Doing son's tax return. Cryptocurrency is quite challenging due to immature companies (sometime bankrupt after short life) and processes.
Have cryptocurrency that got moved from crypto wallet providers (CoinBase, BlockFi) -> private decentralized wallet (MetaMask) -> RobinHood. CB+BF+RH all provide 1099s but MM does not. Worst of all is shuffling the crypto assets through MM losses ability to track lots, basis, and holding duration. The following problems are encountered
- Finding lots + basis. Using tools like koinly, was able to figure out all lots and basis info manually by combining all the transactions in one tool and figure out what went where and all the little fees collected. Takes quite awhile. Surely expensive if paying for tax prep.
- Worse problem is losing lot info means RH provided a 1099B with an undetermined term sale of X shares that include both long and short lots. Have an entry of sale of X share of ETH from various lots. But in reality, X should have split into separate long and short sales.
So my question is
1. Do I follow the undermined term sale X shares and just assume they are all short (probably best?) or all long (even though some are short and some are long holds). I think not much difference as its a net loss so all goes towards CG loss CarryFwd for future.
2. Do I ignore the X shares reported on 1099-B and properly enter the short and long fractions? Downside is these 2 new share #s won't match the 1099-B and of course the added worry for audit trigger.
Finally, tax accounting for Crypto is definitely wild wild west as Crypto itself is basically the wild wild west. Hidden transactions fees everywhere as every little entity (wallet provider, transaction processing) all take their cut. In addition, the window to make any $ has become so short on this version of the legal (latest one can't even pass the legal test) Ponzi scheme.
