Bitcoin: Must I record each buy if I ultimately sold all my Bitcoins in a single transaction?

[clueless1]

I bought Bitcoins at regular interval but ultimately sold all of them in a single transaction. Can I aggregate all purchases into a single one and date it with the last buy's date for long/short gain determination?

Or, if I need to document every purchase, where do I do that in TurboTax (Premier, Online), especially when I only have one sell?

[ErinH]

Did you make any transfers from Bitcoin to other cryptocurrencies? Or were all purchases from USD to Bitcoin, then sold to USD?

[clueless1]

Oops, that's an important detail I left out! My regular purchases were all from USD to Bitcoin; and I sold all Bitcoins to USD in one transaction. By the way, regarding long/short gain, even dated by the last buy's, it still classifies as a long-term gain.

[TomYoung]

The direct answer to your direct question of "Must I record each buy" is "No".  Your direct answer to your direct question "Can I aggregate all purchases into a single one and date it with the last buy's date for long/short gain determination" is "Yes."

Tell TurboTax no 1099-B was received (I assume) and enter the word "various" in the date acquired box.  TT will ask "all purchased before 12/31/2016?" and you answer "Yes".

[clueless1]

@TomYoung Thank you for your helpful and direct response! This "various" keyword is the closest match to what I wanted to learn about.

[PozoNeuvo]

I added to my Ether & Litecoin investment several times in 2017 and then sold the bulk of each in single transactions.  In TurboTax I entered the data in the Investment Income Section and indicated I bought the coins at various dates.  It looked fine when I finished.  However, when checking the data in "Forms", the "Cap Gains Wkts" for each coin, it was noted under Acquisitions, Question 3, that I acquired the coins in a Single Purchase.  When I changed this to Multiple Purchase Lots, my Federal Refund increased by nearly $1,000 and my state tax due dropped a couple hundred dollars.  Despite having the same gross proceeds, cost basis and short term gain, this single change seems significant.  I'm not sure if I'm just missing something or Turbo Tax isn't recognizing this important detail.

[maglib]

the only reason this would happen is if you changed short term gains to long term gains.

[maglib · Accepted solution]

 Cryptocurrency is considered property by the IRS and every move (spending, exchanging, selling, income if paid to you for services, etc), within the tax year is a recordable transaction. Cryptocurrency held for investment has a gain/loss. Cryptocurrency for personal property is only gains, no losses (so for purchases of goods and services, there is only gains, no losses as they are personal). If paid to you for personal services, it is considered reportable income at the spot rate on date of receipt. It can be considered business, hobby, investment, or personal income property depending on your intent to make a profit to consider it a business. If received as payment for services it is subject to self employment income taxes and you must report the income as if you received a 1099Misc  .

To reports gains/losses allowed (NOT FOR MINERS, miners report as self-employed on schedule C using Turbotax Self Employed https://ttlc.intuit.com/replies/4944762 or as hobby income(hobby is as if you are not in the business of making money, and doing it on the side, normally area if you do not plan on being profitable for at least 3/5 years) https://ttlc.intuit.com/replies/5675605 and the cryptoccy for them is they have income immediately at the spot rate upon mining of the currency, they have expenses of producing for schedule C or as itemized deductions, every move even to a similar coin is taxable event (they are not subject to 1031 exchange due to numerous IRS rules that they fail to meet including 1031 must be US property, see notes below) then they sell that inventory unless they held for investment purposes, they can use same investment sales as below to report too, to decide if a hobby or self employed use IRS guidelines https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses, Miners can also sell the inventory using the same sales of investments sales section, since it’s short term sales.)

Miners and non-miners can report sales this way:

1.     Select the Federal tab

2.     Select Wages and Income 

3.     Select Investment Income

4.     You'll list each trade/sale in the Stocks, Mutual funds, Bonds, Other interview 

5.     When asked Did you get a 1099-B or a brokerage statement for these sales? select No 

6.     When asked to Choose the type of investment you sold select Everything else for held for investment, if held for personal goods choose Personal Items.

7.     Translate proceeds of each sale into US dollars at the time of the sale or movement.

8.     Repeat for each transaction or report summarily.

Record each transaction with the date you moved the coins, for how much, when you acquired them, and for what.  You can't take a loss on personal items (if you used cryptoccy to purchase goods and services) which you report those under personal items. Cryptocurrency for investment purposes is recorded as Everything Else. Make sure only personal use cryptocurrency is recorded in the personal Items section.

You can report transactions in summary for the year as investments LT vs ST and Personal LT vs. ST for 4 categories of reporting. You can use various for the date of purchase and 12/31/17 as date of sale.

https://www.irs.gov/pub/irs-pdf/p544.pdf and  https://www.irs.gov/pub/irs-pdf/i8949.pdf  are the IRS rules for property and reporting.  Personal property net losses are not deductible but investment property is....  follow the IRS guidelines for property.

IRS guidance on cryptocurrency as property:

https://www.irs.gov/newsroom/irs-virtual-currency-guidance 

https://www.irs.gov/pub/irs-drop/n-14-21.pdf 

If you have a large number of transactions, there are a few tax reporting softwares to help you out to get proper bottom line such as bitcoin.tax and TT does not support any of their accuracy. Do note that I understand that these softwares are treating it all as investment grade so they may not be completely accurate as personal use does not allow losses.

I hope this was helpful?

https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html

Notes about why not 1031 (these are not organized but, purely notes):

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.

[clueless1]

Thank you for your response.

I understand the tax implications behind owning Bitcoins, regardless of the acquisition method. I just wanted to know if there is a way _in TurboTax_ to enter multiple purchases' detail in a single sell transaction, because I purchased Bitcoins at different times AND at different prices, but sold all my acquisition only in ONE transaction. All purchases were USD to Bitcoin, and the single sell was Bitcoin to USD.

[maglib]

You can
 report transactions in summary for the year as investments LT vs ST and
 Personal LT vs. ST for 4 categories of reporting.     As I stated within the details
Use method as described above. You do not need to enter every transaction. You can use various for date purchased and 12/31 for date sold if reporting in summary or the actual date if sold in 1 lot.