There are many true horror stories of amateur traders going from in the green to losing more than they own. I don't know any place where what you describe is legal.
If this is your strategy (as in method to cheat with taxes) now is probably a good time to calculate how much you owe and put that aside into something less volatile, not to accidentally ruin your life.
I wonder how many other jokers are accidentally conducting life-ruining levels of tax fraud.
I might be wrong, but I believe the IRS views every transaction as a taxable event. Crypto -> crypto included.
You have 1 share of Stock A and I have 1 share of Stock B. We both paid 1 USD for each of our different stocks.
Now I want Stock A and you want Stock B, so we'll trade with each other, and lucky us, both stocks are now valued at 2 USD per share.
After performing this trade, ask yourself these questions (from my perspective, or swap A and B for yours, it's the same either way):
* Have I held Stock B?
* What did I pay for Stock B?
* Do I now hold Stock B?
* Why not?
* What did I sell it for?
* And how much was that valued?
* So then how much did I gain?
* How much is owed in tax?
Unless your local tax law specifies "cashing out" not only as a taxable event, but the only taxable event, which I assure you it does not for stocks, the correct answers are as below. The equivalent to what you seem to describe for crypto would be transferring money in and out of the exchange where you trade stocks, and it would be ludicrous if this was the taxable event, which it isn't - but this is a common misconception among amateur crypto traders.
* I did hold 1 Stock B.
* I paid 1 USD for it.
* I don't hold it anymore.
* My dog did not eat it, so I must have sold it, which I did.
* I sold it for 1 Stock A and it was valued at 2 USD at the time of the transaction.
* 1 USD of value was gained at the time I sold from the time I bought.
* I owe a percentage of the 1 USD of value gained, depending on the capital gains tax rate, which differs.
I'd ask the local tax office anonymously. Not knowing doesn't fly as an excuse, everyone says that and it doesn't matter if it's true. Where is this place, if you don't mind?
Bonus question, what if we trade 1 DOGE for 1 Stock C? Is that different? What about 1 DOGE for 1 USD? What about 1 DOGE for 1 token backed by 1 USD? What about 1 Stock C for 1 token backed by 1 USD? Somehow it seems to get more complicated with "cashing out" laws, not less. Also I don't believe they exist, but I'd like to know too if they do anywhere.
Which country are you talking about here?
That conversion is the sale of property. The IRS doesn't care whether you receive payment for your BTC in DOGE, USD, or corn futures; you divested funds from BTC, and the difference between what the BTC was worth at the time of acquisition VS sale is a capital gain or loss.
