@stvnguan wrote:
@Opus 17 @NCperson
I know we've discussed this already, but according to question 16 on https://www.irs.gov/individuals/international-taxpayers/freque[product key removed]ions-on-virtual-c..., you recognize a capital gain or loss if you exchange virtual currency held as a capital asset (which is what I am doing) for other property, "including for goods...". This would directly contradict what you are both saying. Look up a definition of "good" - it is NOT defined as "something held for investment" or similar. The Q&A on this is extremely clear.
It simply does not matter what kind of good you are trading virtual currency for, it only matters if your virtual currency ITSELF is being held for personal use or for investment. Seeing as I have no clue how to use BTC as a personal use item (seriously, how could that be done?), it is clear that I am allowed to claim a capital loss.
I don't believe I have said anything different. You recognize a gain or loss when you exchange cryptocurrency for any other property for any reason.
However, recognizing a loss and taking a tax deduction for that loss are separate under the law. If you sell personal property (your used bicycle, for example) for less than you paid for it, you have a loss, but it is not tax deductible. If you sell investment property (gold coins, for example) for less than you paid, that also creates a loss, but that loss is tax deductible. This is settled law and non-controversial, although there have been tax court cases where the IRS and the taxpayer disagree over whether a particular piece of property was personal or investment. (For example, if you bought land hoping to resell it to a developer at a profit, but it decreased in value instead, you can deduct the loss. However, the IRS might determine at audit that you bought the land to build a second home, which is personal, so it wasn't really an investment. That's how it can end up in court.)
Where we so-called "Champs" disagree is whether cryptocurrency losses are always deductible, or only deductible if the cryptocurrency is held for investment purposes. I'm sorry to confuse you, and I don't have anything to add on that particular point of disagreement beyond the comments I previously posted.
