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.
When managing your crypto assets in Recap, it’s important to understand the different balance types and how they interact with your overall portfolio. Below, we explain the key terms related to your pool balance, portfolio balance, and other important metrics, so you can ensure your data is accurate and complete.
Recap takes a different approach to some of our competitors by not assuming that all transfers are disposals or acquisitions (and therefore taxable events), which is why we utilise specific balance concepts such as the pool balance and portfolio balance.
These balances are essential in accurately tracking your assets and understanding your tax position. Unlike some competitors, who may obscure or simplify these details, Recap is transparent with its balance data. This transparency ensures you have a clear view of your assets and any potential tax implications, allowing you to make more informed decisions and maintain accurate records.
Pool Balance
The pool balance refers to the total amount of a specific asset in your Section 104 (S104) pool. This is calculated as your acquisitions minus disposals for the asset. The S104 pool is used to track assets for tax purposes, ensuring that the correct acquisition costs are applied when calculating gains or losses.
Portfolio Balance
Your portfolio balance represents the total balance of the asset across all the accounts you’ve added to Recap. This balance is a broader view of the asset, encompassing all exchanges, wallets, and accounts you’ve connected.
Balance Difference
The balance difference is the gap between your pool balance and your portfolio balance. If the balance difference is zero, it means the asset is fully represented in Recap. However, if there’s a difference, it may indicate incomplete or inaccurate data.
Common reasons for a balance difference include:
Missing accounts or transactions: You may have untracked exchanges, wallets, or transactions that need to be added.
Misclassified transactions: Transactions might have been entered with the wrong classification.
Withdrawals to external wallets not tracked in Recap: If you’ve moved assets to external wallets, such as cold storage, these transactions may not be tracked in Recap.
To ensure your data is complete and accurate, aim to bring your balance difference to zero.
Pool Market Value
The pool market value is the current value of your pool balance. This is calculated by multiplying the pool balance by the current market price of the asset. This metric helps you understand the current value of your assets.
Pool Costs
The pool costs represent the allowable costs associated with the asset. These are calculated by adding your acquisition costs (the original price you paid for the asset) and any associated fees (such as exchange or transaction fees).
Pool Gain/Loss
Your pool gain/loss is the estimated unrealised tax position of the asset. It is calculated as the pool market value minus the pool costs. This gives you an estimate of your potential taxable gain or loss if you were to dispose of the asset at its current value.
Example 1
Let’s imagine a customer has connected their Coinbase account to Recap and is therefore tracking all deposits, withdrawals, and trades made on the exchange. In one transaction, they purchase 1 BTC and then withdraw this Bitcoin from Coinbase to a cold storage wallet that isn’t connected to Recap.
As a result, their balances in Recap would look like this:
Pool Balance: 1 BTC (Reflecting the acquisition in the Section 104 pool)
Portfolio Balance: 0 BTC (Since the BTC has been withdrawn to an untracked wallet)
Balance Difference: -1 BTC (Indicating a discrepancy caused by the untracked cold storage withdrawal)
In this case, Recap shows a balance difference because the cold storage wallet is untracked, meaning Recap can’t account for the withdrawn Bitcoin.
To resolve this, the customer would need to add an account for their cold storage wallet in Recap. By doing so, the withdrawal from Coinbase would be matched with a corresponding deposit into the cold storage wallet, bringing the balance difference to zero and ensuring accurate tracking of their assets.
Example 2
Let’s imagine a customer has just received 1337 DOGE as mining income. This transaction is the first time they have received any DOGE tokens. However in Recap, the transaction is incorrectly classified as a Deposit rather than Income.
As a result, their balances in Recap would look like this:
Pool Balance: 0 DOGE
(Since the transaction is classified as a deposit, Recap assumes there is no acquisition for this asset, and it does not enter the Section 104 pool.)Portfolio Balance: 1337 DOGE
(The deposit of 1337 DOGE is reflected in the customer’s total portfolio and is the total amount of DOGE held across all accounts)Balance Difference: +1337 DOGE
(Recap shows a balance difference because the asset is present in the portfolio but not in the Section 104 pool due to the incorrect classification of the transaction.)
In this case, Recap identifies a balance difference because the ETH has been deposited into the portfolio but hasn't been included in the pool balance as there’s no acquisition record for the asset. This discrepancy arises due to the income being incorrectly classified as a deposit.
To resolve this, the customer would need to reclassify the deposit as income, ensuring the transaction is correctly accounted for in the Section 104 pool. This would add the 1337 DOGE to the pool balance and eliminate the balance difference, resulting in accurate asset tracking across Recap.