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How do I account for token swaps (mainnet launch, etc)?
How do I account for token swaps (mainnet launch, etc)?
Written by Eivind Semb
Updated over a week ago

In most cases, a token swap is not considered a taxable event since you have not sold the coins. Instead, the token has been migrated to another blockchain or contract address, and sometimes, the ticker symbol and/or total supply will also have changed.

The token swap ratio is most commonly 1:1, meaning that if you owned 100 tokens before the swap, you would own 100 tokens after the swap. However, some cryptocurrencies have done token swaps with a ratio different than 1:1, and it's important that this is tracked correctly and that the cost basis is carried over without realizing any capital gains. Here are a few examples of prior token swaps:

  • EOS - June 2018, 1:1 ratio

  • VeChain (VEN β†’ VET) - July 2018, 1:100 ratio

  • Elrond (ERD β†’ EGLD) - September 2020, 1000:1 ratio

Example with Elrond

You bought 25,000 ERD tokens and paid 0.01 BTC on July 15th, 2020. At the time of the transaction, 0.01 BTC was worth $500, which also became the cost basis of the acquired ERD tokens.
The tokens were automatically swapped on Binance on September 10th, 2020. After the swap, you now have 25 EGLD tokens, which take on the original cost basis of $500.

To track this correctly, you must add a Trade (Swap) transaction so that Coinpanda will track the cost basis correctly if the swap is not imported from the Binance API. If you are using the Generic Excel file template, you can add Swap to the Label column.

This is how the transaction will look like after being imported:

The original cost basis of $500 will now be tracked correctly for the EGLD tokens received after the swap, and no gains will be realized.

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