I'm still unsure of how to account for the transfer fees which just disappear from the bitcoin balance when it is transferred from the exchange to a wallet and back again to the exchange for sale. Using the example from the original question, above, 1 BTC was purchased for amount $A and then 0.9995 was sold for amount $B. My initial assumption was that my gain would be B-A and that's what I should report and not worry about the leaked 0.0005, but if the fees are not "deductible" (by essentially reducing the proceeds from the sale, since I would be selling fewer BTC than I bought), how and where would I account for the 0.0005 BTC? Is paying the fee considered a sale of part of my BTC to pay for something, similar to ordering a pizza? If so, is that a taxable event at the time the fee is paid?
