> Does that sort of thing still incur capital gains tax in the US?

Yes it does.

It would be same as if you purchased a large amount of gold, and then exchanged the gold for a car, after gold had increased in price.

In the gold situation, you would also pay capital gains, and the US treats crypto the same as property, in this regard.

Still taxed. You're effectively selling them your Bitcoin for the car. Or think if it with any other currency: if you bought Yen as part of your investment portfolio and it increased relative to USD, you still have capitol gains when you cashed it out.

Basically whenever you leave any financial position that increased in value for something not a financial asset then capitol gains are likely (there are exceptions)

Imagine if buying goods didn't incur capital gains. That'd mean you can resell the goods in new condition for a very small loss and get USD but save much more in taxes. IRS said a long time ago that crypto was like any other asset, like gold.

Oh yes it does, according to the IRS:

> Q16. Will I recognize a gain or loss if I exchange my virtual currency for other property?

> A16. Yes. If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss. For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets.

Source: https://www.irs.gov/individuals/international-taxpayers/freq...

Yep, same thing as investing in a foreign currency that increases relative to the USD. When you convert it into a purchase you are realizing a gain, which is taxed.

Heck, even savings account interest is taxable.