2/ Your possibility is correct - the IRS computes tax on USD-equivalent as of trades completed Dec 31; but the USD price crashed in 2018'Q1, and he can't pay his tax bill in crypto. He can deduct the USD-equivalent losses next year but only against capital gains, not his W2 income, and the tax is due now in USD.
2/ Your possibility is correct - the IRS computes tax on USD-equivalent as of trades completed Dec 31; but the USD price crashed in 2018'Q1, and he can't pay his tax bill in crypto. He can deduct the USD-equivalent losses next year but only against capital gains, not his W2 income, and the tax is due now in USD.