Rahim is a 31-year-old single taxpayer. On November 16, 2022, he purchased five crypto coins for $3,000. He sold three of the coins for $1,800 on February 28, 2023. He then sold the remaining two coins for $700 on August 31, 2023. In early 2024, Rahim received a Form 1099-B reporting details about the transaction. Choose the response that correctly describes how Rahim should report this transaction on his tax return
Rahim's transactions involve the sale of cryptocurrency, which is treated as property for tax purposes. This means that gains or losses from the sale of cryptocurrency are reported as capital gains or losses. Here's how Rahim should report these transactions: 1. **Determine the Basis and Proceeds**: - Rahim purchased five coins for $3,000, so the cost basis per coin is $3,000 / 5 = $600 per coin. 2. **Calculate Gains or Losses**: - **First Sale (February 28, 2023)**: Sold three coins for $1,800. - Cost basis for three coins = 3 x $600 = $1,800. - Proceeds = $1,800. - Gain/Loss = $1,800 (proceeds) - $1,800 (basis) = $0 (no gain or loss). - **Second Sale (August 31, 2023)**: Sold two coins for $700. - Cost basis for two coins = 2 x $600 = $1,200. - Proceeds = $700. - Gain/Loss = $700 (proceeds) - $1,200 (basis) = -$500 (loss). 3. **Report on Tax Return**: - Rahim should report these transactions on Form 8949, "Sales and Other Dispositions of Capital Assets," and then summarize them on Schedule
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