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02-13-2018 07:24 PM
My friend sent few Ripple coins(X) and I bought Ether coins (Y) using ripple coins(X) and sent him Ether coins(Y).
I did not benefit or did not realize any capital gain in above case.
Do I need to show these transactions on a tax return, if so how??
02-14-2018 04:57 PM
Welcome to the Community. Whether you have anything to report really depends on whether you just a middleman here or whether you were exchanging your crypto coins for other crypto coins.
In Notice 2014-21, the IRS stated that virtual currency is treated as personal property. This means that the sale or exchange of virtual currency is considered a capital transaction. Taxpayers have gain or loss equal to the difference between your basis in the virtual currency and the amount of cash or FMV of property received. When one type of virtual currency is traded for another type of virtual currency, this constitutes a taxable transaction.
But in the instance described here, it appears that you are acting as a middle man for your friend's transactions? Is that right?
If that is the case, your friend will recognize gain or loss based on the difference between the basis of the coins traded and the FMV of the coins received.
Thanks, hope this clears this up for you!