1040 Crypto Question. Answer No if being scammed?

Forum|Forum|2 years ago
December 11, 2023
4 replies
32 views

Hi asking here, how to answer the 1040 Crypto question in this case.

IRS guideline is not clear in case of scam.

Critter-3

Level 15

Read page 15 ... if that doesn't cover your situation then please be more specific on your question ... https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

hxtudouAuthor

Level 2

So basically buy ETH in Coinbase --> transfer to an "exchange" --> convert to USDT --> do some trading.

Except that the "exchange" may be a scam. Asked for an upfront tax payment on the spot & many more fees when trying to withdraw to the bank. Red flags from what I read online: https://www.youtube.com/watch?v=gHpdnCTv0-g

Made 15% upfront tax payment (the "exchange" only accepts crypto payment) and many more fees.

Not able to receive the withdrawal yet of the "profit" in the "exchange" (reported to FTC, etc)

So in this case, do we still answer Yes to the 1040 question?

I guess if read the word of 1040 question literally "Disposed of a digital asset in exchange or trade for another digital asset"

If so, do we report the ETH --> USDT conversion? What about the other "profit" since technically not receiving the money?