Source
r/tax•
helloidiots

Selling about 1k dollars worth of property for crypto, how do I calculate my cost basis?

Unsolved

Hi, I am selling some collectibles and the buyer offered to pay using crypto which I prefer cause I know it's not reversible. My concern is that I will need to cash out into dollars using coinbase, coinbase will then send me a tax form telling the irs I sold 1k worth of crypto but as far as they are concerned my cost basis for that crypto is 0. That would mean I owe taxes on the full 1k, the reality is that I am not making any profit since I put together this collection with my own money over the years.

How is this normally handled? I have never in the past received a tax form from coinbase. Only used it to cash out a few bucks here and there on those giveaways they used to have.

Thanks

Posted Jun 18, 2023, 3:56 PM UTC

15
vynm2•

What is your basis in the property? Your basis would be the amount of money you spent putting together the collection "over the years." Ideally, you'd want some sort of documentation to support what you claim, but it sounds like you'd be hard pressed to come up with that.

The conservative path then would be to report the full $1k as collectible capital gains. The capital gain tax on collectibles are calculated differently than other capital gains, so you may want to educate yourself (https://www.thetaxadviser.com/issues/2019/nov/taxation-collectibles.html) or consider hiring a professional.

So, you have two transactions that you will need to report:

  1. The sale of the collectible item for the $1k equivalent in crypto. (Conservatively, you'd report the full $1k.)
  2. The sale of the crypto to cash out to dollars. If you've reported the $1k as income in Step 1, your basis in the crypto will be $1k and you'll only be taxed on the difference between what you realize from the sale of crypto (# of dollars) and the $1k basis.
5
helloidiotsOP•

#1 - no problem with that, I can report the sale minus my cost basis. I think the rate would be 28% on my 100 profit. #2 - how is the crypto transaction tied to the sale of my cards as far as the tax form is concerned? Is that all handled in the same tax form, I am concerned that as far as the irs sees it these are separate events, and they might deem I owe tax on the full crypto sale of 1k.

Thanks

3
vynm2•

As I said, there are two separate, reportable transactions. i.e. Yes, the IRS sees them as two separate events and you treat them as two separate (but "linked") events:

  1. Sale of your item for $1k in crypto. This sets your basis in the crypto to $1k. You report your basis and your sale price ($1k). You end up "trading" your item for $1k in crypto and pay tax on the gain.
  2. Sale of your crypto. Since your basis is $1k (from using it as the sale price in transaction #1), you calculate gains/losses from that basis, when you sell the crypto.
3
helloidiotsOP•

So in a nutshell, I just declare the basis of my crypto as 1k and that's it. If they come asking later where I got that basis from I would then show them the paperwork for the sale of my cards.

I was over thinking this and figured I needed to submit some kind of form preemptively to link both transactions.

Thanks

2
vynm2•

So in a nutshell, I just declare the basis of my crypto as 1k and that's it. If they come asking later where I got that basis from I would then show them the paperwork for the sale of my cards.

Yup.

2