It is correct to report the crypto as income on the IRS form 1099-MISC. This is one transaction.
It is correct to report any gain or loss on the sale of the reward. The sale of the one unit which was acquired as a reward is a second transaction. The cost basis of the one unit is determined by the income that was reported on the IRS form 1099-MISC.
IRS Publication 551 Basis of Assets, page 10, states:
The amount you include in income becomes your basis.
You said: So do adjustments need to be made or not?
The only adjustment that I would recommend would be to round the $8.78 in reward income to $9.00
You said: I don't understand how it would reduce my gain?
As @DianeW777 explains so well, at the time of sale, the $9.00 cost basis offsets the sales proceeds and reduces your taxable income on the sales transaction.
In your example, the one unit that was acquired by reward would report reward income of $.49 and the cost basis of the one unit would be $.49.
If the one unit were sold for $2.00, the gain on the sale of the one unit would be $1.51.
@lyakobson
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