My position is that with every CC transaction there will be two events:
- the conversion of CC, virtual currency, into real currency. At this point you will have a recognized gain or loss event (first event).
- then the purchase of the item; this could be the watch, could be services, etc. (second event).
- there are no like-kind or barter provisions that would change the above result. Just because you "exchanged" your CC for a watch, you still have a recognition event on the CC since you no longer own or possess it (disposition of an asset). Your watch, in this example, takes a basis of the value of the CC at the time of the transaction.
- In summary, a taxable event occurs when there is a sale or disposition of an asset. With CC, a taxable event occurs whenever it is traded for cash or other cryptocurrency OR whenever CC is used to purchase goods or services. As noted in bullet 3, in your case, you had a disposition since you no longer hold the CC as you used it to purchase the watch.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
