How would a US citizen, who resides in Puerto Rico, be taxed on transactions conducted during 2023 as described in Part 1? Please provide the relevant Internal Revenue Code section(s) and a brief explanation of the tax treatment applied by the US government to this individual.

Today is November 29, 2023. To promote Spot Bitcoin and Bitcoin Futures Trading, for the next 30 days there shall be no fees or commissions on Spot Bitcoin and Bitcoin Futures trades. You decide to take advantage of this no fees trading special by doing the following trades: You buy Spot Bitcoin for $30,000.00 and you simultaneously sell the December 29,2023 Bitcoin Future Contract for $30,500.00. The size of the Bitcoin Futures Contract is for an amount of 1 Bitcoin.

You remain with a position of long 1 Spot Bitcoin and a short position of -1 in the December 29, 2023, Bitcoin Futures Contract at $30,500.00. You intend to close out and liquidate your Spot Bitcoin and Bitcoin Futures at the expiration of the December 29,2023 Bitcoin Futures Contract to satisfy all your commitments and obligations under that contract and the Spot Bitcoin. There are 30 days between November 29 and December 29. The Initial Margin on a short futures contract is $10,000.00. The Spot price and the futures price of Bitcoin stay the same for the duration of the trade. However, on December 29, 2023, the expiration date of the futures contract, the Spot Price suddenly converges to the Futures price of $30,500.00. You liquidate all trades at the $30,500.00 price.

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As of my last update I am GPT35 For a US citizen residing in Puerto Rico the tax treatment of transa... View the full answer