# How Does Coinbase Calculate Gains?

When it comes to taxes, there are a lot of questions surrounding cryptocurrency. One of the most popular questions is “How does Coinbase calculate gains?”

In order to understand how Coinbase calculates gains, we need to first understand how they define a capital gain. A capital gain is defined as the difference between the purchase price and the sale price of an asset.

If you sold an asset for more than you paid for it, you have a capital gain. If you sold it for less than you paid for it, you have a capital loss.

Coinbase uses the first-in, first-out (FIFO) method to calculate gains. This means that they will sell the asset that you purchased first and then calculate the gain or loss from that sale.

Let’s say you bought two Bitcoin at \$10,000 each on January 1st and then sold one Bitcoin on February 1st at \$12,000. Coinbase would sell the first Bitcoin that you purchased and calculate the gain as follows:

Purchase price: \$10,000
Sale price: \$12,000
Capital gain: \$2,000

Now let’s say you bought two Bitcoin at \$10,000 each on January 1st and then sold one Bitcoin on February 1st at \$11,000. Coinbase would sell the first Bitcoin that you purchased and calculate the loss as follows:

Purchase price: \$10,000
Sale price: \$11,000
Capital loss: \$1,000.

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