Hi lpfaust,
A couple of questions regarding "What is Basis?"

1. Could you explain how cost basis is computed when you have your virtual currency (say, BTC) spread across multiple places, like multiple exchanges? Do you compute cost basis/capital gain in a FIFO manner across all of them (irrespective of where you keep each portion), or separately for each exchange? For instance, consider the following series of purchase and sell transactions:
   echange, date, purchase/sell, amt, rate
   E1, d1, purchase, 2 BTC, 1 BTC = $1000
   E2, d2, purchase, 2 BTC, 1 BTC = $2000
   E1, d3, purchase, 2 BTC, 1 BTC = $3000
   E2, d4, purchase, 2 BTC, 1 BTC = $4000
   E1, d5, sell, 4 BTC, 1 BTC = $5000
   We have two options here:
   (a) Consider all of our holdings as one big pile irrespective of where they reside, and handle it in a FIFO manner across all of them, so capital gain is: (4 BTC x $5000) - (2 BTC x $1000 + 2 BCT x $2000) = $14000.
   (b) Handle each exchange independently, and handle the transactions within that exchange in a FIFO manner, so capital gain is: (4 BTC x $5000) - (2 BTC x $1000 + 2 BCT x $3000) = $12000
   Option (a) seems much more natural to me, but I wanted to make sure that's indeed what the law says, if it addresses this aspect at all.
2. This is a follow-up question in case the answer to my first question is (a). Suppose that a couple files jointly with the IRS. Each has their own virtual currency account in an exchange. Each performs a series of purchase and sell transactions. In order to correctly compute cost basis and consequently capital gain, do we use a FIFO system across the accounts or in each account independently?

Thanks much for your insights!