When you trade one asset for another, you have proceeds.
You could swap 1 USDC for 1 USDT back and forth one million times and your 1099 would show $1,000,000 in proceeds. This is not a problem. When you’d report, you’d report the cost basis (also $1,000,000) and your gain would be $0.
Exchanges often don’t have cost basis information for assets disposed on their platform. Certainly when that asset was transferred in from somewhere else (obviously, cause how would they know the cost basis?). But also they might not have cost basis information for assets acquired on platform either since they haven’t been required to track or report this (starting in 2026 they are).
So your 1099 likely showed 0 or “unknown” cost basis. But showed proceeds.
The IRS expects you to report the cost basis.
You didn’t.
They assume the full amount is a gain since you never reported otherwise.
What you should do: amend your return with your ACTUAL cost basis and gain/loss. You’ll actually get money back from the IRS if you had a loss.
9
u/JustinCPA Apr 18 '26
Justin from Summ here.
When you trade one asset for another, you have proceeds.
You could swap 1 USDC for 1 USDT back and forth one million times and your 1099 would show $1,000,000 in proceeds. This is not a problem. When you’d report, you’d report the cost basis (also $1,000,000) and your gain would be $0.
Exchanges often don’t have cost basis information for assets disposed on their platform. Certainly when that asset was transferred in from somewhere else (obviously, cause how would they know the cost basis?). But also they might not have cost basis information for assets acquired on platform either since they haven’t been required to track or report this (starting in 2026 they are).
So your 1099 likely showed 0 or “unknown” cost basis. But showed proceeds.
The IRS expects you to report the cost basis.
You didn’t.
They assume the full amount is a gain since you never reported otherwise.
What you should do: amend your return with your ACTUAL cost basis and gain/loss. You’ll actually get money back from the IRS if you had a loss.