That's a very good question. I would bet the conversion would be to sell the BTC and then doing a buy of XMR. That ought to trigger the taxable event and whatever exchange would have to send the 1099 for it if over $600. I don't think there's a real way to avoid the taxable event when converting...
Agreed, with outfits like MG and WU making it very very difficult to send money to sponsors and their receivers not to mention blacklisting them bitcoin is pretty much the only game in town in order for sponsors to receive payment. One other option is cash in mail and that even has its risks.