Crypto Trading Portfolio Management and Tax Reporting 1

Question 1

Which cost basis accounting method typically results in the lowest capital gains when crypto prices have risen over time?

Accepted Answer

HIFO (Highest In, First Out)

Answer

FIFO (First In, First Out)

Answer

LIFO (Last In, First Out)

Answer

Specific Identification

Question 2

In the United States, the IRS classifies cryptocurrency as which type of property for tax purposes?

Accepted Answer

Property

Answer

Currency

Answer

Commodity

Answer

Security

Question 3

What is a 'wash sale' rule, and how does it currently apply to cryptocurrency in the US?

Accepted Answer

It does not currently apply to crypto, allowing you to harvest losses and immediately rebuy

Answer

It applies fully to crypto, disallowing losses if you rebuy within 30 days

Answer

It applies only to crypto held on regulated exchanges

Answer

It applies to crypto only if the position exceeds $10,000

Question 4

Which IRS form is used to report capital gains and losses from cryptocurrency transactions?

Accepted Answer

Schedule D and Form 8949

Answer

Form 1099-B

Answer

Form W-2

Answer

Schedule C

Question 5

What does portfolio 'rebalancing' mean in the context of crypto trading?

Accepted Answer

Adjusting asset weights back to a target allocation by buying and selling

Answer

Selling all holdings and converting to stablecoins

Answer

Moving assets from one exchange to another

Answer

Averaging down on losing positions

Question 6

A crypto trader receives tokens through a hard fork. According to IRS guidance, when is this income taxable?

Accepted Answer

At the time the tokens are received and the taxpayer has dominion and control

Answer

Only when the tokens are sold

Answer

Only if the tokens exceed $600 in value

Answer

It is never taxable as it is considered a return of capital

Question 7

What is the primary advantage of using a crypto portfolio tracker like CoinTracker or Koinly?

Accepted Answer

They aggregate transaction history across exchanges and wallets to calculate tax liability

Answer

They automatically execute trades to maximize profit

Answer

They provide leverage for margin trading

Answer

They guarantee the lowest tax bill legally possible