How do I accurately report cost basis between stocks and cryptocurrency exchanges?

[warriorpx741]

I'll provide an extremely basic example to help clarify my question:

An investor buys stock at a stock broker. The investor purchases $1000 worth of stock at the beginning of the year, and sells that same stock mid-way through the year, then valued at $41,000. The investor has now has a  short-term capital gains of $40,000.

Later that year, they decided to take their stock gains and invest it into cryptocurrency with another broker. The cryptocurrency investment goes south, and they end up losing ALL of their $40,000 that they gained from selling stocks. 

The current predicament is this: The stock broker shows a net gain of $40,000, and the cryptocurrency broker shows a net gain of $0. This brings the total short term capital gains taxable income to $40,000, despite losing all of it in another broker.

Obviously the answer is not real, and it is largely simplified to help elaborate my question.

So my question is this: Is there a way for TurboTax to reflect BOTH brokers, and show a net capital gains tax of $0? 

[JulieS]

Yes, all of your transactions are reported on your return, even if they are from different brokers. Because you are buying crypto for investment purposes, rather than as part of a business activity, the transactions end up on the same forms as stock transactions do.

They are first divided into short or long term and then are netted together to arrive at your reportable gain or loss. 

In your example, the crypto broker doesn't show a gain of $0, it actually a loss of $40,000. 

Click here to learn more about reporting crypto transactions.

[warriorpx741]

On the cryptocurrency importer I am using, it is showing a net gain of $0. This is because adding money from the bank to the broker is categorized as a "gain" on the portfolio page. Withdrawing money from the portfolio to your bank will do the opposite. Because of this, it is impossible for the cryptocurrency portfolio to show a balance less than $0. 

I'm just wondering that when these two are combined together into TurboTax, then it will show a combined capital gains (stocks and crypto) of $0.

Thanks for the help. I would just import everything and see but my stock broker documents won't arrive until mid February. 

[JulieS]

You may need to adjust your crypto basis manually in TurboTax. Obviously the $40,000 transferred in is not a gain, is actually the basis of your crypto. 

You are right, you need to see how it gets imported into the program and then go from there. 

[fanfare]

The number of brokerage accounts you use is irrelevant but more than one can cause reporting complications.

IRS requires your crypto SELL transactions to be listed on your own Form 8949,
or on your other forms (e.g. spreadsheets) which have the same information and in the same manner as Form 8949.

If your crypto exchange does not give you a 1099-B, Form 8949 or CSV in the form and manner of Form 8949,
you have to assemble that information yourself,
or pay for a third-party app to do it.