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Thread: Now that BTC is a taxable asset, what's the advantage of it?

  1. #1

    Question Now that BTC is a taxable asset, what's the advantage of it?

    So you can't really go off-grid with it. What's it really good for other than diversification? Thnx.

    https://www.forbes.com/sites/kellyph.../#f28e7a7605fa

    Cryptocurrency is riding high these days. But even as more investors are taking a chance on new currencies like Bitcoin, Ethereum, and Ripple, many are still confused about how to treat it for federal income tax purposes. In 2014, the Internal Revenue Service (IRS) issued guidance to taxpayers (downloads as a pdf) making it clear that virtual currency will be treated as a capital asset, provided they are convertible into cash. In simple terms, this means that capital gains rules apply to any gains or losses. But taxes are rarely simple. Things can get complicated very quickly. Here are the basics:


    • For those taxpayers buying and selling cryptocurrency as an investment, calculating gains and losses are figured the same as buying and selling stock. That's true, as well, when it comes to basis, holding period and a triggering event.
    • For those treating cryptocurrency like cash - spending it directly for goods or services, or using it to buy other cryptocurrencies - the individual transactions may result in a gain or a loss.

    I know, the basics aren't quite so basic. Here's a deeper dive into some of the more complicated bits:
    First, how do you calculate capital gains?

    For tax and accounting purposes, capital gains and losses are calculated by determining how much your cost basis has gone up or down from the time you acquired the asset (in this case, cryptocurrency) until there's a taxable event.

    Okay, you've already lost me. What's basis?
    Basis is, at its most simple, the cost that you pay for assets. The actual cost is sometimes referred to as "cost basis" because you can make adjustments to basis over time. For example, if you add to the asset, either as a new purchase or a reinvestment, your basis is your cost plus the cost of each subsequent purchase/reinvestment.
    Got it. When I trade cryptocurrency on an exchange, I pay commissions and fees. How do I treat those costs?

    When you calculate your basis, you'll figure the purchase price plus any related costs, such as commissions.

    You treat fees differently: If you pay investment-related fees, then you may be able to deduct the fees on your Schedule A, assuming you itemize. But that's only for 2017. The new tax reform law eliminated the deduction for 2018 through 2025 but there is a work-around: If, instead of owning cryptocurrency personally, your business owns the investments, you can deduct investment-related fees on a Schedule C (or your entity's tax form).
    So what's a taxable event?
    A taxable event is typically a sale or disposition of an asset. When it comes to cryptocurrency, a taxable event occurs whenever it is traded for cash or other cryptocurrency or whenever cryptocurrency is used to purchase goods or services.

    There's also another potentially complicating factor. The IRS doesn't require third-party reporting for virtual currency (yet) so there's no form 1099-B or equivalent issued at the end of the tax year. Some companies like Coinbase will offer a summary of transactions which can be used to help you file your taxes but if you withdraw cryptocurrency from an exchange, the exchange can no longer track when happens. In that way, it's the same as taking money out of your bank. For that reason, cashing cryptocurrency out of an exchange or similar platform may be treated as a sale - even if you're forced to withdraw it (Remember: There's very little official guidance right now.)

    And what's a holding period?
    The holding period is the period of time that you own or have access to the asset - typically, the time frame between acquisition and the taxable event.


    • If you hold an asset for more than one year before a taxable event, it's considered a long-term gain or loss.
    • If you hold an asset for one year or less before a taxable event, it's considered a short-term gain or loss.

    Ok, great. Being taxed as capital gains is a good thing, right, because those tax rates are better than normal?
    Sort of. Capital gains rates can be favorable to taxpayers. For 2017 (the return that you'll file when tax season opens in January 2018), capital gains rates for long term gains (those held more than a year) range from 0% to 20%. Short-term capital gains are taxed as ordinary income, which means your marginal tax rate will apply to your short-term gains as well.

    You can find the 2017 tax rates here. For a look at the 2018 tax rates (the return that you'll file in 2019), click here.

    But I don't pay tax unless I actually cash out, right?
    Nope. This is one of the problems. You may have a taxable event even if you don't formally cash out. Anyone using cryptocurrency to pay for goods or services must treat each purchase as a sale. Ditto for trading one cryptocurrency for another.* I know there's confusion over this treatment, but think of it like this: If you trade in your Amazon shares for Microsoft shares, that's a taxable transaction, even if you don't take cash out of your brokerage account. Same analysis.
    (*Note: I'm not going to address section 1031 issues here because it's beyond the scope of this post and because it's disallowed for cryptocurrency under the new tax reform law. If you're reading this and you have no idea what section 1031 is, don't panic: It likely doesn't apply to you.)

    What if I lose money?
    If your realized losses exceed your realized gains, you have a capital loss for tax purposes. You can claim up to $3,000 (or $1,500 if you are married filing separately) of capital losses and the amount of your loss offsets your taxable income for the tax year. If your losses exceed those limits, you can carry the loss forward to later years subject to certain limitations and restrictions.
    Realized gains and losses? What does that mean?
    Cryptocurrency has been up and down over the past year. For tax purposes, you mostly care about the beginning and the end: what happens in the middle doesn't really count. For example, every time that Bitcoin takes a dive, that doesn't equal a real, or realized loss. Similarly, when it goes back up, that doesn't equal a real, or realized gain. To realize a gain or a loss for tax purposes, you have to do something with the asset. Typically, that means that you sell it or otherwise dispose of it - generally, the taxable event mentioned earlier.

    Here's a quick example to help you sort out the math: Assume you invest in Bitcoin worth $1,000. Over the year, assume that the value of the Bitcoin climbs to $25,000 due to market conditions and not any additional investment on your part. You continue to hold onto it. Result? Unrealized gain, no capital gain. Now assume that the value of Bitcoin takes a hit and it falls to $500. Result? Unrealized loss, no capital loss. Finally, assume that Bitcoin climbs back to $750 and you get rid of it. Result? You have a realized capital loss of $250 ($750 selling price – $1,000 basis). You take the loss at the basis, not the high price (the $25,000 high value is meaningless for purposes of capital gain or loss) nor at the low price (the $500 low value is similarly meaningless for purposes of capital gain or loss). You want it to mean something. But it doesn’t. At least not for tax purposes.

    So where do I report my gains or losses?
    At tax time, you’ll report your realized gains and losses on a Schedule D, and then transfer the results to the reconciliation page on your federal form 1040. You don’t file a Schedule D if you don’t have any realized gains or losses: even if the value changes, if there's no sale or disposition, there's nothing to report.
    Got it. So what if I invest in cryptocurrency outside of the United States. I know that I have to report brokerage accounts and other assets on an FBAR. Does that apply here?

    Nope, you don't have to report your cryptocurrency on your FBAR. In 2014, the IRS issued a statement, saying, "The Financial Crimes Enforcement Network, which issues regulatory guidance pertaining to Reports of Foreign Bank and Financial Accounts (FBARs), is not requiring that digital (or virtual) currency accounts be reported on an FBAR at this time but may consider requiring such accounts to be reported in the future." The IRS has confirmed that position for this year.
    Since I don't have to report it on an FBAR, what happens if I just don't report it all, anywhere?

    The IRS has been cracking down on cryptocurrency reporting. They've made some headway into investigating potentially unreported transactions, including some initial success in legal efforts to force Coinbase to turn over customer records. It's likely not an isolated push: In the Coinbase matter, IRS Senior Revenue Agent David Utzke noted that for the 2013 through 2015 tax years, the IRS processed, on average, just under 150 million individual returns annually. Of those, approximately 84% were filed electronically. IRS matched data collected from forms 8949, Sales and Other Dispositions of Capital Assets, which were filed electronically and found that just 807 individuals reported a transaction on Form 8949 using a property description likely related to bitcoin in 2013; in 2014, that number was just 893; and in 2015, the number fell to 802. The IRS argues that those numbers indicate that taxpayers aren't reporting or paying tax on cryptocurrency transactions.

    The takeaway? It's no secret that IRS is making reporting cryptocurrency a compliance priority. Stay ahead of the game by making sure your records and tax reporting are above-board.
    Quote Originally Posted by Torchbearer
    what works can never be discussed online. there is only one language the government understands, and until the people start speaking it by the magazine full... things will remain the same.
    Hear/buy my music here "government is the enemy of liberty"-RPEphesians 6:12 (KJV)//I sell stuff here go buy nao!



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  3. #2

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    No advantage. The IRS issued a tax rule, so let's all pack up and go home folks.

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    Gold and silver coins, paid for in cash, under $10,000 increments FTW.

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    Unless you use coinbase, you are good. I get that you don't like coinbase, but this is a confusing thread. The government has no idea how much Bitcoin you have.
    Lifetime member of more than 1 national gun organization and the New Hampshire Liberty Alliance. Part of Young Americans for Liberty and Campaign for Liberty. Free State Project participant and multi-year Free Talk Live AMPlifier.

  6. #5

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    Quote Originally Posted by heavenlyboy34 View Post
    Now that BTC is a taxable asset, what's the advantage of it?
    It has always been a taxable asset; the guidance was given just to make sure you knew exactly how much they expect to steal from you.

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    This sounds like a political sound bite - bitcoin can only be used on the dark web to avoid taxes and buy drugs!
    “…let us teach them that all who draw breath are of equal worth, and that those who seek to press heel upon the throat of liberty, will fall to the cry of FREEDOM!!!” – Spartacus, War of the Damned

    BTC: 1AFbCLYU3G1dkbsSJnk3spWeEwpqYVC2Pq

  8. #7

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    Gold and silver are taxable assets, what is the advantage
    "He's talkin' to his gut like it's a person!!" -me
    "dumpster diving isn't professional." - angelatc


    "Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes. But let it not be said that we did nothing." - Ron Paul

    "Paul said "the wave of the future" is a coalition of anti-authoritarian progressive Democrats and libertarian Republicans in Congress opposed to domestic surveillance, opposed to starting new wars and in favor of ending the so-called War on Drugs."

  9. #8

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    Quote Originally Posted by specsaregood View Post
    It has always been a taxable asset; the guidance was given just to make sure you knew exactly how much they expect to steal from you.
    ok thnx
    Quote Originally Posted by Torchbearer
    what works can never be discussed online. there is only one language the government understands, and until the people start speaking it by the magazine full... things will remain the same.
    Hear/buy my music here "government is the enemy of liberty"-RPEphesians 6:12 (KJV)//I sell stuff here go buy nao!

  10. #9

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    Quote Originally Posted by dannno View Post
    Gold and silver are taxable assets, what is the advantage
    Those aren't really practical as currency like BTC is ATM, so not really comparable.
    Quote Originally Posted by Torchbearer
    what works can never be discussed online. there is only one language the government understands, and until the people start speaking it by the magazine full... things will remain the same.
    Hear/buy my music here "government is the enemy of liberty"-RPEphesians 6:12 (KJV)//I sell stuff here go buy nao!

  11. #10

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    Quote Originally Posted by Keith and stuff View Post
    Unless you use coinbase, you are good. I get that you don't like coinbase, but this is a confusing thread. The government has no idea how much Bitcoin you have.
    Nah, I'm a BTC n00b. I'm still kinda learning about it myself.
    Quote Originally Posted by Torchbearer
    what works can never be discussed online. there is only one language the government understands, and until the people start speaking it by the magazine full... things will remain the same.
    Hear/buy my music here "government is the enemy of liberty"-RPEphesians 6:12 (KJV)//I sell stuff here go buy nao!

  12. #11

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    Quote Originally Posted by Keith and stuff View Post
    Unless you use coinbase, you are good. I get that you don't like coinbase, but this is a confusing thread. The government has no idea how much Bitcoin you have.
    For now maybe, just because coinbase is the largest, other places will fold soon enough. Unless you mine it, or jump through a bunch of hoops they can find out, especially if you actually use it. It is all public record. Using it to avoid taxes seems to me, to be one of the worst reasons to use it. I'd wager there are braniacs at the IRS right now working on AI programs to troll the blockchain and identify tax-cheats.

  13. #12

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    I don't know if anyone uses Bitcoin for that reason. People concerned about that could use Bitcoin for that reason with ease, though. Still, they might be more likely to use more privacy friendly such as Dash or ZCash.
    Lifetime member of more than 1 national gun organization and the New Hampshire Liberty Alliance. Part of Young Americans for Liberty and Campaign for Liberty. Free State Project participant and multi-year Free Talk Live AMPlifier.

  14. #13

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    Quote Originally Posted by Keith and stuff View Post
    I don't know if anyone uses Bitcoin for that reason. People concerned about that could use Bitcoin for that reason with ease, though. Still, they might be more likely to use more privacy friendly such as Dash or ZCash.
    Or Cardano or Monero or Spectrecoin or any other privacy coins
    “…I believe that at this point in history, the greatest danger to our freedom and way of life comes from the reasonable fear of omniscient State powers kept in check by nothing more than policy documents.”

  15. #14

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    Quote Originally Posted by Keith and stuff View Post
    Unless you use coinbase, you are good. I get that you don't like coinbase, but this is a confusing thread. The government has no idea how much Bitcoin you have.
    They know when you withdraw for fiat. In the US it is going to be a KYC exchange like Coinbase if you want USD. Otherwise how would you end up with fiat that you can use to buy anything? (since no one is really taking BTC now because of the volatility and fees)

  16. #15

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    Quote Originally Posted by dannno View Post
    Gold and silver are taxable assets, what is the advantage
    Coins are not taxable here .

  17. #16

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    Quote Originally Posted by oyarde View Post
    Coins are not taxable here .
    They are at the federal level.

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    Quote Originally Posted by specsaregood View Post
    They are at the federal level.
    Well , yes , but not at the state or county and there is no reporting. You can also purchase firearms from individuals with no reporting .

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    So , if I sell some bitcoin and the IRS knows it , that is different than me selling silver dollars or 1/4 oz gold pc.'s and the IRS does not know it .

  20. #19

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    Maybe Rand can convince Trump to abolish the IRS next.
    "He's talkin' to his gut like it's a person!!" -me
    "dumpster diving isn't professional." - angelatc


    "Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes. But let it not be said that we did nothing." - Ron Paul

    "Paul said "the wave of the future" is a coalition of anti-authoritarian progressive Democrats and libertarian Republicans in Congress opposed to domestic surveillance, opposed to starting new wars and in favor of ending the so-called War on Drugs."

  21. #20

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    Quote Originally Posted by oyarde View Post
    So , if I sell some bitcoin and the IRS knows it , that is different than me selling silver dollars or 1/4 oz gold pc.'s and the IRS does not know it .
    just cuz they don't know it doesn't mean its not taxable though.

  22. #21

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    Quote Originally Posted by specsaregood View Post
    just cuz they don't know it doesn't mean its not taxable though.
    Article One Section Two says I do not need to. LOL

  23. #22

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    Quote Originally Posted by heavenlyboy34 View Post
    Those aren't really practical as currency like BTC is ATM, so not really comparable.
    BTC isn't practical as currency either.

    It's only being used for speculation.

  24. #23

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    Quote Originally Posted by kahless View Post
    They know when you withdraw for fiat. In the US it is going to be a KYC exchange like Coinbase if you want USD. Otherwise how would you end up with fiat that you can use to buy anything? (since no one is really taking BTC now because of the volatility and fees)
    1,000s of places in the U.S. either directly take Bitcoin (most common per capita in New Hampshire) or indirectly do via gift cards or credit cards. If you live in an area where 1,000s of people use crypto, it is pretty easy to exchange for money or a car or rent or house. You must not have ever been to New Hampshire Just attend your local weekly Bitcoin meet up and ask people.
    Lifetime member of more than 1 national gun organization and the New Hampshire Liberty Alliance. Part of Young Americans for Liberty and Campaign for Liberty. Free State Project participant and multi-year Free Talk Live AMPlifier.

  25. #24

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    Quote Originally Posted by r3volution 3.0 View Post
    BTC isn't practical as currency either.

    It's only being used for speculation.
    Quote Originally Posted by Keith and stuff View Post
    1,000s of places in the U.S. either directly take Bitcoin (most common per capita in New Hampshire) or indirectly do via gift cards or credit cards. If you live in an area where 1,000s of people use crypto, it is pretty easy to exchange for money or a car or rent or house. You must not have ever been to New Hampshire Just attend your local weekly Bitcoin meet up and ask people.
    "He's talkin' to his gut like it's a person!!" -me
    "dumpster diving isn't professional." - angelatc


    "Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes. But let it not be said that we did nothing." - Ron Paul

    "Paul said "the wave of the future" is a coalition of anti-authoritarian progressive Democrats and libertarian Republicans in Congress opposed to domestic surveillance, opposed to starting new wars and in favor of ending the so-called War on Drugs."

  26. #25

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    Quote Originally Posted by dannno View Post
    Maybe Rand can convince Trump to abolish the IRS next.
    Only after I get my wall , ok
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  27. #26

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    Today's average transaction fee: $28.62

  28. #27

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    Quote Originally Posted by dannno View Post
    Gold and silver are taxable assets, what is the advantage
    There are not ten go-jillion terabytes of big brother tracking my silver.

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    Quote Originally Posted by r3volution 3.0 View Post
    Today's average transaction fee: $28.62
    About the same as a local bank charges if you bounce a check or cancel a check . Pretty high.

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    It's a whole lot easier to move $10 million in bitcoin across borders than it is to move $10 million in cash, perhaps even 10000 in cash.

  31. #30

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    Quote Originally Posted by gaazn View Post
    It's a whole lot easier to move $10 million in bitcoin across borders than it is to move $10 million in cash, perhaps even 10000 in cash.
    That a problem you have often? moving 10million across borders? are you the secret Ron paul supporting billionaire?

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