Yeah i am basically using your example-different dates. Except instead of selling, they are held.
It seems the fair market values you are using are from the day that they are mined. Let's say we go 364 days with bitcoin at 10k+ [and we hodl], and on day 365 [end of the year] the proverbial s*** hits the fan and it is worth nothing. That is, For convenience, Let say the reported 10.9k profit under their accounting schemes is in reality a loss of about 35k. Does the IRS expect you to pay them $2500 in taxes under their accounting scheme.
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Good question. In my example in the post, the first layer of tax is recognized on the 2017 tax return, the year the coins were successfully mined. The second layer of tax applies to the 2018 tax return (year when the Bitcoin is disposed of). Had the value decreased in 2018 to $1.00 on 12/31/2018 and sold at a 100% loss (instead of $100,000 I used in example), taxpayer would have still had income in year 2017 and a loss in 2018. However if the loss is capital loss, it may be limited to $3,000 per year under US individual income tax law.
Of course same with dislaimer above, this is not personal tax advice, cannot be used to avoid penalties, and is subject to new legislation after the date of this post.