On the Settings page, under Portfolio & Tax -> Portfolio, there are some switch toggles that let you treat airdrops/mining/staking/royalties transactions as income.
Switching these toggles might change the results of your Income Report and Capital Gains Report. The default settings depend on your tax jurisdiction. Always check with your accountant before changing the settings.
Toggle on
If the toggle switch is turned on as in the below image, then the type of transactions that you have received will be treated as income on your reports.
Example:
I mined 2 BTC at a fair market value of $100/BTC, then I would have an obligation to pay $200 of income tax at the time of receiving the mined crypto.
If I later dispose of these 2 BTC, then this will trigger a CGT event at the time of the disposal event. The taxable gains will be the difference between the fair market value at the time of the acquisition v.s. the fair market value at the time of the disposal.
I now dispose of the 2 BTC at a later date, at a fair market value of $1000/BTC. This will trigger a CGT event of $1000 * 2 - $100 * 2 = $2000 - $200 = $1800.
Note that the total 'gains' on your tax report calculation would be:
Income tax $200 when you mined
Capital gain tax $1800 when you sold
Toggle off
If the toggle switch is turned off like in the below image, then the type of transactions that you have received will be treated as a zero-cost buy since there was no cost associated with obtaining the asset.
Example:
I mined 2 BTC at a fair market value of $100/BTC. Since these are not treated as income, the cost base for these 2 BTC is $0/BTC = $0. I don’t pay any tax on this event.
If I later dispose of these 2 BTC, then this will trigger a CGT (capital gains tax) event at the time of the disposal event. The taxable gains will simply be the fair market value at the time of the transaction since the cost base is $0.
I now dispose of the 2 BTC at a later date, at a fair market value of $1000/BTC. This will trigger a CGT event of $1000 * 2 - $0 * 2 = $2000
Note that the total 'gains' on your tax report calculation would be:
Income tax $0
Capital gain tax $2000 when you sold
As can be seen, in both examples, the total ‘gains’ are the same. The difference is when the tax is actually paid (i.e., at what point in time) as well as which category the taxation sits in (e.g., income vs. capital gains).