Deposits & Withdrawals: Understanding Deposits vs Acquisitions → Understanding Withdrawals vs Disposals
Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.
In Recap, not every incoming crypto transaction is treated the same. Understanding the difference between a Deposit and an Acquisition is key to ensuring your S104 pool is correct and your capital gains figures are accurate.
What is a Deposit?
A Deposit is a movement of crypto into one of your Recap-tracked accounts. On its own, a Deposit does not add to your Section 104 (S104) pool and does not record a cost basis.
This is the correct classification when crypto is moving between accounts you already own. For example, if you transfer BTC from Coinbase to your Ledger wallet and both are connected to Recap, the Withdrawal from Coinbase and the Deposit into the Ledger represent an internal movement. No new crypto has entered your ownership, so the S104 pool remains unchanged.
What is an Acquisition?
An Acquisition is any event where crypto enters your ownership for the first time. Acquisitions add to your S104 pool and record a cost basis — the value of the asset at the time it was received — which is used later to calculate your capital gain or loss when you dispose of it.
Common examples may include:
Buying crypto with fiat (recorded as a Trade (Buy) in Recap)
Receiving crypto as income from staking, mining, or salary (recorded as Income)
Receiving crypto as a gift
Receiving tokens from a fork or airdrop
Why the distinction matters
When a transaction that is really an Acquisition is recorded as a Deposit, no cost basis is captured in your S104 pool. When you later dispose of that asset, Recap will show a missing acquisition error and default the cost to zero, meaning your taxable gain will be calculated at the highest possible amount.
This is one of the most common causes of inflated capital gains figures. Getting the transaction type right from the start ensures your pool accurately reflects your acquisition history.
Example
Imagine you receive 0.5 ETH as payment for freelance work. It arrives at your exchange address and Recap imports it as a Deposit.
Because it is classified as a Deposit, no acquisition is recorded in the S104 pool:
Pool Balance: 0 ETH (the ETH has not entered the S104 pool)
Portfolio Balance: 0.5 ETH (the ETH is visible across your connected accounts)
Balance Difference: +0.5 ETH (Recap flags this as a discrepancy)
When you later sell the 0.5 ETH, Recap cannot find a matching acquisition. It defaults the cost to zero and your full sale proceeds are treated as a taxable gain.
The correct classification here is Income. Reclassifying the Deposit as Income records an acquisition at the market value of the ETH on the day it was received, which becomes the cost basis for the eventual disposal.
What to do if a Deposit should be an Acquisition
If you have a Deposit that should have been recorded as an Acquisition, or a related type such as Income or Trade (Buy), you can reclassify it directly in Recap.
See our guide on How to Reclassify a Transaction for step-by-step instructions.
If you are unsure whether a transaction is an internal transfer or an Acquisition, consider where the crypto originated. If it came from an account you already own and that account is connected to Recap, the Deposit classification is likely correct. If the crypto came from an external source, such as a purchase, income payment, gift, or reward, it is an Acquisition and should be classified accordingly.