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Crypto gains question......
Old 06-16-2019, 08:46 PM   #1
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Crypto gains question......

Letís say you buy a million dollar diamond ring from jeweler who accepts crypto.

You have crypto now worth 1M and your basis is 200K.

I know crypto is taxed as property and would be subject to long term or short term capital gains depending on your period of ownership.

In my example, youíre effectively making a purchase with previously unrealized (and untaxed) gains. What does the IRS consider to be the taxable event? And when you consider the anonymity of crypto, how is the transaction reported?

Forgive me if these are dumb questions with obvious answers.

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Old 06-16-2019, 08:50 PM   #2
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The taxable event is the exchange of the crypto for something else. I think the reporting would go on Schedule D.

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Old 06-16-2019, 10:16 PM   #3
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Try reading:

(Found by googling "cryptocurrency")
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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Old 06-17-2019, 08:45 PM   #4
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Thanks for that link. The last bullet point on the “Tax Basics” page is what I’m talking about. I understand what the code intends. What I don’t understand is how that transaction (using crypto to pay) would be reported/accounted for as a taxable event.
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Old 06-17-2019, 09:53 PM   #5
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Yes both my son and I had to report to the IRS and pay taxes on bitcoin.
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