E266 Bitcoin Taxes During Probate

<p>After someone dies with Bitcoin, among all the other chaos, are questions about taxes. How do you pay capital gains from during the decedent’s life? Or if he was a long-term holder, how much capital gains tax will the heirs owe? What about estate tax?</p> <h2>Final year capital gains tax from trading</h2> <p>If decedent was not a true holder, and was buying/selling, there are probably realized gains. You have to sell something to owe capital gains tax.</p> <p><img class="aligncenter size-medium wp-image-42150" src= "https://anthonyspark.com/wp-content/uploads/2022/04/Final-year-capital-gains-tax-from-trading-300x169.jpg" alt="Final year capital gains tax from trading" width="300" height= "169" /></p> <p>But how does an executor sort through to find the basis, the sales prices? It's still complicated, because at least for now, cryptocurrency is not a well-established industry and is constantly evolving.</p> <p>First, check the decedent’s devices for apps that track basis. There isn’t a main app out there right now, so Google “cryptocurrency tax tracking” to see which apps are popular at the time. If you find an app, it’s somewhat good news. The downside is that some of these apps don’t work very well.</p> <p>Next, check the exchange that the decedent was using (Coinbase, Kraken, Gemini, etc.) Some of the exchange platforms do basis tracking, but again it’s not that good yet. Even traditional stock exchanges don’t always track the basis. So, it’s a bit unrealistic to expect the crypto exchanges to do as good a job of tracking basis. When someone is alive, it’s easier for them to track their own basis. But, like any other estate, things become a bit messier when you're doing it for someone who has passed away. It takes work to reconstruct the portfolio to find the values.</p> <p>What happens if you don’t find the basis? You can’t wait around forever; at some point the executor must take a position on the basis. Then the executor files the 5495 with the final 1040, holds his breath and waits to see what the IRS sa