Cryptocurrency and Taxes


Ok, dudes and dudettes, I have a [serious] question: If I give you a 1 crypto, is there a tax event? Obviously, there’s a tax event when you convert that 1 crypto to fiat (depending on your jurisdiction, country, etc.), or trade it for a different crypto in the US, but from me to you, I give you a 1 crypto, does anything happen or need to be reported by either party?


It’s basically a grey area (at least in the US). There hasn’t been an official ruling or statement as to how digital assets apply to section 1031 of the IRS tax code which deals with “like-kind” exchange.

There actually is a bill that would formally make crypto transactions under $600 non-taxable events.


Thank you! If I understand correctly, in my scenario, based on the de minimis proposal, under $600 no one will care. Over, I may have to pay capital gains at the moment of transaction of ownership of crypto? That seems… wrong (if I’m not converting to fiat or another cryotocurrency).

The value of 1 USD is always 1 USD. 1 DOGE = 1 DOGE. So I’m giving you 1 DOGE, but I paid $.10 for it a year ago and now it’s worth $1, if you just want to keep that 1 DOGE, you should report it as income and pay tax on it? Also I have to pay tax on the gain from .10 -> 1? That’s where I’m still hazy.

If I gave you $10,000, you’d have to report that and pay taxes on it. But I wouldn’t have to pay any tax or capital gains on those dollars… they never changed value. Why would I need to pay taxes, as the giver, on a denomination of crypto when no USD or conversion is involved. That’s nuts.


I think the fact that taxes are denominated in USD means that anything of value being exchanged can have a capital gains portion. If I gave you $10,000 in gold, and gold went up in value I’d expect capital gains to come into play on that? Take all of this with a grain of salt because I know almost nothing about taxes.

$10,000 in USD can’t change value in USD, but $10,000 worth of some other asset can change value in USD, so capital gains could come into play, is my understanding.


@TentDweller I guess? But if we’re sticking crypto to crypto, and not even like-kind: I give you 1 bitcoin. You accept 1 bitcoin. I understand you can be taxed on receiving the 1 bitcoin because it’s like a gift and gifts can be taxed as normal income (like when Oprah gives people a car). But would I have to pay taxes during that transaction? It’s not like I bought 1/10th a bitcoin and over time it became 1 bitcoin. There’s no gain there.


I can’t see any possible reasoning that you would have to pay taxes in that case, and even if for some reason the US gov comes out and says you would have to, at a certain critical mass, I don’t see any way they could possibly regulate all like kind exchanges.


Right, me too.

I’m just trying to get my thinking straight.


They have a hard enough time keeping up with their own financial system; not to mention an entirely new one.


Someone pays taxes on that 1 bitcoin eventually.

At the point it’s no longer a bitcoin.

Because that would mean, otherwise, every micro-transaction, every token tip, would be a taxable event.


Yep. If the IRS has any chance to get ahead of regulation (I’d argue that they’re already too far behind to catch up), they’re going to have to make concessions like that de minimis exemption.