Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

How are taxes (federal and California) calculated for

bitcoin transactions? I had a few...
How are taxes (federal and California) calculated for bitcoin transactions?
I had a few transactions of the following types:
1. Buy bitcoins
2. Sell bitcoins
3. Send bitcoins to 3rd partyAll these transactions were done via CoinBase.If some sell/send transactions resulted in losses and some resulted in gains, shall I subtract losses from gains?
Shall I use FIFO principle to calculate cost basis for gain/loss?
Show More
Show Less
Ask Your Own Tax Question
Answered in 15 minutes by:
1/14/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,838
Experience: Taxes, Immigration, Labor Relations
Verified

According to teh IRS - bitcoins are not classified as currency - but are treated as assets.

When bitcoins are purchased - the purchase price is your basis.

When you sell bitcoins - that transaction is reported on your tax return - and a gain or loss is realized.

The gain or loss is calculated in the same manner as for shares or any other assets.

(sale price) MINUS (basis) = gain/loss

You may choose which bitcoins you selling - and specify that when you report the sale.

If you do not specify - FIFA principle is used as you suggested.

You will combine all capital losses and gains - and will calculate for specific tax year - net gain or loss.

.

When you send bitcoins to the third party - we need to know the reason of that transaction for proper classification.

If that is an exchange for another asset or that is a payment for services - that is classified as deemed sale.

Let me know if you need any help with reporting.

Ask Your Own Tax Question
Customer reply replied 4 months ago
the purpose of sending to another party is a payment for services.
What does "deemed sale" mean?
"combine all capital losses and gains" - does it mean that if I had $100 gain from one sale and -$100 loss from another then total gain/loss will be 0?
Customer reply replied 4 months ago
Also, how shall I report gain/loss to IRS? Is there any special form for that?

What does "deemed sale" mean?

In this situation - deemed sale means that such transaction is treated as a barter - for tax purposes it is reported as two sequential transactions - (1)sale bitcoins for its FMV and (2) using proceeds as a payment for services.

does it mean that if I had $100 gain from one sale and -$100 loss from another then total gain/loss will be 0?

Yes - that is exactly correct - all gains and losses realized during the tax year are combined and offset each other.

Also, how shall I report gain/loss to IRS? Is there any special form for that?

Correct - you report each sale transaction and calculate gain or loss separately for each transaction.

These are reported on form 8949 included into your tax return.

https://www.irs.gov/pub/irs-pdf/f8949.pdf

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,838
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,838
32,838 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,495 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,272 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
I'm on Federal Disability, on my Federal Tax forms there are
I'm on Federal Disability, on my Federal Tax forms there are special provisions for this income. How do I handle it on my California State Income tax filling Married Joint? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Will my tax returns be flagged/audited if I don't report tax
Will my tax returns be flagged/audited if I don't report tax credit of $1500 that I got in my 1095-A?… read more
abci168
abci168
Principal
27 satisfied customers
I recieved a 1099 From a broker and barter exchange for a
i recieved a 1099 B From a broker and barter exchange for a portion of my pension. however the 1099b does not have all the info required to file properly what do i do. … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
What form Tennessee tax form would a California resident use
What form Tennessee tax form would a California resident use to report to Tennessee taxing authorities the income and expense relating to the rental of a single family residence located in Tennessee?… read more
abci168
abci168
Principal
27 satisfied customers
On line 17, Form 1120 ,C Corp Federal Tax return are state
On line 17, Form 1120 ,C Corp Federal Tax return are state corporate income taxes deductible.If I am doing my Federal C Corp returns for 2017 are the state corporate income taxes due but not paid yet … read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,113 satisfied customers
I am filing a final 1120S return. The only asset is an auto
I am filing a final 1120S return. The only asset is an auto with a depreciated basis equal to the fair market value, and this auto is being transferred to the shareholder who made the loan. A sharehol… read more
Lev
Lev
Tax Advisor
32,838 satisfied customers
Do I report form 1099- if box 7 says loss not allowed. No it
do I report form 1099-b if box 7 says loss not allowed … read more
Lev
Lev
Tax Advisor
32,838 satisfied customers
Where can I find capital loss in my previous years taxes?
Where can I find capital loss in my previous years taxes? and how can see how much of it was already carried over? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,272 satisfied customers
How is gain or loss treated on sale of equity membership in
how is gain or loss treated on sale of equity membership in golf club … read more
Lev
Lev
Tax Advisor
32,838 satisfied customers
Should a missed RMD be reported on the tax form of the year
Should a missed RMD be reported on the tax form of the year it should have been taa should a missed RMD be reported in the tax year it should have been taken … read more
Lev
Lev
Tax Advisor
32,838 satisfied customers
TRUST RETURN FORM 1041. THE ONLY ASSET (THE DECEDENT'S HOME)
I AM FILING TRUST RETURN FORM 1041. THE ONLY ASSET (THE DECEDENT'S HOME) WAS USED AS A RENTAL PROPERTY FOR 9 YEARS AND THERE IS CAPITAL GAIN. … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Federal and California state taxes: Yet another "Do I Need
Federal and California state taxes: Yet another "Do I Need To File" questionMy wife and I receive Social Security benefits totaling a bit more than $35K annually, and in the past we have not needed to… read more
Lev
Lev
Tax Advisor
32,838 satisfied customers
Where do report for Partnership (LLC) returns using Form
Where do report for Partnership (LLC) returns using Form 1065 income recipient from taxable federal grant? Specifically, 1099-G, Box 6.… read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
1,026 satisfied customers
I have a question about report stock option transaction. If
Hello, I have a question about report stock option transaction. If I sell a put option in Dec of 2017 with the expiration date in 2018. I have a sales proceeds in 2017 but do not know whether there wi… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,199 satisfied customers
Are there federal or California tax credits for installing a
Second opinion] Are there federal or California tax credits for installing a new furnace, A/C system and attic and wall insulation?… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
HOW DO I REPORT THE GAIN OR LOSS FROM A 1099-A ON A RENTAL
HOW DO I REPORT THE GAIN OR LOSS FROM A 1099-A ON A RENTAL PROPERTY. THE 1009 A HAS 518,000 IN BOX 1 AND THE FMV AS 405,000. IR WAS SOLD AT AUCTION FOR 340,000 THE INSOLENCY AT THE TIME WAS 135000 AND… read more
Lev
Lev
Tax Advisor
32,838 satisfied customers
Didnt report income from the sale of asset but it wouldnt of
hello. didnt report income from the sale of asset but it wouldnt of changed my taxes for the year as I had a large tax loss for the year. Is there still a penalty for this type of omission? should I a… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,199 satisfied customers
Lane, Here is the situation: a QTIP has capital loss
Lane, Here is the situation: a QTIP has capital loss carryfwds. the QTIP terminated in 2017 due to the death of the beneficiary. As I understand, the QTIP assets become assets of the beneficary's esta… read more
taxmanrog
taxmanrog
Master\u0027s Degree
935 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x