Quick answer
If you can't prove what you paid for your crypto, the tax authority may treat the entire sale proceeds as a taxable gain.
Reporting
Australia
Canada
United Kingdom
United States
Missing Cost Basis
The problem arising when original acquisition costs for crypto assets cannot be determined, leading to potentially inflated tax bills.
AustraliaCanadaUnited KingdomUnited StatesUnderstanding Missing Cost Basis on crypto
Missing cost basis occurs when a taxpayer cannot determine the original acquisition cost of cryptocurrency they are selling or have sold. Common causes include lost exchange records (especially from defunct platforms like FTX or Celsius), crypto received before records were maintained, airdrops or forks where cost basis is unclear, or assets transferred between wallets with no acquisition history. If cost basis cannot be established, the IRS default position is that it is zero — meaning the entire sale proceeds are taxable. Tax advisors generally recommend using reasonable estimation methodologies (documented clearly) rather than defaulting to zero.
Missing cost basis occurs when a taxpayer cannot determine the original acquisition cost of cryptocurrency they are selling or have sold. Common causes include lost exchange records (especially from defunct platforms like FTX or Celsius), crypto received before records were maintained, airdrops or forks where cost basis is unclear, or assets transferred between wallets with no acquisition history. If cost basis cannot be established, the IRS default position is that it is zero — meaning the entire sale proceeds are taxable. Tax advisors generally recommend using reasonable estimation methodologies (documented clearly) rather than defaulting to zero.
What this means for your crypto activity
Inflated gains
Missing cost basis inflates your reported capital gains — you pay tax on proceeds rather than just profit.
Defunct exchange reconstruction
For FTX/Celsius users, cost basis reconstruction from email receipts, bank records, and blockchain data is possible.
Reasonable estimation
Reasonable estimation (based on available evidence of purchase price) is preferable to zero and must be documented.
On-chain recovery
On-chain analysis can often recover cost basis from wallet address history even when exchange records are lost.
Old holdings
Starting to track from zero cost basis forward (and accepting the inflated gain) may be necessary for very old holdings.
- Missing cost basis inflates your reported capital gains — you pay tax on proceeds rather than just profit.
- For FTX/Celsius users, cost basis reconstruction from email receipts, bank records, and blockchain data is possible.
- Reasonable estimation (based on available evidence of purchase price) is preferable to zero and must be documented.
- On-chain analysis can often recover cost basis from wallet address history even when exchange records are lost.
- Starting to track from zero cost basis forward (and accepting the inflated gain) may be necessary for very old holdings.
Seeing it in action
Example scenario
Claire bought ETH on an exchange that closed in 2019. She has no records and the exchange is defunct. She sells the ETH in 2024 for $8,000. She searches her emails for any confirmation of the original purchase and finds a bank debit of £2,000 in 2019. Using this as documented evidence, she claims £2,000 as her cost basis rather than defaulting to zero, reducing her taxable gain from £8,000 to £6,000.
How this works across jurisdictions
- Australia
ATO expects cost base documentation; reasonable reconstruction from available evidence is acceptable.
- Canada
CRA requires ACB calculation; reconstruction from available records is necessary for accurate reporting.
- United Kingdom
HMRC expects pool cost to be maintained; reconstruction from bank records and exchange data is acceptable where original records are unavailable.
- United States
IRS default for missing cost basis is zero; taxpayers should use best available evidence for reasonable reconstruction; document all assumptions clearly on Form 8949.
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