281–290 of 304 posts
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Increasing the block size doesn't seem to me like a long-term solution for Bitcoin's scalability problem. From the tone of your post though, it seems like you're mind is unlikely to be changed about Bitcoin Cash.
Can you elaborate on why you think that increasing the block size doesn't seem like a solution for scaling?
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I can only assume that there is some population of speculators that are only able to purchase bitcoin cash through Coinbase.. maybe the other exchanges make it too difficult?
A number of friends of mine in the US only want to deal with Coinbase. It is probably a combination of having already set up there and not wanting to submit ID to other exchanges, and having trust issues with other ones.
So if I sell my newfound BCH today, which was birthed from thin air a few months ago, but originates from BTC I bought years ago, is it short term capital gains or long term?
I would treat it as a dividend. If you roll it back in then don't pay taxes. If you sell it and take the cash then I assume it would be taxed based on when you bought the bitcoin. There is precedent here with trading stocks. (disclaimer: I am not an accountant)
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https://bitcoin.tax/blog/how-to-tax-bitcoin-cash-bch/ What if you had no interest in BCH but you owned 1,000 BTC. Do you suddenly have a $277,000 income tax bill? Yes, as discussed by Tyson Cross, tax attorney at BitcoinTaxSolutions.com. Since you have accession to wealth then this is taxable income.
Here is a counter point I would argue. Anyone can make a Bitcoin fork, in fact Bitcoin forks are being made every week now. Is every Bitcoin holder now liable for that? Also these forks often collapse, so when was the income gain? The same day? You'd have people owing more tax than their entire net worth. (Forks often pump in the first day/week then drop to nothing.) If this is possible then you could attack every Bi…
So if I sell my newfound BCH today, which was birthed from thin air a few months ago, but originates from BTC I bought years ago, is it short term capital gains or long term?
Consider the following counterfactual: What if Bitcoin Cash had become accepted as the "true" Bitcoin and the original Bitcoin's market cap plummeted to near zero? Then you would treat it as a long-term capital gain if you sell it, right? Technically, there is little to distinguish a contentious fork from an upgrade to the Bitcoin protocol. As another counterfactual: What if the SegWit2x fork had happened, and each o…
It's trivial to distinguish between the two. One has existed for several years and the other came into existence in 2017. One goes by the name Bitcoin or Bitcoin Classic, and the other by the name Bitcoin Cash. Legally and for tax purposes, the technical underpinning of the currencies is irrelevant...
The sale of Bitcoin Classic could be long-term gain because it could be held for >1 year (the threshold for LTG). The sale of Bitcoin Cash is short-term gain (for the 2017 tax year) because it came into existence in 2017.
Note that Bitcoin Cash should not be treated as a stock split for capital gain purposes--generally you would not get to share the basis of your Bitcoin Classic holdings with your Bitcoin Cash holdings. You can do that with stock because tax-rules specifically provide this option for stock and equity ownership interests. Bitcoins aren't equity ownership interests, they're assets. If you acquired Bitcoin Cash through the fork, you received free assets, and you're taxed on it as if you received free money.
So if I sell my newfound BCH today, which was birthed from thin air a few months ago, but originates from BTC I bought years ago, is it short term capital gains or long term?
If/when you later sell it, you will be taxed again on any gain in the value of the BCH at the time of sale as capital gain (but only on the gain, not the total value of the BCH). Alternatively, if the value has dropped, you will get a capital loss deduction. Whether it is short-term or long-term capital gains/losses depends on how long you've held the BCH at the time of sale.
And yes, this is the consensus of the experts...especially the ones at the IRS...
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I don't agree with the stock split comparisons. Bitcoin Cash is not something that existed inside Bitcoin and was then spun out. It's more like a new company was formed and it's cap table was initialized as a copy of another pre-existing company. I think there just isn't any precedent for the concept of "forking" and how the internal revenue code applies to it.
I see your point. This is something I can imagine lawyers arguing over and there is no right/wrong answer really. The cap table is interesting though. One could say it starts off at $0 but that isn't really true as there is a 'good will' value due to the public knowledge of the fork and that the coin will be worth something.
BCH received in the split would be treated as free money received (because Bitcoins are currency, not equity interest), so as cash income, and thus would be taxed like cash income.
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Short term capital gain with a cost basis of $0 makes the most sense.
And if Bitcoin Cash starts being recognized as Bitcoin? (Far fetched, but not in the Segwit2X case.) Use your original cost basis?
On the other hand, when you sell the BCH, your basis will the FMV when received, so you would only be taxed the second time on the gain in price (if any).l
Earlier quoted context omitted.
Consider the following counterfactual: What if Bitcoin Cash had become accepted as the "true" Bitcoin and the original Bitcoin's market cap plummeted to near zero? Then you would treat it as a long-term capital gain if you sell it, right? Technically, there is little to distinguish a contentious fork from an upgrade to the Bitcoin protocol. As another counterfactual: What if the SegWit2x fork had happened, and each o…
I don't see how the IRS could coherently distinguish between these two cryptocurrencies and treat the sale of one as a long-term gain but a sale of the other as a short-term gain. It's trivial to distinguish between the two. One has existed for several years and the other came into existence in 2017. One goes by the name Bitcoin or Bitcoin Classic, and the other by the name Bitcoin Cash. Legally and for tax purposes,…
My comment about distinguishing was not about Bitcoin Cash, but about the following counterfactual:
>What if the SegWit2x fork had happened, and each of the two resulting cryptocurrencies had roughly equal market cap and each claimed to be the "true" Bitcoin?
In this hypothetical situation, there is (by assumption) real disagreement about which of the two cryptocurrencies is the "real" Bitcoin, and I don't see how the IRS would be equipped to decide this contentious issue. And if it doesn't make such a decision, then the only remaining possibility is to treat the two chains equally.
So if I sell my newfound BCH today, which was birthed from thin air a few months ago, but originates from BTC I bought years ago, is it short term capital gains or long term?
BCH received in the fork should be treated like the receipt of free money: as income. So, you get taxed on that as if it were cash. If/when you later sell it, you will be taxed again on any gain in the value of the BCH at the time of sale as capital gain (but only on the gain, not the total value of the BCH). Alternatively, if the value has dropped, you will get a capital loss deduction. Whether it is short-term or l…
Why is that? Another way of looking at it is that the value of your existing bitcoin holdings got split between two competing chains. In a rational market, value of your bitcoin holdings pre-fork should be equal to the sum of the value of your holdings on the two post-fork chains.