Cryptocurrency Buy and then send to an exchange to buy other coins.

[IamAW123]

Last December I purchased Bitcoin and Ethereum approx 3000$ total. I used the coinbase cost basis estimator to enter all my info in personal property and recorded that I made other investments with the sales of the above. All but one was a few dollar loss and my gain was 10 cents. All that said when I sent this to the other exchanges I purchased the alt coins immediately (same day) now I am holding the other coins. Do I have to record the other exchanges. I think the total would probably be a small a few dollars or less loss or gain.

[maglib]

They are not 1031 exchangeable.  You record the gain/loss on exchange of 1 for another.  You do not roll basis of 1 into the other. Every move, is reportable. So you buy bitcoin for $3000, you then get ethereum of value 3700, you report a $700 gain as if you sold the bitcoin as every move is a recordable gain as cryptocurrency does NOT meet rules of 1031 property.  You have to report every move from one to the other as a sale and new basis.  You report every sale....  If you do not, the IRS will assume every move was for 100% gain and tax you as such, just like if you had a 1099-B and had to record the moves.

I have a bunch of notes as to why they are not exchangeable that I have not cleaned up that I'm giving you.

1031

Does not qualify for like kind exchange, they don't use a QUALIFIED INTERMEDIARY nor do they make a written election at time of exchange. Plus no form 8824 filed.

IRS RULES: To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction).  Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property.  Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .

The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary.  However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient. 

Replacement properties must be clearly described in the written identification.  In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified. 

How do you report Section 1031 Like-Kind Exchanges to the IRS?
You must report an exchange to the IRS on  Form 8824, Like-Kind Exchanges and  file it with your tax return for the year in which the exchange occurred. 

Form 8824 asks for:

Descriptions of the properties exchanged
Dates that properties were identified and transferred
Any relationship between the parties to the exchange
Value of the like-kind and other property received
Gain or loss on sale of other (non-like-kind) property given up
Cash received or paid; liabilities relieved or assumed
Adjusted basis of like-kind property given up; realized gain
If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

Add this to the fact the currency is not US real property in the United States and property outside the United States are not like-kind properties.

[Walk_the_walk]

Hi Sandy:  Your precise crypto transactions are not real clear from your OP, but to be clear about your tax reporting questions, keep in mind that gains (or losses) from BTC or ETH or other alt coins swaps (or purchases) must be reported on your return, even if a mere swap is involved.  

As an example, if you bought BTC at $1000, kept it for a few months, moved it from Coinbase to Gemini (or Bittrex, or similar exchange) and bought LTC with it, but the BTC when swapped, at that moment in time, was now worth $1075, you would have to report the additional $75 in short term capital gains.  Sure it's a tiny amount, but that doesn't matter. And, you would need to know the fair market value (FMV) in USD at the exact moment of that swap.  Crytpocurrency values change in the blink of an eye every day, so it's important to know the fair market value at the time of the sale or the swap.

Some sites, like BitStamp, provide this info with great reporting tools.  Other sites, like Bittrex, don't, and you have to have screen shots at the time to know the USD fair market value at the time of the swap, to report the gain or loss.

Good news.  If you do not have the FMV info, but you know the date and time, you can go online and do some research and find historical value information on BTC, ETH, LTC, etc.   

As to your situation, it sounds like your transaction(s) are probably nearly at "break even", from a gain or loss viewpoint, but the IRS has a different POV.  The IRS wants you to report it anyway.  

It's important to keep track of these crypto trades.  There are some sites online that can help you with that, but going forward, take screen shots and save them if you do swaps on sites that do not have good reporting tools, and log those sales or swaps into an Excel or similar spreadsheet either immediately, or within a day or two, while your memory is fresh.   That way, you not only have accurate data on your sales (the easy part), but also on your swaps (which can be more complicated).

Also, don't forget that your cost basis for your crypto sale or swap should include that fee that the exchange charges you, typically 0.25%-1.9%, depending on which exchange.  Include your fees in your cost basis when you report gains or losses.

Also, this sounds harder than it is.  If we were talking about selling or swapping Beanie Babies, or trading horses for cattle, it would seem less complicated, yet those kinds of sales/swaps are quite similar and also taxable.