Virtual Currency - Should I answer "No" to the crypto question on Form 1040 if I just purchased Bitcoin and did NOT sell, exchange or do anything with it? purchase ONLY.

[AamilD]

@maggie74, if you invested in crypto but never sold it you can mark that as a No. If you however take crypto from one exchange such as Coinbase and place it in another exchange such as Gemini, then it could result in a taxable exchange even if you didn't sell it.

[T4Tax]

I'm seeking clarification on this question ("did you acquire,... virtual currency") as well.  I have already answered "no" and am in the Other Tax Situations section but now realize my husband had Coinbase rewards of $42 in 2021 as well as 4 small purchases.  We had no sales, exchanges or disposals.  Do I need to go back and answer "yes" since we did acquire?  If so, does answering yes prompt other questions that have to be answered?  We don't have gain or loss to report.  I did read that the Coinbase rewards should be reported in Less Common Income / Miscellaneous Income / Other Reportable Income.  Can you explain all of what I need to do? 

[Vanessa A]

Yes, you would report that you acquired Crypto.  You will be asked then if you sold, you will simply answer no and nothing else should be reported. 

Yes, the rewards would be reported as other income.  Basically, what you stated, is all you need to do. 

[maggie74]

thank you. Now I would like to go back to check my answer. Where do I find the crypto question in the program?

[FangxiaL]

On the Income & Expenses screen, click on Wrap up income in the lower right corner. After going through a few screens you will see the question asking Did you receive, sell, exchange, or dispose of any virtual currency in 2021? Make your change as necessary.

[maggie74]

I found the answer on another part of this site. They indicated that once you answer the question, it will not show up again when going through step by step - and I did not come across it. I've got mine corrected now.

[MaxRLC]

Please clarify - 

"Did you acquire, sell, exchange, or dispose any virtual currency in 2021?"

I see multiple replies in Turbo Tax and other Community Forums that contradict each other. 

If a taxpayer only PURCHASED bitcoin/crypto and did NOT Sell, Exchange or Dispose of the virtual currency in 2021, the answer

to that question is NO.    

If a taxpayer "RECEIVED" bitcoin/crypto, then the answer is YES.  Further, if the taxpayer RECEIVED, SOLD, EXCHANGE or DISPOSED of virtual currency, the answer would be YES.  

Again, to clarify, if the taxpayer PURCHASED or BOUGHT only, the answer to that question is NO. 

("No, I didn't acquire, sell, exchange or dispose of virtual currency in 2021")

Please reply and clarify if that is your understanding to this post.   This issue is very confusing, controversial and the subject of many online community discussions.  Many individuals struggle with trying to determine how to download transaction data from crypto exchanges who have not made the process easy.  Further, Turbo Tax has not made the process easier by being unable to upload CSV files.  When trying to upload a crypto CSV file, Turbo Tax looks for a TXF file.  Well, that means the file has to be converted.  Good luck with that.  

[fanfare]

to acquire is to receive or to purchase or even to find lying on the sidewalk.

So the answer has to be yes if any virtual currency came into your possession.

It's not rocket science.

[MaxRLC]

Agree.

Some in this forum have rudely replied that a taxpayer must answer Yes - even if they only purchased with USD.

Wrong.

From the IRS website:

A5(a). If your only transactions involving virtual currency during 2021 were purchases of virtual currency with real currency, you are not required to answer “yes” to the Form 1040 question, and should, instead, check the “no” box.

That is the correct answer.  If you only PURCHASED virtual currency with USD (real currency), you answer NO. 

No means No.

To the respondent who suggested that "lying on the sidewalk" or "it's not rocket science" should be a general premise for answering Yes needs to view the IRS website. 

[MaxRLC]

Incorrect.

From the IRS website (and not the sidewalk):

"A5(a). If your only transactions involving virtual currency during 2021 were purchases of virtual currency with real currency, you are not required to answer “yes” to the Form 1040 question, and should, instead, check the “no” box."

If purchased only and not exchanged, sold, or disposed, the answer is NO.

[fanfare]

The question used to use the word "acquire".

The current question uses the word "receive".

If you come into possession of crypto, that is receiving, or acquiring.

The new draft of 2022 Form 1040 qualifies the meaning of "receive", in a way which would exclude purchasing, or finding on the sidewalk.

@MaxRLC 

Is there anyway to understand why the IRS makes this distinction? I don't know.

[MaxRLC]

Thank you. 

Perhaps, each person can decide for themselves what the IRS's intentions are with this clearly confusing conundrum.

The issue of "acquire" vs "receive" can be resolved by determining if there were any taxable events and if those events were reported 

to the IRS. 

If no taxable events and nothing reported to the IRS, select the "NO" response. 

@fanfare