Crypto Trading Portfolio Management and Tax Reporting 2

Question 1

How long must you hold a cryptocurrency to qualify for long-term capital gains tax rates in the US?

Accepted Answer

More than 1 year

Answer

Assets held for more than one year qualify for long-term capital gains rates (0%, 15%, or 20%), which are significantly lower than short-term rates taxed as ordinary income.

Question 2

When you pay for goods or services using Bitcoin, what tax event occurs?

Accepted Answer

A capital gain or loss is recognized based on BTC's value at the time of payment vs. your cost basis

Answer

Because crypto is property, spending it is a disposal event that triggers a capital gain or loss equal to the difference between your cost basis and the fair market value at the time of spending.

Question 3

What is 'tax-loss harvesting' in crypto portfolio management?

Accepted Answer

Selling losing positions to realize losses that offset capital gains

Answer

Tax-loss harvesting involves selling depreciated crypto assets to realize a capital loss, which can offset capital gains from profitable trades and reduce overall tax liability.

Question 4

Which of the following crypto events does NOT create a taxable event in the US?

Accepted Answer

Transferring crypto between your own wallets

Answer

Transferring crypto between wallets you own is not a taxable event; no change in ownership occurs, so no gain or loss is realized.

Question 5

What is the annual capital loss deduction limit against ordinary income for US individual taxpayers after offsetting capital gains?

Accepted Answer

$3,000

Answer

After netting capital gains and losses, US taxpayers can deduct up to $3,000 of net capital losses against ordinary income per year, with excess losses carried forward.

Crypto Trading Practice Test

Crypto Trading Practice Test

Crypto Trading Portfolio Management and Tax Reporting 2