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I am a US resident and (a few years back while I was living in Europe) I bought 1 BTC for about 6,000 €.

For the first time this year, I filed my 2019 taxes in the US and I used TurboTax.

I asked Coinbase for a 1099-K but they did not send me one and they replied to my inquiry saying that I don't need one due to my limited amount of transactions.

I tried to download from PRO.coinbase.com my transaction history and upload that csv into Turbotax but it wouldn't let me. When I was asked to enter the transactions manually it only asked about the sells but in my case I used the profits of my first trade to buy back BTC at a higher price (i.e. I made a loss).

Was it mandatory for me to declare these 2 transactions since I only made a capital loss?

These were the exact transactions in 2019:

  1. I sold 1 BTC for 8608.42 €

(- right after that the BTC price increased)

  1. I used all my 8608.42 € for a new buy order that got me 0.803321 BTC

(i.e. I made a gain loss)

Thanks for your help!

  • You said "a few years back". When did this transaction happen? 2019 taxes would only cover 2019 transactions. – Joe Jul 17 at 5:09
  • I bought it a few years back and sold it in 2019 (so only this year I may have to pay taxes on it - if any) – Gabe Jul 17 at 5:12
  • So just to be clear, you bought some bitcoin in, say, 2017, sold it in 2019, and then within a few days/weeks/? bought the exact same amount back for slightly more cost? Or you bought the same amount of money worth back (but slightly less BTC)? How much was the original purchase price of the BTC? Less than your sale/rebuy price? – Joe Jul 17 at 5:25
  • correct, (let's say) bought in 2017, sold in 2019 and within a couple weeks bought the same amount of money worth back but slightly less BTC. Original purchase price was 6,000 €. Thx – Gabe Jul 17 at 5:32
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First off, if you needed to file Schedule 1, then you should have answered "yes" to the question at the top of the page - "At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" - since you did some of that. This doesn't affect your taxes directly and doesn't care if you made money or not.

Second, you definitely should have reported it (regardless of gain or loss), and it's possible the IRS will send you a notice later on. You may or may not have any consequences of this, depending on the financial details of your tax return. And yes, even file if you think it's a loss - it's still important to do so.

I'm not sure that it's definite how the IRS handles virtual currency transactions - nothing I can find is explicit - but assuming they treat them like stocks, you may owe tax on the profit you earned in 2019 over 2017 even though you repurchased. If the money went the other way - if it was a loss 2017->2019 - it would be different, or at least may be different (it's also unclear if wash sale rules apply to BTC), but they don't apply on profits in any event.

As such, you probably had a ~$3000 profit on the first transaction, and you owe taxes on that. Depending on your income, that could range from $0 to $450 most likely (as it's a long term gain), or as much as $600 if your income is high enough to hit the 20% CG rate.

BTC Purchase  Sale  Profit
1   $6000     $9000  $3000
2   $9000     -       -

Maybe the table above helps - that's how the IRS sees your transaction. They also don't care about the BTC "amounts" - first one is a buy [something] for $6k, sell [something] for $9k; second is buy [something else] for $9k.

Do also consider US / Euro fluctuations here, both between 2017 -> 2019 and 2019 -> 2019. I'm not 100% sure how those are handled, but it's important to think about it and find out.

Finally, I don't know how your purchasing this while not in the US and not subject to US Tax laws affects the basis. It may, or may not. Look into it, or more likely ask a tax pro (and not someone working for H&R Block, but an actual tax accountant).

My recommendation would be to consult a tax pro if you can, as this is enough money that you'll end up owing some penalties. They can help make sure you have this exactly right and minimize the consequences to you. Also, given your other question, it sounds like you might have another thing to discuss with the IRS agent on the phone - do the same thing, call to ask to have them waived, and explain that you thought it was a wash but you learned from discussing with some folks on the internet it isn't.

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    Please note I am not a tax professional, nor an accountant, and I'm certainly not your accountant. We'll have some other views on this in the morning, so wait that long at least until you do anything rash; and do talk to a professional who can look over your return. It sounds like you're pretty new at this US tax thing, so it might help a lot to have someone look at it properly. – Joe Jul 17 at 5:39
  • Thanks for your reply. To the first point I replied "yes" and then entered no transactions (it only asked to enter sells) – Gabe Jul 17 at 5:44
  • @Gabe Er, I thought you did sell a Bitcoin in 2019. So, you did not enter this sell information when asked about it? – Dilip Sarwate Jul 17 at 12:32
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    The probably true, but a bit against commen sense claim here is that selling with a profit is taxable, buying is not deductable (except later when you sell).. – lalala Jul 17 at 13:07
  • Yes, that's very well stated, thanks @lalala! – Joe Jul 17 at 14:46

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