USDC buys/sell with foreign income

[Nikkadim]

Complex question.

1) This year I had a rental property income in a foreign country where I paid taxes ~30% (or $1000) on my income  

2) I bought a  USDC coin (crypto) with foreign currency (simply exchange foreign currency to USD and bought USDC coins 1:1)

3) Then I sold this USDC crypto coins on Coinbase to USD 1 :1 (1 USDC = $1 USD)

4) And withdraw the money to my US bank account 

What would be my steps to declare this operation?

1) I need to declare my foreign income and tried to get Foreign Tax Credit (Form 1116)?

2) Claim the Foreign Earned-Income Exclusion (FEIE) (the country, where I had that income, has a special agreement with the US)

3) As I understood I should not report any capital gain on my crypto transactions since I did not make any income buying  USD - >USDC -> USD with the exchange rate of 1:1. Am I right?

Am I missing something?

Thank you.

[Critter-3 · Accepted solution]

1) I need to declare my foreign income and tried to get Foreign Tax Credit (Form 1116)?   Yes you must report the income on a Sch E and use the 1116 for the tax credit.

2) Claim the Foreign Earned-Income Exclusion (FEIE) (the country, where I had that income, has a special agreement with the US)  Rental income is not earned income so no exclusion is allowed. 

3) As I understood I should not report any capital gain on my crypto transactions since I did not make any income buying  USD - >USDC -> USD with the exchange rate of 1:1. Am I right?   All crypto transactions must be reported even if the end result is a zero.

[Nikkadim]

Thank you @Critter-3 

It's still a bit not clear whether should I pay any income/gain taxes on crypto my transactions since the initial buy was made with foreing currency? Indeed it was exchanged for USD first and then bought a USDC 1:1 and that let me think it was no additional gain/income generated here.

[Critter-3]

ALL crypto sales are reported on the Sch D no matter what the end result is.  Same thing if you went thru the FOREX market.  This is the law.  If the end result was no gain or loss where do you think you are paying income taxes on a zero result ?  Think about it... the IRS gets the sales but not the buys ... reporting the sale on the Sch D will give both sides of the transactions.  Failure to report the sale will get you an IRS CP2000 in a couple of years asking you to explain why you didn't report the sales on the original return ... so just comply now and save yourself headaches later.