What are Non-taxable events (NTE)?
The Non-taxable-event label has programmed cost basis logic, that is similar to that of the Internal Transfer label, but is different as it does not require both sides of the transactions to be recorded in the Cryptio Sub-ledger.
Therefore the two main characteristics of a non-taxable event transaction include:
Having at least one side of the transaction imported.
Requires no gain/loss to be calculated.
This article gives you some examples of non-taxable events and gives you some advice on how to use Cryptio to mark the relevant transactions as non-taxable.
Examples of Non-taxable events:
Buying crypto with fiat currency
Donating crypto to a charity or a tax-except non-profit
Transferring crypto assets between owned wallets or exchanges
How should I account for Non-taxable events in Cryptio?
You can track all your movements which are not taxable thanks to the Non-taxable event labels type. There 2 labels belonging to this type:
the internal transfer label which is automatically detected in our system and applied to the relevant movements
the non-taxable event label which can be applied to any movement.
What are internal transfers?
An internal transfer is a transaction that's crypto-asset & original cost basis has moved from one imported wallet to another. Internal Transfers don't have any gains/losses computed as the assets haven't left the owner's treasury.
In your account, an internal transfer will appear as both a deposit and a withdrawal. Consequently, it is extremely important that both are labelled correctly to avoid errors in reports. In Cryptio, we have created algorithms to automatically label these for you!
Manually adding Non-taxable event labels to transactions.
When you are adding Non-taxable event labels on the transactions page, the process is different to setting rules on the labels page.
Here we are trying to make sure that you follow the same process as above and ensure you select both sides of the transaction.
Step one is to select '+label' on the transaction
Step two is to decide what type of label you want to add to the transactions i.e. Taxable (Income/Expense) or Non-Taxable (Internal Transfer/NTE).
Applying NTE labels to transactions.
If you apply the Internal Transfer label the software will look for the counter transactions. If there's no counter transaction you will not be able to apply the internal transfer label.
If you apply the Non-taxable event label the software will not look for the counter transactions and you will be able to apply the Non-taxable event label.
The Cryptio Review Module
The Cryptio review module can help you ensure no non-taxable events are not missed! You can find the list of all your transactions that are not labelled yet by clicking on "Needs review" and then "Missing labels". In this section on the transactions page, we will identify the transactions which are internal transfers and need labelling.
- If a transaction has been flagged, however, its counter-party has not been identified
- Two transactions have NOT been auto-flagged as internal transfers, but the algorithm identifies them
Note: internal transfers can sometimes still have a cost basis attached if the transaction has a fee. In that case, the cost basis is one of the fees. The same goes for gains and losses.