Kamal sold cryptocurrency in 2021. Which form or schedule should he use to report the income from this sale on his U.S. federal tax return?

• A. Form 1099-INT
• B. Schedule D (Form 1040)
• C. Schedule E (Form 1040)
• D. Schedule C (Form 1040)

Answer: (B)

Verified step by step guidance

1. Understand the nature of the transaction: Kamal sold cryptocurrency, which is considered a capital asset for tax purposes in the U.S. This means the sale is subject to capital gains tax.
2. Determine the correct form for reporting capital gains: Capital gains and losses from the sale of assets like cryptocurrency are reported on Schedule D (Form 1040). This form is specifically designed for reporting gains and losses from investments.
3. Review the other options provided: Form 1099-INT is used for reporting interest income, Schedule E (Form 1040) is used for reporting income from rental properties or royalties, and Schedule C (Form 1040) is used for reporting income from self-employment. None of these are relevant to reporting cryptocurrency sales.
4. Confirm the correct choice: Since cryptocurrency sales are treated as capital gains, Schedule D (Form 1040) is the appropriate form to use.
5. Ensure proper documentation: Kamal should gather all records related to the cryptocurrency sale, including purchase price (cost basis), sale price, and any associated fees, to accurately complete Schedule D.