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Cryptocurrency sale


Robin

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First time for one of these. Client says they received no document. Says he had a S/T gain of $2,500 on a $10,000 investment. He traded multiple times on the exchange but gave me this as the result in the end.  What type of backup can I request of him. I will definitely report on his return in any event. How has others handled these transactions?.

TIA for any guidance.

-Robin

 

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Does the client have a copy of all their trades? Does the exchange(s) they use generate an end of year gain / loss for the account? It wouldn't be printed, they would have to find it (doubtful they do)?

IMO I'd use the best figures they have available to them and move forward as if they traded a stock. If they report a gain and their name shows up later in an IRS crackdown, they've done a LOT more than 99% of the people.

The exchange I used for my one bitcoin purchase doesn't generate anything unless you do a transaction larger than $20k. I did a small amount to buy a laptop just so I could see how it all works.

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For those of us committed to details, this response might not fly.  The price of cryptocurrencies changes by the second, and people buy/sell/use fractions of a coin down to many decimal points, so there is no easy way to trace every single buy and sell, and the fees vary just as wildly.  The limited regs the IRS has provided says they really don't care how you do it, just be consistent.  If you want to use the midnight price, or the 6AM price, do it for all transactions, and use the same exchange for the quotes.  They can't keep up with this stuff either, and I doubt they'll drill down into nanosecond prices to raise or lower someone's reported gains or losses.  As long as there is some kind of reasonable record, I doubt an auditor would disallow it.  My client who mines bitcoins tells me we are among the "elite" 833 people or so who reported their crypto transactions a couple of years ago.  I just use his records, which seem to be okay because keeping track is some kind of odd hobby of his.

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