What is the average basis method, and when is it used on Form 1099-DA?

 The average basis method is a method for calculating the cost basis of certain digital assets when they are sold or exchanged. Instead of tracking the cost of each unit of a digital asset, you calculate the average cost of all units of the asset you hold. This simplifies reporting for assets acquired at different prices.

When it can be used on Form 1099-DA:

• The average basis method can only be used for digital assets that are also tokenized securities.

• The security must qualify under section 1012(c) or (d) of the tax code.

• When using this method, you report the average cost per unit to determine the gain or loss for the transaction.

• This method helps brokers and taxpayers report transactions accurately on Form 1099-DA without tracking each acquisition date and price for the asset.