@Omidmoj wrote:
Thank you for your response. My issue here is that my father would be purchasing the cryptocurrency from other individuals (mostly family friends or other family members) and not an official exchange and so It's difficult to have a transaction track record. Perhaps an unofficial letter/agreement can be produced.
What I find strange is why I would be responsible for unrealized capital gains of a non-US citizen. For example, if my father who isn't a US citizen or resident is gifted a crypto currency at a cost basis of $0 and then gifts it to me and the FMV is $1000 at the time of the gift. The capital gains tax I would be paying is due to a capital gain not incurred by a US citizen or in the US.
I'm not involved in cryptocurrency transactions but I don't quite see how your father can obtain coins from other people without having a transaction record, unless he hands them some cash and they give him the passwords to their wallets? In any case, most taxpayers are not audited. If audited, you will need to convince the examiner of your proof.
Unrealized capital gains are not taxed in the US, only when they are realized. If you are the person selling the asset, you are the person who is realizing the gain and responsible for the tax.
However, if unrealized gains are taxed in your father's country, that's an adjustment to the cost basis. For example, suppose he is gifted cryptocurrency at $0 cost basis, but your country taxes unrealized gains, and the FMV on 12/31/2020 is $800 so he pays capital gains tax on his unrealized gain. That raises his adjusted basis to $800, which basis you acquire along with the gift. Of course, if audited, you would also have to prove his adjustments to basis.
