Even the most cautious taxpayer should only have to pay taxes on a gain if you cashed out for dollars and spent it on goods and services. If you bought other investments or if you keep your bitcoin, you should not pay taxes. If you sold your bitcoin on coinbase and sent profits to a bank account, you might be at risk. If they are actually saying you need to pay because you bought low and they think you're holding, I would do what Jeff suggests. Say you lost it or that it was stolen and file a loss, but you can only file a loss for what you bought it for.
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