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Started By
Message
Crypto and taxes.
Posted on 7/22/21 at 12:52 pm
Posted on 7/22/21 at 12:52 pm
The SEC does not consider most cryptos a security. I don't know if that matters or not.
Scenario:
Bought one Bitcoin at $30K of U.S. dollars.
Waited one year and that one Bitcoin is now worth $50K of U.S. dollars.
Purchased a truck worth one Bitcoin. Forwarded it to the deanship and the sales transaction was made with Bitcoin currency. The price of the truck is one Bitcoin.
Are federal taxes required to be paid on the $20K of USD appreciation?
Does it matter that the Bitcoin was never converted to USD before the transaction was made with the dealership?
Scenario:
Bought one Bitcoin at $30K of U.S. dollars.
Waited one year and that one Bitcoin is now worth $50K of U.S. dollars.
Purchased a truck worth one Bitcoin. Forwarded it to the deanship and the sales transaction was made with Bitcoin currency. The price of the truck is one Bitcoin.
Are federal taxes required to be paid on the $20K of USD appreciation?
Does it matter that the Bitcoin was never converted to USD before the transaction was made with the dealership?
6
Posted on 7/22/21 at 12:56 pm to GumboPot
quote:
Are federal taxes required to be paid on the $20K of USD appreciation?
Yes
quote:
Does it matter that the Bitcoin was never converted to USD before the transaction was made with the dealership?
No
Posted on 7/22/21 at 12:58 pm to GumboPot
Doesn’t matter. Crypto is fake money.
Posted on 7/22/21 at 1:02 pm to Mingo Was His NameO
However to me one year ago the price of the truck was 1.67 Bitcoin. A year later the price has come down to 1 Bitcoin.
We now have to pay gains taxes on all products that reduce in price?
ETA: can I declare losses on purchases on goods that go up in price?
We now have to pay gains taxes on all products that reduce in price?
ETA: can I declare losses on purchases on goods that go up in price?
This post was edited on 7/22/21 at 1:04 pm
Posted on 7/22/21 at 1:06 pm to GumboPot
Nice hypothetical scenario “baw”
We know all you cringeto nerds drive priuses
We know all you cringeto nerds drive priuses
Posted on 7/22/21 at 1:06 pm to Mingo Was His NameO
quote:
quote:
Are federal taxes required to be paid on the $20K of USD appreciation?
Yes
quote:
Does it matter that the Bitcoin was never converted to USD before the transaction was made with the dealership?
No
If i convert my money to pesos and a year later back to dollars, i would have to pay taxes if there were gains in the currency exchange?
Posted on 7/22/21 at 1:08 pm to meansonny
quote:
If i convert my money to pesos and a year later back to dollars, i would have to pay taxes if there were gains in the currency exchange?
If the answer is yes, can you declare losses in Mexico?
Posted on 7/22/21 at 1:11 pm to GumboPot
quote:
If the answer is yes, can you declare losses in Mexico
My follow up was going to ask why i couldnt be shorting pesos when i converted to dollars (i.e. a separate transaction from the first one).
Posted on 7/22/21 at 1:12 pm to GumboPot
quote:Yes
Are federal taxes required to be paid on the $20K of USD appreciation?
quote:No
Does it matter that the Bitcoin was never converted to USD before the transaction was made with the dealership?
Posted on 7/22/21 at 1:23 pm to TigerTatorTots
I found the answer on the IRS website:
LINK
quote:
Q–6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property?
A–6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency. See Publication 544, Sales and Other Dispositions of Assets, for information about the tax treatment of sales and exchanges, such as whether a loss is deductible.
LINK
Posted on 7/22/21 at 1:25 pm to GumboPot
quote:
We now have to pay gains taxes on all products that reduce in price?
ETA: can I declare losses on purchases on goods that go up in price?
It has nothing to do with the goods and their prices.
It has everything to do with the fact that the IRS has classified crypto not as a currency, but as a security.
Does it make sense? Well... most currencies don't fluctuate in value like crypto does.
This could all be changed by changing the law, by the way.
Posted on 7/22/21 at 1:28 pm to meansonny
quote:
If i convert my money to pesos and a year later back to dollars, i would have to pay taxes if there were gains in the currency exchange?
Do you even IRC Section 988, baw?
Posted on 7/22/21 at 1:34 pm to LSUFanHouston
quote:
It has everything to do with the fact that the IRS has classified crypto not as a currency, but as a security.
But the SEC has not declared the crypto as a security (only for three original owners of Ripple). Why the difference between the IRS and the SEC?
I think you mean the IRS has declared crypto as property, right?
Posted on 7/22/21 at 1:49 pm to GumboPot
quote:
I think you mean the IRS has declared crypto as property, right?
I think that is what I said?
quote:
But the SEC has not declared the crypto as a security (only for three original owners of Ripple). Why the difference between the IRS and the SEC?
Well... you mean we have inconsistency between government agencies??? Shocker!
One agency is concerned about raising revenue. The other is concerned about the public market for securities.
The IRS wants the revenue by deeming it a security. The SEC probably doesn't want to have to regulate it so they say it's not a security.
Posted on 7/22/21 at 2:31 pm to LSUFanHouston
Posted on 7/22/21 at 4:55 pm to LSUFanHouston
quote:
It has everything to do with the fact that the IRS has classified crypto not as a currency, but as a security.
Is it a security? There's no wash sale rule. I think it's considered property.
Posted on 7/22/21 at 4:58 pm to GumboPot
Posted on 7/22/21 at 5:39 pm to tigercross
Cryptocurrencies are considered "property" by the IRS. They don't meet the legal or the economic definitions of currency. That's why "cryptocurrency" is a misnomer. They're digital assets.
There are tests to determine if an asset can be deemed a security or not. The biggest part of that test is if the coin/token issuance is dependent on the management/development team completing something to give the underlying asset value (then it would be considered a security).
Some industry players got together and formed a Crypto Rating Council to evaluate the risk of a given token/coin being considered a security or not. On a scale from 1 to 5 with 1 being not likely a security and 5 likely being a security, BTC rated as a 1 (not likely a security) and XRP rates as a 4 (likely a security).
https://www.cryptoratingcouncil.com/asset-ratings
There are tests to determine if an asset can be deemed a security or not. The biggest part of that test is if the coin/token issuance is dependent on the management/development team completing something to give the underlying asset value (then it would be considered a security).
Some industry players got together and formed a Crypto Rating Council to evaluate the risk of a given token/coin being considered a security or not. On a scale from 1 to 5 with 1 being not likely a security and 5 likely being a security, BTC rated as a 1 (not likely a security) and XRP rates as a 4 (likely a security).
https://www.cryptoratingcouncil.com/asset-ratings
Posted on 7/22/21 at 11:16 pm to Hand
great post thank you
Posted on 7/22/21 at 11:41 pm to GumboPot
You wouldn’t have this problem with Iraqi dinar.
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