out, highest in first out and average cost. Eight jurisdiction presets plus a custom option each derive a default lot method and a default pooling scope, and both stay editable per portfolio.

Gas carries two selectable treatments. It can be capitalised into cost basis, with the fee treated as a disposal of the fee asset, or it can be expensed. Either way the fee asset leaves an accounting lot, so the lot-consumption step is recorded with the fee.

Behind both settings sits an inspectable lot ledger recording every add, disposal, cut, move, reservation and release. The capital gains and losses report then carries, per disposal, the asset, the amount disposed, the acquisition date, the disposal date, the proceeds, the cost basis, the gain or loss and a link back to the source transaction.

Ethereum sync and gas capture are described on the Ethereum integration page.

More in this series

Accounting Token Anatomy: ERC-20 Tokens. This article stands alone, but the series builds in order.

Previous (02.1.6): ERC-20 Token Journal Entries: A Complete Worked Example

Sources and further reading

Canada

• CRA, Information for crypto-asset users and tax professionals. canada.ca
• CRA, Reporting income from crypto-asset transactions. canada.ca
• CRA, Determining the value of crypto-assets for tax filing. canada.ca
• CRA, GST/HST from crypto-asset transactions. canada.ca
• CRA, GST/HST Memorandum 17-1, Definition of Financial Instrument. canada.ca
• Excise Tax Act, subsection 123(1). laws-lois.justice.gc.ca
• Income Tax Act, section 47, identical properties. laws-lois.justice.gc.ca
• Income Tax Act, section 54, definitions including superficial loss. laws-lois.justice.gc.ca
• Income Tax Act, section 40. laws-lois.justice.gc.ca
• Income Tax Act, section 230, records and books. laws-lois.justice.gc.ca

United States

• IRS, Digital assets. irs.gov
• IRS, Frequently asked questions on digital asset transactions. irs.gov
• IRS, Notice 2014-21. irs.gov
• IRS, Revenue Ruling 2019-24. irs.gov
• IRS, Revenue Procedure 2024-28 (safe harbour for allocating unattached digital-asset basis to wallets and accounts). irs.gov
• IRS, Notice 2025-7. irs.gov
• IRS, Notice 2026-20. irs.gov
• IRS, Instructions for Form 1099-DA. irs.gov
• IRS, Instructions for Form 1040. irs.gov
• 26 U.S.C. 1012. govinfo.gov
• 26 U.S.C. 1211. law.cornell.edu
• 26 U.S.C. 1212. law.cornell.edu
• 26 U.S.C. 1222. law.cornell.edu
• 26 U.S.C. 6001. law.cornell.edu
• Treasury Regulation 1.1012-1. ecfr.gov
• Treasury Regulation 1.6045-1. law.cornell.edu
• Treasury Regulation 1.6001-1. law.cornell.edu

United Kingdom

• HMRC Cryptoassets Manual. gov.uk
• HMRC CRYPTO10000, introduction and status of the manual. gov.uk
• HMRC CRYPTO20250, what is trading. gov.uk
• HMRC CRYPTO22100, what is a disposal. gov.uk
• HMRC CRYPTO22200, pooling. gov.uk
• HMRC CRYPTO22280, fees satisfied in tokens. gov.uk
• HMRC CRYPTO40000, businesses chapter contents and its exchange-token scope. gov.uk
• HMRC CRYPTO40050, businesses and applicable taxes. gov.uk
• HMRC CRYPTO41250, companies: what is a disposal. gov.uk
• HMRC CRYPTO41350, corporation tax on chargeable gains: pooling. gov.uk
• TCGA 1992, section 104. legislation.gov.uk
• TCGA 1992, section 105. legislation.gov.uk
• TCGA 1992, section 106A. legislation.gov.uk
• TCGA 1992, section 107. legislation.gov.uk
• Taxes Management Act 1970, section 12B. legislation.gov.uk
• Finance Act 1998, Schedule 18, paragraph 21. legislation.gov.uk

European Union

• CJEU, Case C-264/14 Skatteverket v Hedqvist. eur-lex.europa.eu
• Council Directive 2006/112/EC, the VAT Directive. eur-lex.europa.eu
• Council Directive (EU) 2023/2226, DAC8. eur-lex.europa.eu
• Regulation (EU) 2023/1114, MiCA. eur-lex.europa.eu This article is educational material, not tax advice. Tax outcomes depend on taxpayer type, residence, business activity, transaction facts, elections, local law, and changes in legislation or administrative guidance.