It is common for projects to conduct token swaps which might require some manual work to account for this correctly for tax purposes. A token swap is in general not considered a taxable event since you have practically not sold the coins, but instead, they have simply been swapped/migrated to another blockchain or the ticker symbol and/or total supply have changed.

The token swap ratio is most commonly 1:1, which means that if you owned 100 tokens prior to the swap, you will own 100 tokens also after the swap. However, some projects 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. These are some of the token swaps for popular coins conducted in the past:

  • EOS (June 2018, 1:1 ratio)

  • VeChain, VEN → VET (July 2018, 1:100 ratio)

  • Elrond, ERD → EGLD (November 2020, 1000:1 ratio)

Let's look at Elrond as an example:

You bought 25,000 ERD tokens and paid 0.01 BTC on July 15th, 2020. The tokens were automatically swapped on Binance in September 2020. After the swap, you have now 25 EGLD tokens which take on the original cost basis and purchase date of the old ERD tokens.

To track this correctly, you need to update the currency (ticker symbol) and amount for the transaction(s) where you bought the ERD tokens that were swapped later. In our case it will look like this:

Original transaction: 0.01 BTC → 25,000 ERD (July 15th)

Updated transaction: 0.01 BTC → 25 EGLD (July 15th)

This is how it looks after we have tagged the original transaction as "Ignore" and then created a new manual transaction for 25 EGLD bought:

By doing this, the original cost basis AND purchase date will be tracked correctly for the EGLD tokens received after the swap. It is not an issue that you have "bought" EGLD before the new token was actually launched since the cost basis is calculated from the price of BTC sold on July 15th.

Did this answer your question?