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Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

altcoinreport.co

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Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#51

Post by antisthenes »

trophycase wrote: post #33
antisthenes wrote: post #22

Earlier quoted context omitted.

That makes NO sense at all and I continue to be surprised at the fundamental misunderstanding of the US tax system by techies (it's really not that complicated for individuals). You pay tax on the GAINS, not on the value of the trade. If he owes the IRS $50k, it means he has a realized gain of ~$333,000. Where did that money go? The only possibility here is that he took $330,000 and reinvested ALL of it into 'altcoin…

It does make sense. I buy Bitcoin at $1000 in March. I trade my Bitcoin for Ripple in December when Bitcoin is worth $20000 and Ripple is worth $3. I have $19000 in gains because that is a taxable event. Fast forward to April and my $20000 of Ripple is now $3500 and I owe about $9000 in capital gains taxes. Even if I sold everything I can't cover what I owe because the losses on Ripple are in the next tax year and no…

The post didn't specify it was all short term gains. But even if they are, you still get to deduct your losses from any future capital gains once you sell at a loss. You and a lot of other replies seem to think I was saying it's impossible and arguing against that.

It's not. It's just highly improbably and extremely imprudent.

Alternatively, his altcoins bounce back up, he sells them and this time pays the tax properly.

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#52

Post by dustingetz »

hippich wrote: post #32
antisthenes wrote: post #22

Earlier quoted context omitted.

That makes NO sense at all and I continue to be surprised at the fundamental misunderstanding of the US tax system by techies (it's really not that complicated for individuals). You pay tax on the GAINS, not on the value of the trade. If he owes the IRS $50k, it means he has a realized gain of ~$333,000. Where did that money go? The only possibility here is that he took $330,000 and reinvested ALL of it into 'altcoin…

You can end up in this situation if you traded profitably in 2017 (which is totally reasonable to expect due all the price hikes) and then lost a lot in trades in 2018. As far as how he got $330k - each time you convert one crypto to another you realize gain/loss. And it is quite possible to expect him to do just that.

Super common situation is you make a couple trades in 2017'Q4 and 2018'Q1 during the bubble and just decide the whole thing is stupid and forget about it all because you never realized anything in USD and it's all fake. And then the IRS comes and says actually you owe USD. And the price dropped back down so you might not even have enough to cover it!

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#53

Post by SideburnsOfDoom »

thinkmassive wrote: post #49
SideburnsOfDoom wrote: post #40

Earlier quoted context omitted.

I have already read the wikipedia page, and it says " often by government regulation." So not necessarily so then. See here for an example of non-governmental fiat monies: https://en.wikipedia.org/wiki/Company_scrip of course "because someone says so" is an oversimplification of fiat; they need to do so believably which is why the United States of America has the resources to do it but I would not be able to. Company…

> Proof of work is valuable in itself? This is actually an interesting way to analyze it. The trust created by PoW apparently does create value to many people.

I don't think that it does in itself, actually; but there seems to be the perception that it does.

How much would you pay for an hour of video of me digging a hole with a spade and then filling it in. That's proof of work, and also worthless.

How much would you pay for someone to provably burn ton of coal? It's only valuable if it does something useful for the energy expended.

The blockchain's proof of work has been characterised as "Computers yelling Numberwang at each other" and what use does it have outside of itself? It burns huge amounts of of energy to produce waste heat and a trivial hash.

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#54

Post by [deleted] »

dustingetz wrote: post #45
dustingetz wrote: post #39

Earlier quoted context omitted.

1/ Short term, so 50k tax is 150k gains 2/ Your possibility is correct - the IRS computes tax on USD-equivalent as of trades completed Dec 31; but the USD price crashed in 2018'Q1, and he can't pay his tax bill in crypto. He can deduct the USD-equivalent losses next year but only against capital gains, not his W2 income, and the tax is due now in USD.

Continued: As a though experiment: lets say 100% of crypto traders owe 1/3 of their gains (obviously not real). There is nowhere close to enough USD liquidity to handle a sell like that and it would liquidate everyone and still leave them unable to pay their USD tax bill. The apparent USD liquidity is mostly actually Tether liquidity. There is not actual USD liquidity – nobody is buying huge amounts of BTC who doesn'…

[deleted]

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#55

Post by seanmcdirmid »

tom_ wrote: post #36
antisthenes wrote: post #22

Earlier quoted context omitted.

That makes NO sense at all and I continue to be surprised at the fundamental misunderstanding of the US tax system by techies (it's really not that complicated for individuals). You pay tax on the GAINS, not on the value of the trade. If he owes the IRS $50k, it means he has a realized gain of ~$333,000. Where did that money go? The only possibility here is that he took $330,000 and reinvested ALL of it into 'altcoin…

Short-term CGT in the US is around the 40-50% mark, something like that. Our hero bought 8 BTC for $7,200, or so goes their story, then sold it for $120,000-worth of altcoins, making a taxable gain of $113,800. 45% of that taxable gain = ~$50,000.

Short-term CGT is basically your ordinary income tax rate. So if you are taxed around 50%, then you aren't in the USA since the top rate is 39.6%. Also, your ordinary income tax rate depends on your income, the rate for $120k is 28% (but that only applies to income after 90k, before that it is taxed at 25% or less). You would only be taxed at 39.6% for gains after $418k.

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#56

Post by lavezzi »

AltcoinReport wrote: post #2

Due to the massive amount of capital gains taxes owed on crypto, Tom Lee believes there will be a sell off in order to pay these taxes. Following tax day, he believes Bitcoin will find footing again.

I think he is wrong, this is more likely to happen next year.

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#57

Post by lavezzi »

jaycroft wrote: post #24

A couple related observations: 1) With the dramatic rise and then fall of the Nasdaq back in 2001, with similar timing (peak right around New Years Day [0]), and a similar amount of new and uninformed market participants (online day trading just beginning to become a thing), could some of the early 2001 market performance be due to a similar dynamic? Noob traders make bank in 2000, log in to H&R block, start doing th…

"The IRS will not impose a penalty for the failure to file the delinquent FBARs if income from the foreign financial accounts reported on the delinquent FBARs is properly reported and taxes are paid on your U.S. tax return, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted."

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#58

Post by twblalock »

SideburnsOfDoom wrote: post #40
twblalock wrote: post #38

Earlier quoted context omitted.

Fiat in the case of currency involves more than "someone says so". It generally means that a government makes a law or a regulation that says the money is legal tender, and also that the value of the currency is derived solely from that law and is not "backed" by any physical goods. No government or other monetary authority has said that cryptocurrencies are legal tender in their country, or has required that anythin…

I have already read the wikipedia page, and it says " often by government regulation." So not necessarily so then. See here for an example of non-governmental fiat monies: https://en.wikipedia.org/wiki/Company_scrip of course "because someone says so" is an oversimplification of fiat; they need to do so believably which is why the United States of America has the resources to do it but I would not be able to. Company…

> Saying that "bitcoin is a commodity" means what exactly?

It means that the government does not legally consider it any kind of currency, fiat or otherwise. It's taxed like a commodity when you buy and sell it. It's not legal tender.

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#59

Post by jaycroft »

antisthenes wrote: post #48
jaycroft wrote: post #42

Earlier quoted context omitted.

How do you get a $50k tax bill implies realized gain of 330k? OP states $120k gain on top of 47k salary. To be generous, i'll first assume that he has had his salary withheld at the correct rates. Federally he will owe 32253 in additional tax (short term so treated as income, and marginally falls into a mix of 25 and 28% brackets). Must be that he also is in a high tax state. I understand California the best (which a…

If it was all short term capital gains, then yes, but he would still have realized gains way over what the tax bill is. That wasn't specified in the post though. Usually capital gains refer to something that's taxed at a lower rate for assets held for more than 1 year, 15% (or 20% if you're in a higher bracket) How tax/financial-illiterate do you have to be to pour ALL of your realized gains back into altcoins going…

The original post states that he bought in early 2017, and sold in late 2017. That makes it clearly all short term capital gains.

Re: Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day

#60

Post by SideburnsOfDoom »

twblalock wrote: post #58
SideburnsOfDoom wrote: post #40

Earlier quoted context omitted.

I have already read the wikipedia page, and it says " often by government regulation." So not necessarily so then. See here for an example of non-governmental fiat monies: https://en.wikipedia.org/wiki/Company_scrip of course "because someone says so" is an oversimplification of fiat; they need to do so believably which is why the United States of America has the resources to do it but I would not be able to. Company…

> Saying that "bitcoin is a commodity" means what exactly? It means that the government does not legally consider it any kind of currency, fiat or otherwise. It's taxed like a commodity when you buy and sell it. It's not legal tender.

Ok, so if we're saying "commodity" as in "not legally any kind of currency or legal tender" then that's a valid reason.

If we're using "commodity" to refer to an useful substance like wheat or silver "a product of agriculture or mining" ( https://www.merriam-webster.com/dictionary/commodity ) Then I would disagree, bitcoin does not fit this definition, the value of bitcoin is an agreement, nothing more. "Agreement" and "because we say so" seems a lot like fiat to me.

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