How does it work for filing cryptocurrency taxes on TurboTax when any crypto asset position is staked on an exchange, and sold as either capital gains or loss later?

[gabegssanchez89]

So, to add disclosure of my question above, I have staked crypto assets through Kraken but was unstaked at the time of selling any particular asset. Ergo, upon going over all parts of IRS Form 1040, TurboTax detected several transactions for a closer look at what I had from a CSV file (i.e. every transaction which identified either as a capital gain or loss, and staking rewards which a crypto asset position earns rewards from).  The reason for this comes from the question, "How did you receive this investment?", asking me if it was a settlement, investment purchase, gift, or something else. At first, I would have determined it as "I received it as a gift", knowingly aware that crypto staking involves receiving rewards in the form of more crypto within its network. But I need a second opinion. What should the right approach here when classifying each transaction as a staked reward, given which all of the rewards were sold through a crypto exchange?

[MarilynG1]

Staking awards are reported as income, since they are available for you immediately.  If you sold your awards, the Capital Gain/Loss would be the difference in value from when you received the awards to what you sold them for. 

This is treated as property. So, like property sales or the sale of stock, any gain or loss from the sale or trade of cryptocurrency is reported as a capital gain or loss. If you buy and sell it within 12 months, it’s treated as a short-term capital gain.  If you hold it for over 12 months, it’s taxed at the lower, long-term capital gain rates.

Here's more info on Reporting Stake Awards and Reporting Crypto Earnings/Loss. 

We are having an Ask the Experts event specifically about Crypto transactions on 03/15/23. Please register for it here.

@gabegssanchez89