So how does BitCoin Cash distribution get handled in USA? Is it like a dividend? A stock split? A spin-off? What about all of these airdropped tokens? Are they dividends, with tax payable even if you didn’t “collect” them in some way? Or splits? Can you deduct the Day1 value of the new token from the capital gain on the first token? Or do you assume the cost of the new token was $0 and any sale is a total capital gai…
IRS sends warning letters to more than 10k cryptocurrency holders
231–240 of 416 posts
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#232Earlier quoted context omitted.
Forks are a unique economic situation. I think a slightly more accurate metaphor is if someone printed money and mailed it to you. A cost basis of 0 on a sale is the most "fair" way to account for forks/drops/etc. imo. Otherwise there's too much burden on the individual to keep track of all the many forks that occur.
> Forks are a unique economic situation Companies pay stock dividends, in themselves or in a subsidiary they're spinning out to shareholders, all the time. Using a reasonable materiality threshold (which would allow for ignoring novelty forks) this isn't a challenging accounting problem.
But the paying Corp needs to declare dividends. If it’s not declared properly, it’s usually treated as highly taxed income.
Source: warning from an accountant on self-owned corporations
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#233Earlier quoted context omitted.
"I can call up my card company and claim a fraudulent charge after getting the goods... It takes something like 180 days before a CC charge becomes much harder for the payer to dispute, vs. bitcoin's 10 minutes for very hard and 60 minutes for basically impossible." Yes, because obviously what we need is less power to the consumer. So what if it takes you 60 minutes to get home just to test the product you just bough…
I don't mind less power in exchange for not having to give up so much of my information to merchants. As someone who's sold things before I also like that bitcoin presents a tradeoff on prevalence of buyer fraud vs. seller fraud, and that if I want more power as a consumer I can opt-in to various escrow or risk-absorbing systems rather than rely on buyer-side-bias in charge disputes as a poor man's escrow. It's not o…
* There's no need for a tradeoff. We could just have a method of payment that gives less of your information to merchants.
* You can't 'opt-in' to 'various escrow or risk-absorbing systems'. That's because these services simply do not exist at this moment at Bitcoin-land. They may well never exist or be supported by merchants. You're comparing a non-existing theoretical model against real-world working stuff.
* Unfortunately, elder fraud is too rife where I live. The scammers call the elderly person, convince him/her to buy various utterly useless stuff like a rock to scare away tigers. This is almost never done in person, but by phone, and they use credit card details. At least there, there's some hope of chargebacks and a record of the transaction. Removing even those limited restraints... that's not what we need.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#234So how does BitCoin Cash distribution get handled in USA? Is it like a dividend? A stock split? A spin-off? What about all of these airdropped tokens? Are they dividends, with tax payable even if you didn’t “collect” them in some way? Or splits? Can you deduct the Day1 value of the new token from the capital gain on the first token? Or do you assume the cost of the new token was $0 and any sale is a total capital gai…
In Sweden the value of the coin in a fork (like Bitcoin Cash) should be zero.
This definitely makes the math easy for determining acquisition cost.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#235Earlier quoted context omitted.
Fair enough, but if I convert a bunch of dollars to pesos and then the value of a peso increases and it allows me to buy a nicer car (in pesos) than I could have when I received the peso, is that taxable? If it is, is the dollar the only exception to this rule? Because I know for a fact nobody pays taxes (or carries forward losses) on the increased purchasing power of their cash held in dollars.
Yes, because you as a US person track your gains/losses relative to the USD so if you buy Pesos and the value of the Peso changes relative to the US Dollar over the time period you held them that is in fact a capital gain and reportable to the IRS for tax purposes. Every country that taxes capital gains operates the same way to the best of my knowledge. > Because I know for a fact nobody pays taxes (or carries forwar…
Wait, the gain relative to USD is only reportable when you sell the pesos (to convert them back to USD, or to CHF or BTC or whatever). Is using a currency to purchase a good a "sale"? Would you incur capital gains tax on the USD-converted value of the car you had bought using the pesos?
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#236Glad I sold at the peak and made sure that my accountant filed the appropriate gains paperwork.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#237This is no different from any other profit or gain. The Government isn't specifically targeting these people; it just wants them to make sure they realize it's like any other investment.
Here's one situation where it is very different. Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%. This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a l…
I agree with you, but "My effective tax rate is 2000%" is a huge stretch. No, you got taxed 20% when you generated the income. Just because the place-you-keep-your-money blew up doesn't increase your "effective" tax rate or any other. It's a you problem if your mattress-full-of-cash burns down, or your bank goes out of business, or whatever -- you were taxed at the time you generated the income, and if you didn't set the money aside at the time, that's not the government's problem. You can't really say they're increasing your tax rate.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#238This is a question I don't know. And I was wondering if HN could shed some light on this. The IRS treats bitcoin as an investment property. What happens when one trades investment property for a car, or a boat, say?
You are taxed as if you sold the BTC and immediately bought your boat with the proceeds of the BTC sale.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#239Earlier quoted context omitted.
Here's one situation where it is very different. Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%. This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a l…
This is not different. Coincidentally, I was the engineer at Zenpayroll (now Gusto) who was working on enabling employees to be paid in crypto back in 2013/2014. We never got to the implementation phase because of precisely this scenario. Bitcoin is so volatile that it's a very scary way to be paid. The downside risk (you can't pay rent because bitcoin did something weird that week) is really really bad for users and…
What about setting up partial compensation on a sliding scale? If my rent+bills+other fixed expenses is X% of my income, I could just take as much as cash as will pay for that and take out the rest of the 1-X% in crypto
That said, unless there are tax implications of paying/getting paid in BTC that cause you to e.g. not realize gains, it's really no different than just paying the employee in all cash and letting them purchase as much crypto as they want with it.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#240So long as this is the case how can it possibly make sense to use bitcoin to actually transact e.g. fulfill the vision of bitcoin as "digital money" if every time you buy a cup of coffee with bitcoin the expectation is that you'd have to calculate capital gains and report every year?
This applies to any forex. If you're in the US, but you buy a coffee using CAD somewhere near the border, you have to keep track of that transaction and report it as a cap gain (or loss if you want).
Things get weird when you use a strange currency for any transaction.