re: Official CryptoTalk Thread

Long post by someone that seems knowledgable on the subject...

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This post is specifically for U.S. citizens if you are not one this won't apply to you. I've seen a lot of confusion on how capital asset taxation works, and specifically in the crytopcurrency realm. The strategy of "buy on the way up, sell on the way" has legitimate tax implications.

Let's start with the basics. The IRS has made specific stances that cryptocurrency is considered property and subject to capital asset taxation. It is not treated as stocks. This has some fairly serious implications for trading/buying/selling around here.

1. Gains are considered short-term or long-term based on how long the asset is held. Any assets held less than one year are taxed as ordinary income. If you buy in January (on the way up) and sell in March (on the way down). You technically have to report this as an increase in ordinary income. This does not matter if you don't transfer back to fiat. It is still a taxable event. Meaning it raises your federal tax bracket rate and you have to pay the ordinary income tax rate (as high as 39.6%). If you happen to be a jerk-off and live in California or New York, you are ALSO subject to state income tax rates - top rate is 13.3% in California. This is in addition to your federal tax obligation. The IRS just recently issued a John Doe summons to subpoena the transaction records on Coinbase. Unreported gains will not be handled nicely.

2.Gains held longer than one year are taxed as capital gains, at a much reduced rate, 20% if you are in the 39.6% federal tax bracket. Try as much as you can to hold for one year the tax savings are huge.

3. If you exchange one currency for another this is not eligible for what is known as a like-kind exchange (1031). Like-kind exchanges are not considered taxable events and you are able to transfer you original basis to the new asset at transfer. What does this mean? If you transfer BTC into ETH you have a taxable event. Talk about fricked in the arse.

4. If you are margin trading in which you borrow one currency immediately sell it, then buy back the initial currency at the end of the trade for a gain. Guess what every transfer is a taxable event. Luckily, if you buy the second currency almost right when you borrow it the fair market value will not be much different than your cost basis, thus no taxable gain. But when you sell back to the original currency and have a gain, technically that is a short-term gain and is taxed as ordinary income. Any interest you use to finance this loan, however, is considered investment interest and is able to be deducted. So people should be considering the potential tax implications. Of course, it is quite hard to enforce this as the exchanges are not issuing 1099s. But don't expect to wire yourself $10k a week and the IRS won't find out about it.

You can certainly plead ignorance and not do anything, but you may get Sniped, as in Wesley Snipes. Unless you were in the move Blade, your stay in jail will be much different. You may have to go bluepill just to survive. Don't get Sniped. If we are talking under $20,000. I would worry a lot less, there are plenty of BTC ATMs, or local meetups where you can exchange for cash, even though its 3% below the spot. I'm not saying to do this, as it is illegal, I'm just saying people have been known to do this. As the old adage goes, "The only certainties in life are faking your own death and taxes". It's clear which route I'm going, Alphabay has some interesting offers.

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LINK

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I would say that on polo, you're technically trading one crypto to another so that wouldn't cause you to have a taxable event

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I'm almost certain it doesn't need to be converted to fiat in order to be subject to capital gains tax. Generally speaking, an exchange of a piece of property for another (which cryptocurrencies are considered) will subject you to capital gains tax (think of it as investing in a piece of art for 1k, it appreciates over time and you "sell" it for another piece of art worth 10k, you'd owe capital gains tax on the 9k even though you didn't take hard cash). There are caveats, of course, but regardless of the exchange you're using, and regardless of if you're trading your crypto for fiat or other crypto, the IRS would say you owe either STCG or LTCG tax on that exchange.

Still technically a gray area, and I'm not sure the rules on stock swaps apply, but I expect the IRS would consider that gain taxable.

Edit: Looks like someone beat me to the punch

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cryptocurrency...is that like a dessert? some sort of twitter?

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"Cryptocurrency"? Is that a sativa or a indica??

im not sure.

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Seems like a no brainer based on players involved

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Awwww.. You're going to inflate our egos! Too kind.. Thanks, man!

Use your 2 ETH to open up a posh car detail in 5 years to keep our Lambos poppin.

There is a massive wall of RED right now.

I think I will be on the sidelines until the week of all weeks.

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Yeah the syntax is very similar. Main difference is that it's statically typed, it reminds me a lot of Go.

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I never used go looks like an interesting one though.

Based on the tutorial i scanned it seems pretty straight forward to build things out.


Are you building anything cool? My first thought is for an auctionhouse with no need for auctioneer or having to worry about nonpayment. Seems like real estate is the hot ticket app right now.