Cryptocurrency investors licking their wounds from the so-called crypto-crash shouldn’t get too creative when reporting their losses to the Internal Revenue Service, tax practitioners warn.
Most taxpayers will be subject to the traditional federal realized gain and loss rules, meaning investors in currencies such as Bitcoin, Ether and Dogecoin will see their losses after gains capped at $3,000, even if the net values of their digital wallets dropped hundreds of thousands—or millions—of dollars in the last month.
The same is likely true for investors in currencies that some view as “worthless,” like Luna, which lost as much as 99% of ...