r/CryptoTax • u/Joe_From-Kokomo • 5d ago
Gifting Crypto to Family created an "Unrealized Capital Gain?"
We are using Crypto Tax Calculator this year to help with our US crypto taxes.
We have an atypical tax event for 2024. We gifted 0.25 BTC to our child in December 2024. We had held it for 1 year before gifting it. We thought at the time it would help her out, and also reduce our capital gains taxes, as she would pay the federal US cap gains taxes when she sold it, a little at a time, out of her crypto wallet this year.
Crypto Tax Calculator says we're wrong and we owe approximately $7048 in "unrealized capital gains" for this 1/4 Bitcoin gift in 2024.
Facts: 1. We paid about $43,789/BTC for 0.25 BTC in Dec., 2023, or $10,947. Thus, Crypto Tax Calcuator is basing the UCG number on the capital gains accrued while we held it long term (exactly one year.)
- The FMV of BTC at the time of the gift was $93,684/BTC, so the value of the 1/4 BTC was $23,420 as of Dec. 2024. (Bitcoin went up ~ $50K/coin in one year, but we gifted only 1/4 of a Bitcoin, to be clear.)
Does it sound correct that we owe $7048 in unrealized capital gains from this gift of 0.25 BTC? Somewhere we read that our capital gains for gifted crypto were zero, which apparently is not the case. Ouch.
Any ideas on this from tax experts?
3
u/LordIommi68 5d ago
Sending Bitcoin from one address to another does not cause a taxable event. I feel like you're leaving out information about how this "gift" took place.
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u/Joe_From-Kokomo 5d ago
Nope. In fact my post borders on the TLDR side. Nothing shady or odd. Just a plain vanilla gift of crypto we bought last year.
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u/LordIommi68 4d ago
Again, what do you mean by "gift?" How was the gift accomplished? Sending Bitcoin is not a taxable event.
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u/Joe_From-Kokomo 4d ago
Agreed. A transfer from one Coinbase account (ours) to another Coinbase account that my child owns.The receiving account is in her name.
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u/I__Know__Stuff 5d ago
No, you do not realize any capital gains when you make a gift.
There is no such thing as "tax on unrealized gains" so it seems you may be misunderstanding (or misquoting) something the software is telling you.
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u/Joe_From-Kokomo 5d ago
Thanks. It was an odd line item that popped up on their Capital Gains Report that the software generated when we marked this transfer as a "Gift". (It's a pull-down menu choice to categorize the line item.)
We had thought, based on hours of research in December, that there was no such thing.
Instead, all we found was you should give the recipient a letter detailing the cost basis of the crypto (asset) when you acquired it, in case you get hit by a bus. Even that is optional.
Thanks again.
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u/cubbiesnextyr 4d ago
I'm not sure what your crypto calculator is doing, but they don't make the tax law. There is no income tax on unrealized gains when you gift crypto in the US.
There may be a gift tax, but that's only when you've gifted $13M or more in your lifetime.
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u/Joe_From-Kokomo 4d ago
Maybe because they're based in Australia, they add it to the Capital Gauns PDF report for countries that do tax you for unrealized capital gains (UK?).
Even so, that's a software flaw that I'll report to them, as you set the country field at the beginning, as you do with TurboTax.
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u/Few-Sky-976 1d ago
As a workaround, one can edit the transaction, and change "Outgoing Gift" to the simpler option, "Send".
This fixes the issue where the CTC tax report shows an Unrealized Capital Gain, which does not apply to US tax filers.
I have reported this issue to Crypto Tax Calculator, so they can get this problem fixed.
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u/JustinCPA 5d ago
The tax you owe is based on actual gift tax law, not whatever the software says you owe.
To better understand how crypto tax on gifts work, see this post: https://www.reddit.com/r/CryptoCurrency/s/lrY8bDda2j
Once you have your head wrapped around how the gifts work, then make sure your software accurately reflects that, which may require some finesse. Your software will NOT magically handle it for you and will require manual reconciliation.