Part 3/7:
A pivotal challenge arises when individuals attempt to convert Monero to another coin—or cash it out. If they used Monero to purchase different cryptocurrencies, documentation is critical. If someone fails to accurately disclose the original transaction details—specifically the cost basis of the initial Monero purchase—the IRS could calculate the gain on the sale of the new asset as if the cost basis were zero. This miscalculation would unjustly inflate the taxable income, resulting in potentially severe financial penalties.