What a vault deposit actually is
A Hyperliquid vault — HLP included — is a pooled account that trades on its own ledger while depositors hold a share of its equity. When you deposit USDC it leaves your perp balance and enters the vault's; when you withdraw, your share of the vault's equity comes back as USDC.
The deposit itself is a transfer of your own capital into a pooled position, not a disposal — like moving funds into any managed vehicle, the basis question attaches to the share you now hold, not to a sale that never happened. The withdrawal is where value changes hands: if you get back more than you deposited, the difference is your share of the vault's trading results.
Withdrawals run on vault-specific lock periods — the funds are committed to the vault until its lock expires, which means the 'profit' exists as vault equity well before it lands back in your balance. When it becomes yours for tax purposes is one of the open questions below.
What's taxable, and the contested part
Deposit and withdrawal mechanics are not disposals — capital in, capital back. The taxable content is the return: the excess of withdrawals over deposits is your profit share, and a net loss is a loss in the normal way.
The character of that return is the contested part. Filers take different positions on whether vault returns follow the character of the underlying trading (the vault's own perp gains and losses, passed through), constitute ordinary income on receipt, or behave like a capital gain realized on withdrawal. There is no settled guidance specific to venue-native vaults — the position is yours and your preparer's.
Timing is genuinely ambiguous too: profit accrues to your vault share continuously, but you can't touch it until the lock clears and you withdraw. Whether income is recognized as it accrues inside the share or at withdrawal is a dominion-and-control question in the same family as staking rewards.
What the ledger records
Vault activity never enters your trade history — the vault's fills belong to the vault's address, not yours. Your address's record is four ledger row types: `vaultCreate`/`vaultDeposit` rows (USDC out), `vaultWithdraw` rows (net amount back, after commission and closing costs), and `vaultDistribution` rows when a vault pays out. A vault leader additionally earns commission on depositor profits — that commission is income to the leader in the ordinary way.
Because the ledger only sees the boundary crossings, a vault depositor's own trade file shows the deposits and withdrawals but nothing between them — the month's trading inside the vault is invisible at the depositor level. A reconstruction of vault return therefore works from the flow rows: net withdrawn minus net deposited over the period, not from any fill.
Basisproof reads the same public ledger: vault deposits and withdrawals are classified as perp-universe boundary flows and printed as their own lines in the report — so the vault leg of a year is visible and quantified even though it produced no fills on your address.
Common questions
?Is depositing into a Hyperliquid vault taxable?
No — moving your own USDC into a pooled vault isn't a disposal. The taxable part is the return: withdrawals in excess of deposits are your profit share, taxable under whichever characterization your preparer takes.
?Are HLP or vault gains ordinary income or capital gains?
Contested — filers argue each of pass-through trading character, ordinary income on receipt, and capital gain on withdrawal. There is no settled guidance for venue-native vaults; it's a position question, not a mechanics question.
?Why don't my vault gains show in my trade history?
The vault trades under its own address — your history only sees the boundary rows (deposits out, withdrawals back). Your return is reconstructed from those flows, not from fills you never made.
?Is vault leader commission taxable?
Yes — commission paid to a vault leader on depositor profits is income to the leader. It appears as its own ledger flow, separate from the leader's own deposit returns.
The vault leg, quantified
The paid report classifies vault deposits and withdrawals as their own boundary flows — net return over the year is a computed line, not an estimate.