Community Discussions
Explore the latest discussions and community conversations related to this domain.
Where to buy and sell crypto
Main Post:
Tell me guys, what are the best exchange to buy and sell some crypto with lower fees, I've some in stock, and I want to sell but need to know where.. What do you suggest me?
Top Comment:
Coinbase vs Coinbase Pro vs Cash App
All these companies are insured and very easy to setup and verify with great UX. Due to its simplicity Cash App is a little easier to use out of the 3. All these methods require AML/KYC verification, cash app delays this until you withdraw the BTC.
Coinbase.com
Pros-- Easier to Use than coinbase pro. Allows you to lock in a price (but have to wait ~1 week) for BTC to be released which is helpful during a bull market.
Cons
Coinbase has upset some of the Bitcoin community for supporting scams and insider trading= https://www.youtube.com/watch?v=0l1KwAZKGts, ~1 week delay on withdrawing Bitcoin, more complex to use than cash app, highest fees with 1.49 % bank transfer and 3.99% debit card fees, overcharges on withdrawal fees or onchain transactions
Pro.Coinbase.com
Pros-- Lowest fees of the 3 when you use a buy limit order = 0.15%, unlike coinbase pays for your onchain withdrawal fee(But the week delay(~2 days SEPA in EU) on fiat arriving preventing buying can make you lose BTC unlike the other 2)
Cons
Coinbase has upset some of the Bitcoin community for supporting scams and insider trading= https://www.youtube.com/watch?v=0l1KwAZKGts, ~1 week delay(~2 days SEPA in EU) on depositing fiat with bank transfers before you can buy BTC, most complex to use of all 3
Square Cash App
https://cash.app/help/us/en-us/1016-bitcoin
https://itunes.apple.com/us/app/square-cash/id711923939?mt=8
Pros-- Easiest to use of the 3, Best alignment with Bitcoin politically, Allows you to lock in the price immediately and withdraw quickly(once verified), No fees to buy Bitcoin or withdraw bitcoin
Cons-- Only available in USA, No way to send BTC to cash app to to sell thus once you withdraw you have to sell elsewhere, despite having no fees their spread is slightly wider thus making them slightly more expensive that coinbase pro typically
Here is a complex price analysis comparing cash app to Coinbase, to coinbase pro I did a while ago.
So lets assume a 100 USD as a typical transaction for most. So when I do this on cash app I get 5295.75, and on coinbase pro I get 5236 (100-0.15%) so 0.01888 btc cash app 0.01906 coinbase pro = 0.00018 BTC difference or 94 cents higher on cash app ... but also keep in mind that cash app lets you instantly purchase BTC with a deposit showing instantly where you lock in the rate like coinbase which has a 1.49% fee instead of waiting 1 week so a better comparison would be 5227 (100-1.49%) =0.01884 BTC so cash app actually has lower fees in this regards.
Thus , if you want to wait a week you can save a dollar , but also likely buy BTC at a more expensive amount in a bull market.
TL;DR
Good idea to setup an account with either "Cash app and coinbase pro" or "gemini and cash app" if you are in the USA. Unless you live outside the USA , you should never use regular coinbase due to the fees.
Use cash app during a bull market where you need to instantly lock in the price. Perhaps use coinbase pro in a Bear market where the delay won't hurt you or if you need to sell some Bitcoin.
Never store your bitcoins in a web wallet or exchange. You own 0 bitcoins if you do not control your private keys. After buying your bitcoin withdraw them to your personal wallet
If you want to buy Bitcoin without verification than -
https://www.reddit.com/r/Bitcoin/comments/b2wj6k/p2p_exchanges_eg_localbitcoins_bisq_hodlhodl/
You will pay at minimum a 7% premium to buy without ID
If you are outside the US than look into kraken or Bitstamp as well
The sale off of crypto
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Well this morning I panicked and sold what I had and came out of it with a fraction of what I started with.
I still have some left and was wondering if anyone out there who trades in crypto would be willing to teach me the ways of making money. I am not that good at it yet but believe there is still lots of money to be made.
Top Comment:
100% the opposite of you did, if you believe in what you’re invested in, a pullback shouldn’t matter at all
Did I ruin my life by trading crypto?
Main Post:
Apologies if this topic has been covered before or is breaking any rules. Throwaway for obvious reasons.
I feel like I ruined my life by dabbling into cryptos as a clueless college kid.
I first caught wind of it when a buddy of mine said he was going all in on ETH in May of last year. I said hell with it, signed up on Coinbase and threw $5000 into crypto. Mind you this is like half of my life savings, but in the grand scheme of things it's not too much to lose.
Well, I went down the rabbit hole and struck gold a few times, hitting 10x's on multiple alt coins... I brought my 5k initial all the way up to a $880k portfolio in December 2017.
Now I should have listened. I should have cashed out, yes. Once I hit $1 million I was going to... I would have been set. And then, JUST like that the market tanks going into the new year.
I didn't know anything about taxes so I never bothered to set aside anything. They really never do teach this stuff. I gambled in more than a few bad ICOs to start 2018, had some money in coins that absolutely plummeted with no chance of recovering, etc. Today my portfolio sits at $125k, a far cry from my $880k . My estimated tax liability for 2017 is about 400k (live in California).
I'm a student and I work part time making $12/hr as a retail associate at Barnes & Noble. I haven't paid any taxes or filed any returns for 2017. I wanted to but I have no idea where to begin.
Here's the 1099-K Coinbase reported this spring: https://imgur.com/a/cpPwR9u
Is my life over?
tl;dr: poor college kid invests 5k in crypto last year, ends up with 875k short term gains for 2017, lost most of it in 2018, hasn't paid taxes or filed any returns yet
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EDIT: Yes, these were crypto-to-crypto trades (i.e. Bitcoin for Ethereum, Ethereum for Litecoin). These are considered taxable events from what I understand. At no point did I ever cash out to fiat and transfer any USD into my bank accounts from these tradings.
EDIT 2 (11/2/2018): Thank you all so much for the support and advice. I realize I can't reply to all of you but I am definitely reading each and every one of your comments. I've scheduled a consultation with a tax attorney that specializes in cryptocurrency and alternative investments. I appreciate it all very much, these last few months have been mentally trying.
Top Comment: As a CPA my advice is to find a qualified CPA immediately. This is a complex and potentially dangerous position to be in and shelling out for qualified help is the best position. Also if you do owe tax, interest is going to start eating you alive if you don’t get ahead of this. Hope it works out but seriously, get a tax professional and stop wasting time trying to get free advice.
Question about FCA ban on the sale of Crypto derivitives in the UK?
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Not sure if this is entirely the right sub but BTC will probably be effected by this ban to a degree too. The FCA has recently banned the sale of Crypto derivatives from or within the UK. At the moment DeFi has really kicked off and there are a lot of up and coming tokens sold by decentralised exchanges that aim to set up crypto derivates. A lot of these new exchanges offer their own coin for governance and to pay fees etc. I work in finance (and held to high profession standards) and I'm always paranoid of getting into trouble with crypto trading so I'm very careful with what I do. Will I be breaking these new rules if I personally invest in the derivative exchange currencies? I would not be actually investing in derivatives, just the currencies the platforms provide and I would not vote in any governance, I would just keep the currencies in a wallet somewhere while they hopefully appreciate in value. It would be great to hear anyone's opinion on this? FCA ban: https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers
Thanks!
Top Comment:
The ban is for stock brokers selling derivatives that are based on crypto, so that's ETF's and the likes that don't directly hold the asset.You can personally buy whatever you want. However there will be some products (like the ETF that could be stuck in your pension) that a stock broker can no longer sell you.
You can vote in governance, buy De-Fi assets and whatever else. You're allowed to do it.
flash sale!!
Main Post: flash sale!!
Top Comment:
buy high and sell low
Buy high sell low strategy
Main Post: Buy high sell low strategy
Top Comment: You can always refer to this handy dandy chart of investor psychology.
I am a tax attorney, here are my answers to the most common questions about the taxation of bitcoins
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Edit: On March 25, 2014 the IRS released Notice 2014-21 addressing the taxation of bitcoins. This post was updated on March 26, 2014 to reflect the IRS's positions contained in the Notice.
Last Edit: June 2017
Introduction
I've noticed a significant amount of uncertainty around here about the taxation of bitcoins. In effort to provide some guidance , I've compiled some of the most common questions I've seen and tried to provide straight-forward, easy to understand answers. I am a tax attorney, but there is so much uncertainty surrounding bitcoins that I expect some people to disagree with one or more of my conclusions. If you have a contradictory opinion, please share it. We would all benefit from an educated discussion of this issue.
Keep in mind this post is intended for a layman audience. If you are a tax professional or want a detailed examination of this topic, you find this post lacking. Please don't nit pick this post with technicalities or narrow exceptions, I purposely excluded such nuances for the sake of readability.
I should note that this post does not address aggressive tax planning strategies. Such strategies are a lot of fun to discuss, but they do not belong in this type of post. If you are interested in such strategies, perhaps we can make a follow-up post on another day.
Legal Disclaimer
This post was created for general guidance on matters of interest only, and does not constitute legal advice. You should not act upon the information contained in this publication without obtaining specific advice from a tax professional. No representation or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this post, and I do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this post or for any decision based on it.
CIRCULAR 230 DISCLOSURE To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
THE AUTHOR Tyson P. Cross is a tax attorney licensed in California and Nevada. He represents individuals and businesses with tax issues related to Bitcoin and other cryptocurrencies, including tax return preparation, tax planning, and FinCEN compliance. He can be reached at Tel: +1 775-376-5690 or by visiting www.BitcoinTaxSolutions.com.
Topic 1: Realization
#1: Are gains on Bitcoins taxable?
Yes. This is one of the only unequivocal answers you'll find in this post. All income is taxable, regardless of source or form, unless the Internal Revenue Code specifically states otherwise. Bitcoins present a lot of interesting tax questions, but whether gains are taxable is not one of them.
#2: When do my gains become taxable?*
Gains are taxable in the year they are realized. Realization occurs when you exchange bitcoins for any type of other property; such as cash, merchandise, or services. This includes everything from haircuts to yachts. Essentially, any transaction involving Bitcoin is a realization event and triggers taxable gain. Note: IRS Notice 2014-21 expressly confirms this treatment.
Because I've seen a lot of misinformation on this point, I want to make myself perfectly clear. If you own bitcoins that have appreciated in value, you cannot use them to purchase goods or services without realizing gain. Such a purchase is an accession to wealth. It puts you in the same position as if you had first sold the bitcoins for cash and then used the proceeds to purchase the goods or services directly. Yet, one would be a taxable transaction while the other would not? The IRS would never tolerate such a blatant loophole, and neither would the courts. In fact, this exact argument has already been rejected for other types of assets. The outcome for bitcoins will be the same.
Unfortunately, this has some serious implications for the future of bitcoin. I have to question the effectiveness of bitcoin as a medium of exchange when the user has to calculate his or her tax liability on every single transaction. As the saying goes, the power to tax is the power to destroy, and this is no exception.
Note: There is a code section that might provide some relief here, but only if bitcoins are categorized as a foreign currency. Under this code section, the use of bitcoin to buy goods and services would be tax free as long as the transaction was personal (i.e. not for business or investment) and did not generate more than $200 of gain. Unfortunately, the IRS ruled in Notice 2014-21 that bitcoin is not a currency for tax purposes. So, this code section is inapplicable unless the IRS changes its position sometime in the future.
#3: What if I sell my bitcoins but do not withdraw the proceeds from the exchange?
It doesn't matter, your gains were realized the moment you sold them. It is irrelevant whether the proceeds from the sale are kept in your bank account or your exchange account, you still have a realized gain for tax purposes.
#4: What if I exchange my bitcoins for altcoins? Is this a like-kind exchange?
This is a fair question and implicates what is known as a "like-kind exchange." Under Section 1031 of the tax code, exchanges of like-kind property do not trigger recognition of capital gains, and therefore are tax-free. Whether or not bitcoins/altoins are like-kind is uncertain to say the least. As intangible property, bitcoins/altcoins would qualify as like-kind only if they have the same rights, characteristics, and obligations. This is a very difficult test to apply to virtual currency.
Additionally, if characterized as a foreign currency, bitcoins would be automatically barred from like-kind treatment anyways. Thus, there are two significant legal hurdles that must be overcome before bitcoin and altcoins can qualify as for like-kind status. Although nothing is for certain when it comes to bitcoins, I'm fairly confident that the IRS would not agree with like-kind treatment and you run the risk of having the unrecognized gains added to your tax return (with penalties and interest added). Thus, I would not suggest that you try to qualify such a transaction as a like kind exchange until further guidance on this issue is given by the IRS or you obtain a tax opinion letter from an attorney concluding that your treatment of bitcoins/altcoins as like-kind appropriate.
Lastly, keep in mind that like-kind exchanges must still be reported on your tax return (using Form 8824).
edit: IRS Notice 2014-21 concluded that bitcoins are not a foreign currency, therefore it is possible that bitcoin can qualify for like-kind treatment if the "rights and characteristics" test is met.
#5: So how can I avoid realizing gains on my bitcoins?
The only way to avoid realization is to hold your bitcoins without selling or exchanging them. If you were hoping for a different answer, I'm sorry. Whether you decide to actually report you realized gains is of course a different matter, but as far as the law is concerned, you have realized gains upon any sale or exchange of your bitcoins.
#6: How does the IRS know about my gains? *
The IRS only knows what it is told. This means that it has no knowledge of your bitcoin transactions unless someone tells them. Here are four way that can happen (others may exist).
First, your bitcoin exchange or payment processor may report your transactions to the IRS. This would be done with a Form 1099, which you’ve probably encountered at one time or another in a different context. However, it does not appear that bitcoin transactions are currently subject to the 1099 reporting requirements (although that will probably change). Thus, unless they voluntarily file a 1099 against you, it is unlikely that the IRS will receive a report of your bitcoin transactions. Note that they would need your social security number to file a 1099 in your name. Edit: IRS Notice 2014-21 clarifies that "payment settlors" who convert bitcoin payments to cash for merchants will have to file 1099s. IF you are not a merchant, than this does not impact you.
Second, your bank or bitcoin exchange might file a Suspicious Activity Report ("SAR"). US banks and bitcoin exchanges are required to file SARs for wire transfers that are “suspicious” and larger than $5,000 ($2,000 in the case of bitcoin exchanges). The meaning of “suspicious” is very vague and highly discretionary. Out of an abundance of caution, many banks automatically treat all international transfer as “suspicious.” So, if you’ve sent or received a wire transfer of more than $5,000 to/from an international bitcoin exchange like Mt. Gox or BTC-e, you can be pretty sure that your bank has already filed a SAR against you (although they are prohibited from telling you if they did, so you'll never know for sure). The larger and/or more frequent you SAR filings, the more likely they will become a legitimate red flag and trigger an investigation. Although FinCEN is generally concerned with money laundering activities, the IRS does have access to FinCEN filings and it is common for IRS special agents to participate in FinCEN investigations.
Third, someone can rat you out to the IRS, which happens far more often than you might think. The simple fact is that people get jealous, and if they've heard that you've made lots of tax free money with bitcoin, they might get tempted to make sure justice is served. There's also that nice reward the IRS will pay them for snitching.
Fourth, you voluntarily and accurately report your gains on your tax return. That might sound ridiculous to some people given the inherent anonymity of bitcoin, but there are some very rich people in prison right now who used to think the same thing about their Swiss bank accounts. The fact is that penalties for failing to report income are significant. This includes the possibility of criminal prosecution. You can also add to this the additional penalties for failing to report foreign financial accounts (discussed below), which can be even more severe.
At the end of the day, you have a decision to make. You can comply with the law and pay taxes just like everyone else, which is admittedly unpleasant. Alternatively, you can violate the law and hope that you don't get caught. Maybe you will, maybe you won't. If you are caught, though, the amount of money you'll be forced to pay in penalties and interest will drastically exceed the amount you saved. That's not to mention the possibility of a felony criminal conviction and a prolonged stay at Club Fed. Personally, I have seen the havoc wreaked on people's lives by tax crimes and I would never want to be in their shoes. Neither should you.
TL; DR: Gains on bitcoins are taxable income. They become taxable when you sell bitcoins for cash or exchange them for goods or services. The IRS does not receive any direct information regarding your bitcoin transactions, but it has other ways of finding out. The monetary and criminal penalties for failing to report gains are not worth the taxes you'd save.
Continued Below Edit: This post has been edited since it was first posted. An asterisk was placed next to the questions that underwent more than just grammatical changes. Additionally, questions related to losses were inadvertently omitted from the first post, but have since been added back.
Top Comment:
.......Continued from Post Above.....
Topic 2: Recognition
#7: How do I calculate my gain or loss? * Gain or loss is calculated first on each bitcoin transaction, then on an aggregate basis by combining all your gains and losses to produce a net figure. Your tax preparation software will automatically perform these calculations, so the actual mechanics aren't really necessary for you to understand. However, you'll have to know the basics in order to enter the correct information into the software.
Basically, gain or loss is computed by taking the sales price of each bitcoin and subtracting its cost. The technical terms are “amount realized” and “basis.” Although simple in concept, determining amount realized and basis can be quite complex, as we’ll see below.
Edit: A good tool for calculating your gain or loss in bitcoin transactions is available for free at www.bitcointaxes.info.
#8: What is my Basis?
Generally, basis is equal to cost. So, if you purchase 1 BTC for $500, then your basis is $500. You can also add to this amount any acquisition costs like broker commissions or wire transfer fees. So, let's assume a 1% fee and a $5 wire transfer fee. This would mean your basis is $500 + $5 + $5 = $510.00. If you later sell that bitcoin for $900, your gain would be [$900] - [$510] = [$390].
#9: How do I determine my basis in each bitcoin? *
If you’ve acquired bitcoins at different times and at different prices, determining basis can be quite complex. This is because bitcoins are fungible. Once a bitcoin is purchased, it becomes indistinguishable from the other bitcoins stored in the same wallet or account. In a subsequent sale or exchange, there is no way to trace the cost or acquisition date of the bitcoin being transferred out.
Contrary to what you might have heard, it is not acceptable to arbitrarily choose the bitcoin with the highest cost or most preferable tax impact. The IRS requires you to use a system with rules that will produce a reasonable and consistent result. The default system (and the one generally preferred by the IRS) is to assume that your bitcoins are sold in the order they were acquired. Thus, the first bitcoin you purchase is assumed to be first bitcoin you sell. This is called the FIFO method ("First in, First Out").
There are some other methods available, such as LIFO ("Last In, First Out") and Average Cost Basis, but it’s not clear if bitcoins are eligible for these alternatives. So, I would caution against using any system other than FIFO without guidance from a tax advisor or instructions from the IRS. Note: If bitcoins are classified as a foreign currency, then it becomes possible to use any method you want, as long as the chosen method is reasonable, you use it year-to-year, and it does not always give you the bitcoin with the highest cost available. As discussed below, it is still uncertain whether bitcoins can qualify as a foreign currency, so again I must urge caution in deciding to take this position. Edit: IRS Notice 2014-21 clarified that bitcoins are not a foreign currency for income tax purposes.
I'll note that it's theoretically possible to avoid this problem altogether if you keep each and every bitcoin purchase in separate wallets or accounts. This would allow you to trace the actual cost of each bitcoin you later sell or exchange, alleviating the need for the FIFO (or alternative) method.
Either way, determining cost will require some detailed record keeping. I will discuss record keeping in more detail below, but remember that the burden to prove basis is on you. The IRS will not give you the benefit of the doubt here. If you cannot prove the cost of each bitcoin, they will assume it was $0. Obviously you don't want that to happen, so keep good records of your bitcoin purchases.
#10: What if I mined my bitcoins, what is my basis then?
IRS Notice 2014-21 clarifies the treatment for bitcoin miners. Specifically, miners must recognize income for each bitcoin mined during the taxable year. The amount of income is equal to the market price of bitcoin on the day it is awarded on the blockchain. This also becomes the miner's basis in the bitcoin going forward and will be used to calculate gain/loss in the future when the bitcoin is sold.
For example, assume you mine 1 bitcoin in 2013. On the day it was mined, the market price of bitcoin was $1,000. You have $1,000 of taxable income in 2013. Going forward, your basis in the bitcoin is $1,000. If you later sell the bitcoin for $1,200, you have a taxable gain of $1,200 - $1,000 = $200. See below for the character of this gain.
You mining expenses, such as electricity, would not be included into basis. Instead, they would be deductible in the taxable year as an expense. Miners will need to determine if their mining activity rises to the level of a trade or business, which is a highly factual determination.
This is a very difficult question to answer with any degree of certainty. The problem is that bitcoin mining is a completely unique activity that yields an even more unique product. To reach an answer, one must resolve some difficult tax issues. Namely, what is bitcoin mining and how do we classify the bitcoins it produces?
Unfortunately, addressing these two issues would be a lengthy and detailed post in itself, so I cannot fully address them here. Suffice it to say that bitcoin miners will need a very competent tax advisor to make sure their gains are properly reported.
Not to leave you without any guidance whatsoever, the answer will most likely depend on the size and scope of your mining activity. Large scale miners should probably treat themselves as a manufacturing business, and the bitcoins they produce as inventory held for sale to customers. Such bitcoin miners would not determine their gains in the same manner as normal investors. They would compute income at the end of the year by figuring their total sales and then subtracting "cost of goods sold." The latter would take into account the cost of producing bitcoins, such as electricity. Other expenses, like depreciation on the mining rig, would presumably be deductible as an ordinary business expenses. Obviously this implicates some complex accounting rules that are far beyond this post. A tax advisor with some knowledge of these rules would be needed to accurately determine your tax liability.
Smaller mining operations can probably get away with treating their mining as an "activity for the production of income," as opposed to a manufacturing business. In such a case, they would follow the same rules for determining gain or loss as normal investors. I suspect their basis in this case would be determined by allocating their mining costs on a pro rata basis, assuming they can reasonably track and allocate such expenses (like electricity). The safest and most conservative approach, on the other hand, would be to use a basis of zero. Depreciation and other indirect expenses would likely be deductible as an itemized expense, similar to a general investor (see below).
I must emphasize that neither of these treatments is a perfect fit. I expect different tax advisors to reach different conclusions on the correct treatment. The goal in any case is to use the best method of matching income to expenses, whatever that is. Presumably the IRS will respect your chosen method as long as you can convincingly argue that it is the best at accomplishing this goal.
#11: What if I received my bitcoins as payment, what is my basis then?
If you sell goods or services and accept bitcoin as payment, your basis in those bitcoins is equal their fair market value at the time they were received. Generally, this is determined by reference to the average market price on that day. Thus, if you wrote a software program for someone and received 1 BTC as payment on November 1st, your basis in those bitcoins is equal to the average price of 1 BTC on that day.
The choice of which exchange to use for this purpose (e.g. Mt. Gox, Bitstamp, etc.) is up to you. Whichever exchange you choose, you should have a reasonable explanation for your choice. You should also stick with that choice when computing your gains in the future. Arbitrarily picking exchange prices that best suit your tax interests will not be acceptable to the IRS in a subsequent audit.
#12: What if I received my bitcoins as a gift, what is my basis then? * It depends. Generally, you inherit the basis of anything given to you as a gift. This means you would take the same basis as the friend who gave you the bitcoins. However, an important exception applies if the friend’s basis was more than the market value of the bitcoins at the time of the gift (i.e. the bitcoins had a built in loss).
In that case, you would wait to determine your basis until you sell or exchange the gifted bitcoins in the future. When the time comes, you would use the following rules:
- First, calculate your gain/loss using your friend’s basis.
- If this results in a gain, then the default rule applies and nothing changes.
- If this results in a loss, however, then you do not inherit your friend’s basis. Instead, you must use the market value of the bitcoins on the date of the gift and recalculate your gains/loss.
- After recalculating, you must check if you still have a loss. If yes, then proceed with using the market value as your basis. However, if the recalculation results in a gain, then the tax law says to ignore the gain and report nothing. To be clear, you have no gain or loss in this situation.
Now that last point might confuse many readers, so here is an example to demonstrate. Assume you received bitcoins worth $750 at the time of the gift. Your friend’s basis was $1000. This triggers the exception discussed above and you have to wait until you sell the bitcoins in the future to determine your basis. Consider three alternative sale prices:
- Sale Price = $1200. Using your friend’s basis of $1000, this creates a gain of $200. Therefore, you inherit your friend’s basis and have a realized gain of $200. No problem.
- Sales Price = $600. Using your friend’s basis of $1000, this creates a loss of $400. Therefore, you cannot inherit your friend’s basis. Instead, you must use the value of the bitcoins on the date of the gift, which was $750. Therefore, you have a loss of $150. No Problem.
- Sales Price of $900. Using your friend’s basis of $1000, this creates a loss of $100. Therefore, you cannot use your friend’s basis. Instead, you must recalculate your gain/loss using the value of bitcoin on the date of the gift. Now you have a gain of $150. Therefore, you disregard the sale and have no gain or loss to report.
This is a perplexing tax treatment. It might help to think of this rule as preventing your friend from shifting bitcoin losses to your tax return. This is why you get to inherit his basis only if it would create a gain on the subsequent sale. If not, then the amount of his loss is extinguished and you get to recognize only the amount of loss that accrued after the gift occurred. This also explains why you would have no gain or loss if the market price of bitcoin has increased since the time of the gift but is still less than your friend’s original basis.
In any case, when receiving bitcoins as a gift, make sure to ask the person what his or her basis was in the bitcoin, as well as their acquisition date (which you always inherit). Lastly, write down the date of the gift and the market price of bitcoins on that day.
#12: #13: How do I determine Amount Realized (i.e. Sales Price)?
This depends on the transaction and if you sold bitcoins for cash or exchanged them for goods/services.
In the case of a sale, amount realized is equal to sales price, less any selling costs you incur in the transaction (like commissions or wire transfer fees). So, if you sell a bitcoin for $900 and incur a 1% transaction fee, your amount realized is $900 - $9 = $891.00.
If you exchanged bitcoins for goods or services (instead of selling them), then amount realized is more complicated. This is essentially a barter transaction, where the default rule is to use the fair market value of the goods or services received in the exchange. For example, if you purchased a laptop on November 29th with bitcoins, your amount realized would be equal to the Fair Market Value of the laptop on that date. The easiest way to determine Fair Market Value is by reference to the sales price, although an alternative method can be used if yields a more accurate value.
Presumably, the sales price of most goods or services will be denominated in dollars (even though payment is made in bitcoin). Thus, if the laptop's price was $1,500, you can safely assume that it's FMV was also $1,500. If the sales price is denominated in bitcoin (instead of dollars), you'll have to convert it into dollars using the average exchange price on that day. As mentioned above, the choice of which exchange to use for this purpose (e.g. Mt. Gox, Bitstamp, etc.) is up to you. The most conservative option would be to use the price from the exchange that you purchased the bitcoin in the first place. Whichever exchange you choose, you should have a reasonable explanation for your choice. You should also stick with that choice when computing your gains in the future. Arbitrarily picking exchange prices that best suit your tax interests will not be acceptable to the IRS in a subsequent audit.
TL; DR: Gain is determined by subtracting basis from amount realized. Basis is generally equal to cost, but special rules must be followed (such as FIFO) if your bitcoins are mixed together. Amount realized is generally equal to sales price. If goods or property were received instead of cash, then amount realized is equal to the FMV of the property received.
Worth time and effort to recalculate CGT (for crypto)?
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Hi all,
I was being stupid here, so now I want to seek advice.
After thinking that I have calculated my crypto taxes for 2017, I have paid this off today with my house deposit and savings for the year. (i did not make any substantial profit from start to today. In reality I merely exchanged money for future losses if I ever will use them)
However, after paying this off, I have just realised that there was something called the Bed and Breakfast rule, whereby if you sell a crypto and then rebought it back within 30 days, that sold crypto should be matched with what was bought. There is also the same day rule as well. This is crazy as I did not incorporate this into my calculations. All my alt-coin investing went through Bitcoin, which means that if I was to try and incorporate this into my calculations, that would take a huge amount of time (maybe days or weeks) because bitcoin can go in decimals, and not whole numbers and I have a fair amount of trades to work through.
This will essentially save me some money I think, as it keeps the gains unrealised.
Should I have to run back to excel and redo this?
If I do spend the time and energy doing this and then resubmit back to HMRC, how will they refund me?
Top Comment:
get the data, pop it in here, all the hard work done for you
http://www.cgtcalculator.com/
You can save a ton of money on taxes - Everyone should sell out of their crypto right now, then immediately buy it back
Main Post:
Wash sale rules don't apply to cryptocurrency as of now. If you took huge losses this year, you should sell out of all of your positions right now, then immediately buy back in. This way you harvest that loss and can save a tonnnn of money on your tax bill (in the US). I am not promoting any product by doing this. I just want to let people know... especially those who have huge losses.
Top Comment:
There are too many tax shills and fear mongers on crypto social media.
I pay my taxes because I'm happy with my government's service.
If I lived someplace like Venezuela where the tax revenue is misused, I would follow this advice:
SilverHoardCrypto God | CC: 268 QC 8 points 11 days ago
Trade on an exchange that doesn't require KYC, like Binance. You can get by just fine without verification. I'm not saying don't pay taxes, but everyone realizes that the current laws are idiotic and not built with cryptocurrencies in mind. Do you really want to be the guy who paid outrageous taxes to only have those laws change the next year to something more specific and reasonable?
Personally I do intend on paying taxes, but only when I cash out. And on the entire amount. Not on individual trades from one coin to the other. That's ridiculous. The only thing that will be done on a KYC exchange like Coinbase is fiat on and off ramping. Other than that, there's nothing anywhere linking me to any of those trades. Throwaway emails, non-KYC exchanges, anonymous wallets, VPN usage, and for good measure I swap things through XMR. Previously through something like Shapeshift but I'm gonna have to find an alternative now that they implemented KYC
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It's not smart to keep all of your money in one coin.
Monero will always give you the advantage of acquiring most of the tokens you want anonymously through xmr.to and morphtoken.
Yes, you will have to sell on localmonero, localbitcoins, Paxful, hodl hodl, Bisq, or coinatmradar in microtransactions and you probably won't be able to cash out 1M without paying a penny in taxes.
Bottom line is, this situation could have been much MUCH better given the OP had invested more in privacy-oriented coins (best is xmr imo). The goal is not 100% tax evasion (although possible), you could literally have an anonymous crypto fortune (including stablecoins to evade market volatility) and no one could link it to you.
If I were the OP I would regularly change all my earnings into XMR and back into BTC or whatever on xmr.to or Morphtoken or Shapeshift (previously because now they have KYC crap) so noone can link the trades/money to me.
Then when I'm done I could turn most of earnings to monero, buy un-taxable stuff with it, sell on localmonero, get some BTC and turn it to stablecoins on many accounts etc... I mean if you want to evade 400k in taxes you should be ready for some time consuming procedures.
Bear in mind that this isn't even the purpose of monero I'm just saying it's possible to do with it.
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deleted 0 points · 11 hours ago
I've been trading on okcoin 20x then moved to Bitmex when it opened. Never paid taxes in the great USA and been margin trading without giving up my identity for 5 years. No issues here bro. Also traded alts on Binance. Made like over 30 BTC at my peak.
When I sold I did so anonymously as well. That's the trick. Don't give up your identity.
deleted 1 point · 11 hours ago
<3 localbitcoins cash in the mail. People legit just mail you cash in the mail. Use the cash for rent (pay rent in cash ftw), food, gas, cell phone. Only thing I can't pay for in cash is my car insurance I think.
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ElectronicChronic-8 points·8 days ago
DO NOT disclose all your trades. Government doesn’t know shit about crypto. Lie your face off. They ONLY care about your fiat trades. They are not going to ask for all your wallet address to verify your coins have... That’s ALL you should disclose. We can find loopholes too, take advantage of them.
ElectronicChronic-4 points·8 days ago·edited 8 days ago
You think government will be checking your crypto-to-crypto trades that you transferred to other markets? You think they’ll know how much coin you got from forks? Don’t let the fear mongering get you. Government is out of their realm in crypto. This is our realm, and we can outsmart IRS. If you cannot see how goddamn easy it is to lie about your holdings in this space, then you’re a lost cause.. keep bending over for Uncle Sam, be my guest. People like you - law abiding citizens - are truly ruining crypto and what it stands for.
ElectronicChronic-4 points·8 days ago
Your tax money doesn’t help with shit. Get that through your head. You’re all being swindled with the false promise that you’re helping society. I’ll pay donations over taxes any day of the week.
I guarantee you IRS will have 0 clue how to track down all these trades. A shit ton of data sift, with very small number of people who have any sort of understanding. Government just knows you have a CB/Kraken/Gemini account, and they know much fiat you’ve used to buy whatever coins on those markets. To think they’ll be hiring Blockchain analysis crews for every single person is a joke. Don’t be naive.
Something to consider next year for you kiddos - move your coins often, and consider dabbling in privacy coins. Peace.
Here are dozens of articles about governments and corporations manipulating the sentiment on Reddit and other social media:
https://np.reddit.com/r/shills/comments/4kdq7n/astroturfing_information_megathread_revision_8/
Is there such a thing as a crypto wash sale?
Main Post:
If you sell a position and take the loss for tax purposes, and rebuy the same position, say a week later, is it a wash? I haven’t seen any posts on this topic so far, so was just curious for those who have filed taxes the last year.
Top Comment:
Wash sales would destroy a lot more people