15 lessons for bitcoin investors
How many bitcoin investors are not up to speed with the IRS crackdown? Millions, probably. Coinbase has 35 million customer accounts. The number of taxpayers reporting crypto trades was, until recently, in the hundreds.
In computing a gain or loss you use as your starting point the “basis” of an asset, tax lingo for your original purchase price .You have to report the disposition of a virtual coin if it is:But merely transferring coins, such as from a wallet to an exchange or vice versa, is not a disposition. Nor do investors who buy and hold owe a tax.This rule forbids the claiming of a loss on sale of a security if you bought that security within 30 days before or after.
As with 1099-Bs, so with the Ks, the fact that you didn’t get the form does not absolve you of the obligation to report all sales and other dispositions.When a share of stock splits in two, by and large, there’s no taxable transaction. Its purchase price gets carved up and assigned to the two pieces; you declare a sale on either of those pieces only when you dispose of it. If and when you do sell a piece at a gain you’ll get the favorable capital gain treatment.
How does the tax agency justify its rule? With some very strained logic. It sees a coin split as less like an oil company splitting in two than it is like a taxpayer stumbling on a $100 bill in a parking lot. Your new possession has a basis of $9,800 and any gain or loss from that point is a capital gain or loss. That could create a painful result. If the coin collapses in value to $8,000 and you sell it then, you have broken even, but you’ll probably owe tax. That’s because you’d be combining $1,800 of ordinary income, taxed at a high rate, with $1,800 of capital loss, which may be worth considerably less on your tax return.
A donee’s cost basis and holding period are the same as if you still held the coins, but with one small distinction: If the property has fallen in value during your ownership, then a special rule comes into play.
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