coinbase wallet app - token convert - tax event?

magneto

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Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

Hi,

coinbase wallet app (not the trading platform, but the separate wallet app) recently introduced a new function that allows conversion between erc-20 tokens such as usdc, dai, etc..

my question is 1) does this actually get reported to irs like the trading platform does when you make a trade. I assume no since the wallet is anonymous, they cant really report it. 2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs

100%. Don't think that just because it's a 1:1 swap that it's not a capital gains event.

Any time you dispose your coins for another altcoin and/or fiat, you are liable for CGT. You don't even need to withdraw the coins that you transact into for this to count as taxable - the trade itself triggers it.

Whether or not Coinbase reports it is another story altogether. I suspect that they're not that fond of compliance, but you never know. They have your KYC/AML stuff for a reason.

Theb

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Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

Hi,

coinbase wallet app (not the trading platform, but the separate wallet app) recently introduced a new function that allows conversion between erc-20 tokens such as usdc, dai, etc..

my question is 1) does this actually get reported to irs like the trading platform does when you make a trade. I assume no since the wallet is anonymous, they cant really report it. 2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs

Yeah this kind of feature within the wallet is still considered as trading as you can profit from these kinds of conversion even if it didn't happen in a trading platform. As long as it doesn't involve in the normal operations of crypto which is sending and receiving the crypto itself and it involves selling/buying/trading the crypto you will be incurring taxable income. And yes this kinds of conversion should be reported to your proper Taxing authorities so you need to keep in record of the conversions you are doing within the app as proof and documentation of the trading you are doing.

hugeblack

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It is best to avoid taking legal advice using Bitcointalk forum. The forum is multilingual and multinational and you may get inaccurate results.
In USA, All conversion are subject to tax report^[1] and coinbase's platform does not care about privacy. You own the private key, but they definitely know your IP address.

The question is, do they report to IRS? I don’t know if they did, but if they did you might expose yourself to a legal issue.
It is best to consider it as tax event and report it.

Again, avoid taking legal advice from Unknown people.

[1] https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

o_e_l_e_o

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Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

I assume no since the wallet is anonymous, they cant really report it.

Nothing with Coinbase's name on it is anonymous. The Coinbase wallet will absolutely be sharing all kinds of data with Coinbase, which will most likely include any trades or conversions you do from inside the wallet.

Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs

Yes. See question 15 here:

Quote from: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss.

Your cost basis will be the total amount in USD you paid for the coins you are selling/disposing, versus the total amount in USD the coins you are receiving are valued at.

Cnut237

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Quote from: odolvlobo on February 27, 2021, 09:14:45 PM

In the U.S., a conversion from one token or coin to another is a taxable event. You must report the gain or loss in value of the coin you converted from. Unless you transact in huge amounts, the gains or losses with stablecoins might be too small to report. I think the threshold is $10.

If anyone from the UK is reading this thread, it's the same here, too. Converting, for example, some Bitcoin into Ethereum is a taxable event, based on the price as at the moment of conversion. If you keep your trades below the capital gains threshold, you should be okay... but any gains over that need to be reported, as I think do trading volumes above a certain threshold, irrespective of whether or not you profit.

Quote from: odolvlobo on February 27, 2021, 09:14:45 PM

I am not a tax expert.

Me neither. There are plenty of qualified accountants who are happy to provide advice on crypto. By all means listen to random forum posters like me, but if you want proper advice then go to the experts.

odolvlobo

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Quote from: Charles-Tim on February 27, 2021, 08:03:21 PM

Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs

Converting from one coin to another are not taxed, only gain are taxed. Like on custodial exchanges like Coinbase, cryptocurrencies are taxed if you spend or sell it having gaining already. If no gain, no tax. Like even converting from stable coin to another stable coin has no gain, so no tax.

In the U.S., a conversion from one token or coin to another is a taxable event. You must report the gain or loss in value of the coin you converted from. Unless you transact in huge amounts, the gains or losses with stablecoins might be too small to report. I think the threshold is $10.

For example, if you obtain 10,000 USDC at $0.999 ($9,990) and then convert it all to DAI when USDC is worth $1.001 ($10,010), that's a $20 gain and must be reported.

I am not a tax expert.

Charles-Tim

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Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

my question is 1) does this actually get reported to irs like the trading platform does when you make a trade. I assume no since the wallet is anonymous, they cant really report it.

It is noncustodial but it is owned by Coinbase which can not make me trust the wallet. But normally, it is not like custodial wallets or exchanges, there should be privacy and not such report.

Quote from: real_newguy05 on February 27, 2021, 07:49:31 PM

2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs

Converting from one coin to another are not taxed, only gain are taxed. Like on custodial exchanges like Coinbase, cryptocurrencies are taxed if you spend or sell it having gaining already. If no gain, no tax. Like even converting from stable coin to another stable coin has no gain, so no tax.

real_newguy05

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Hi,

coinbase wallet app (not the trading platform, but the separate wallet app) recently introduced a new function that allows conversion between erc-20 tokens such as usdc, dai, etc..

my question is 1) does this actually get reported to irs like the trading platform does when you make a trade. I assume no since the wallet is anonymous, they cant really report it. 2) is this considered a tax event by irs? if i convert say from usdc to dai, it's just a 1:1 conversion, do i have to report it to irs

Topic: coinbase wallet app - token convert - tax event? (Read 108 times)