If I transfer cryptocurrency to another exchange, it is not a taxable event, but can I choose to treat is as one?

[denis9]

E.g. I transfer BTC with a basis of $500 from 20 different transactions from exchange A to exchange B. The value at the time is $700.  Can I treat this as a $200 capital gain sale, plus purchasing a new single lot for $700?

Why? It can keep things simple when it comes to computing your gains in the context of all the exchanges from a specific exchange.

[KathrynG3]

It depends on the rest of your circumstances. In your scenario, my logic would be to not combine events, but to treat them separately whenever possible to better address each part.

For more guidance, see this resource from the IRS:

Frequently Asked Questions on Virtual Currency Transactions

[denis9]

Thanks for the link. I saw this: "No.  If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, then the transfer is a non-taxable event, even if you receive an information return from an exchange or platform as a result of the transfer."

I could not confirm whether you actually could choose to treat it as a sale and repurchase. Obviously, I could choose to manually do it that way before/after the transfer (with some additional cost in fees), so in that sense it feels like a technicality that perhaps could be allowed.

The issue here is simplifying accounting. If I transfer currency from one exchange to another, and there are 18 open lots from the source exchange, I need to make sure that the target exchange carries in those 18 different positions. Normally, the target exchange export will only list one "deposit" transaction. It's a solvable problem, of course. Probably have to manually edit the export from the target exchange to change one deposit into 18 deposits.

[JohnB5677]

The simple answer is if you sell all of your holdings in Exchange A you will have a transaction that would result in a capital gain or loss.  This is reportable on your tax return.

If you then purchased  an amount in Exchange B it would be acceptable.  

Currently cryptocurrency is not subject to Wash Sale rules, but that can change.

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.