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Transaction 1: On 2014-12-27, I sent a holiday gift of 0.1 BTC (which according to Coinbase was worth about 31.47 USD at the time) from my Coinbase account to an email address.

Transaction 2: On 2015-03-28 (91 days later), my Coinbase account received 0.1 BTC (which according to Coinbase was worth about 25.32 USD at the time) with a note stating: "This transaction was automatically returned to the sender because the recipient never logged in to claim it." (And, I never tried to resend it. Ie, I kept it.)

Each is a separate transaction confirmed on the Bitcoin blockchain.

When reporting my taxes, I think my accountant just said we could ignore both transactions. But, I'm curious if that's correct. If not, how should I have reported these transactions on my taxes?

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I would describe this as an attempted but uncompleted gift, with no tax consequence. A gift of this amount would not have been reportable, taxable, or deductible by you. Reversing the intended gift should not be a taxable event either.

(If the gift had been completed and the recipient sold the Bitcoin, the recipient would have to figure capital gains tax.)

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  • The last sentence should be removed or clarified since basis rules for capital gains on sold gifts are not so simple.
    – Hart CO
    Oct 2, 2018 at 3:49
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    @HartCO That's why I said "would have to figure", not how to do it. :) It's not part of the question, but seemed worth mentioning because it was a likely consequence if the gift had succeeded.
    – nanoman
    Oct 2, 2018 at 4:12
  • @nanoman I read it as, they would owe capital gains tax, which may or may not be true.
    – Hart CO
    Oct 2, 2018 at 4:36

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