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Thanks for your reply, Terri. What you said makes sense, but I still have a few more questions.

 

Am I to assume that a broker being regulated or not has nothing to do with gains/losses I realize through trading forex (typically, if brokers are unregulated, they do not fulfill regulatory filing requirements)? I would think that if they aren't reporting trades people make, all profit/loss is not recognized as a tax event for 988 or 1256 election...

 

Regarding crypto purchase and selling, an example scenario would be as follows:

I purchase $100 worth of bitcoin, then transfer all of it into a broker account (bringing bitcoin wallet to $0). With the broker, I manage to add to the account balance. I then withdraw $100 and have it transferred to my bitcoin wallet. I then convert exactly $100 into cash (bringing bitcoin wallet to $0).

 

Since I purchased $100 of bitcoin and then later converted that same $100 back to my bank account, I assume there is nothing to tax...correct?

Another scenario in question is if I start with a bitcoin wallet balance of $0 & then have $300 worth of bitcoin transferred to my wallet (from an unregulated broker, or even as a gift from a friend, etc.) and then convert the bitcoin to cash. Is the origin of the bitcoin determined and therefore necessitating the correct tax form?