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Tax-Free Bitcoin-To-Ether Trading in US to End Under GOP Plan
- sharemywin 9y agoSo, this and the SECs recent decisions are the point when the US gets left behind on the next major advancement of technology. An almost fricitionless, ubiquitous, audit-able marketplace. well, except for monero and zcash.
- tyleraldrich 9y agoDid you really think you'd be able to trade around money without being taxed?
- sharemywin 9y agoSo, what do I pay in? Does that mean every transaction in monopoly should be taxed? How about coins ERC20 tokens inside ethereum? what if I trade one crypto kittie for another? I get that buying something for USD and later selling something for USD you've made a gain.
- Rmilb 9y agoIRS considers it an asset not money.
- chollida1 9y agoProbably good news for investors long term. Bitcoin again continues to grow up and be treated as an equal to bonds, stocks, etc. If you are a holder, or HODL as the kids say, then you get the benefit of long term rates, if you are a short term trader then you pay the short term capital gains rates, just like any other currency/commodity. trade. Concrete rules will bring in more conservative money. This was the last loop hole that some people were concerned about wrt to taxes and virtual currency trading.
- nerdwaller 9y agoIt’s a double edge sword I guess, because if these are treated as securities - many exchanges will need to subscribe to a lot more regulation and start providing tax paperwork (1099s included) - requiring them to have an SSN on file, removing loads of the anonymity people may be fond of.
- matchcohnn 9y agowithout wash trades to pump up its value, what good is bitcoin for?? - bitcoin isn't usable as a transactional currency. it costs $30-40 per transaction. Plus other currencies are gaining steam, and offering other choices for people to transact - bitcoin isn't rare to be a store of value.....everyday there's a new viable cryptocurrency springing up - bitcoin isn't safer than dollar.....it can drop 90% in any day; no official entity is going to prop it up and make sure it doesn't crash. it can be banned by countries (and has been by a few) - bitcoin isn't easy than square cash or visa or wires.....it can take several weeks to send money. plus the transaction fees are high
- chollida1 9y ago> without wash trades to pump up its value, what good is bitcoin for?? Can you please explain in clear terms how a wash trade pushes up the value of bitcoin? I can see it increasing the volume but not the value.
- sremani 9y agoI do not think bitcoin has this problem because of the volume, but "painting the tape" is done to a lot of alt-coins by shark-pools.
- deleted 9y ago[deleted]
- cgmg 9y ago> bitcoin isn't rare to be a store of value.....everyday there's a new viable cryptocurrency springing up What makes bitcoin 'rare' isn't the fact that it's a cryptocurrency, just like what makes a dollar 'rare' isn't the fact that it's a piece of paper. It's the network (i.e. hash power) behind it.
- g09980 9y agoIIRC like-kind treatment was never made available, with the new tax plan or without.
- ringaroundthetx 9y ago> IIRC like-kind treatment was never made available, with the new tax plan or without. They never clarified and now they'll never have to. Like-kind treatment is given to property, with specific exemptions made by the IRS. If the IRS never made an exemption, but it did designate cryptocurrencies as property, then like-kind treatment applies. Given that cryptographic hashes are the only thing trading in any distributed ledger technology, it doesn't matter what the name plastered on the network is, it would fit existing regulations and case law around like-kind exchange. Now with the new law change from Congress, the agency or the courts will never have to deal with it if they don't challenge 2017 tax filings.
- cik2e 9y agoThere is another loophole that's just as good. Wash sale rules don't apply to crypto, yet.
- fpisfun 9y agoI don't see how it's just as good, it's good but not nearly the same
- deleted 9y ago[deleted]
- antihero 9y agoHow would they enforce this in any way at all?
- toomuchtodo 9y agoKnow Your Customer, requiring exchanges to provide the necessary data, etc.
- squaredpants 9y agoWhat about decentralised exchanges?
- toomuchtodo 9y agoTax evasion rarely works out long term.
- tomschlick 9y agoYup. Remember, it wasn't the police who got Capone, it was the IRS.
- cinquemb 9y agoSo the IRS is going to put the same amount of resources into each of the new mini - Capones as they did Capone?
- throwawaymanbot 9y agoIsnt this kind of thing against the bitcoin philosophy? I thought bitcoin was meant to be free of these sorts of issues.
- jschmitz28 9y agoIs the cost basis calculated by the US dollar value of each at the time of the exchange? Or based on the exchange rate of the two currencies? Scenario: 1. I buy 1 ETH for 1 USD when rates are 1 ETH/USD, 2 ETH/BTC. 2. I trade 1 ETH for 1 BTC when rates are 2 ETH/USD, 1 ETH/BTC. Option 1: I’ve incurred a loss, because the sale is reported as first a sale of ETH for USD, then a purchase of BTC at whatever the cost basis between BTC/USD. Option 2: I’ve incurred a gain, because I traded directly from ETH to BTC, and the relative value between ETH and BTC has gone up.
- chollida1 9y agoIt's driven off whats called your dollar cost average. So in your scenario Buy 1 ETH for say $500, your cost base is $500. If then trade the 1 ETH for bitcoin, it only depends on what ETH is worth at that moment. If 1 ETH is now worth $400, then you have a $100 loss, if ETH is worth $500 then no taxable gain or loss, if 1 ETH is wroth $600 then you owe tax on $100 of capital gains. What bitcoin is worth is irrelevant until you sell the bitcoin. EDIT Just assume that every transaction between crypto currencies has an implicit, convert to USD first and then buy the other Crypto with USD. Also, There is always a USD price, what the price is, is a bit of an art, but its what ever price you can convince the IRS of.
- jschmitz28 9y agoThanks - given your comment it sounds like option 1 mentioned above where gains are calculated based off of USD value even if the currencies are traded directly. But as another commenter mentioned, I don’t see how this can work because the trade doesn’t involve USD at all, and the exchange rate for USD/ETH may vary widely between exchanges. And for more niche cryptocurrencies, a USD value may not even exist because there are no trades between USD and that currency.
- teawrecks 9y agoAt the end of the day, you're going to pay your taxes in USD. So yeah, the USD value does matter.
- reaperducer 9y agoSo... Bitcoin people complain that it's not taken seriously as a real currency. Then when it is, with all the associated regulatory and tax ramifications, they complain about that, too.
- colordrops 9y agoWho complaining? The "Bitcoin people"?
- anonyx69 9y agoStill not being taken seriously as a "real currency" - it is being taken seriously as "real property" though.
- KirinDave 9y agoA lot of bad things can be said about bitcoin as a technolgy and its community of participants. A lot of bad things. None of these things are present in your post. Most bitcoin folks are happy it's not "real currency", it's not clear what you even mean, there are already taxes and whatever "regulation" means, the SEC is starting to single out individuals for punishment.
- KasianFranks 9y agoIf you are a U.S. citizen or if you don't do the double Irish like Google and Apple. Typical misplaced understanding of crypto.
- deleted 9y ago[deleted]
- xur17 9y agoMost tax advisers I spoke with recommended against treating this as an in-kind exchange anyways.
- gojomo 9y agoBut if this bill means that the IRS will only reject like-kind starting January 1, 2018, then those advisors (and their clients) made an expensive error-on-the-side-of-caution, didn't they? Perhaps even to the extent that people who followed that advice might dare to amend their 2016-and-earlier returns? This year, the case for 'in-kind' exchange might be best for Bitcoin and its baby Bitcoins (Bitcoin Cash and Bitcoin Gold) – the functional differences are initially miniscule, though likely to grow in time.
- ultraluminous 9y agoThe in-kind rule is not going to apply to any kind of crypto. TFA states it's now formally restricted to domestic real-estate.
- gojomo 9y agoTFA is explicit that it is reporting on a legislative change (expected but not yet signed into law) that'd be effective January 1, 2018. It strongly implies a more-favorable treatment is being lost, and that more-favorable treatment was still available for ty2016, and is still available 'now', and through December 31, 2017.
- gamblor956 9y agoNo, TFA is saying that a potential method of characterizing bitcoin exchanges is being explicitly eliminated. It never says that this method was acceptable. Unlike other forms of law, tax law can be retroactive (see, e.g., the loss-harboring tax shelter scandal). You could always play with fire and try this for your 2016 and 2017 transactions, but if you get audited, expect penalties.
- VeronicaJJ123 9y agoThis is how most tax advisors were treating it any ways.
- kindfellow92 9y agoThis was already the case... FUD https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf
- Akujin 9y agoThis is so ridiculously complicated to the point of next to impossible for a normal person to calculate. Lots of non bitcoin crypto currencies can't even be properly quantified in USD. When there's no exchange that trades said crypto in USD you're then forced to calculate the value based on it's value of bitcoin which can swing wildly from one exchange to another. There's no way to verify any number you put down after the fact as a lot of these exchanges aren't based in the US. Have no reporting mechanism. And is generally a cluster fuck. So yea that IRS agent doing an audit will in many cases literally have very little to work with. The only thing they will see is you buying bitcoin for X dollars and selling some random crypto 50 trades later for Y dollars. You'd still obviously pay tax on the overall but good luck trying to pin down all the trades in the middle.
- thefreeman 9y agoAre exchanges going to provide us with necessary tax documents in order to pay these taxes? So far all I've found is a terrible csv export that shows the date and amount of purchases of various crypto currencies, but no information at all on the current price at the time of purchase or the amount sold for (this is on Coinbase). I'm starting to get a bit concerned.
- fataliss 9y agoTechnically there are graphs that recorded the history of price at any point in time. So you could fill your taxes even with that poor csv Coinbase gives. Now 100% aboard with you, exchanges need to get on it and deliver us some workable tax documents. It's already enough of a pain as it is now, no need to make my tax season any worse!
- xur17 9y agoI'm planning to use either cointracking.info or bitcoin.tax - they accept these exports, and use their own feeds for determining cost basis at purchase time. Overall I've been pretty dissappointed by the recommendations put out by the IRS - I ended up having to talk to pay to talk to a tax advisor due to the conflicting advice on the internet.
- thefreeman 9y agoAwesome, thanks for those. I had no idea these resources existed.
- sanmon3186 9y agoI tried cointracking.info a couple of months back and figured that it would take some time for it to stablize. With different exhanges using different formats, and no support for all exchanges (at least the ones I am using), it is tough to tally. I finally used their export as basis and built my own excel sheet. I don’t think I have it all figured but I am happy with what I have. Now whenever I make any transaction, I add entries to my sheet.
- nawtacawp 9y ago
- unpwn 9y agodoes this apply to all the alt coins or just eth-btc?
- KirinDave 9y agoWash sale rules still apply (as has been noted elsewhere). But it's pretty likely this government will start to aim for that as well. The only policy lens by which this current congress's bill makes sense is on that "rewards existing businesses moving into new markets" as opposed to "new businesses competing with existing via new markets." And while I'm not a fan of the bill or its primary authors, I'm simply not able to accept the idea that they don't have a policy direction.
- drvdevd 9y agoThis fits quite nicely with having less “net neutrality” doesn’t it?
- KirinDave 9y agoI believe so. The existing GOP agenda appears to be to reward large corporate donors by systematically opposing competition. They're actually much less of a capitalist party than the democrats. This is why every libertarian should be doing everything they can do to piss on this tax bill. It's MUCH worse than the status quo.
- withdavidli 9y agoWhile it was deemed to be treated as property, IRS never gave guidance on ability to treat it as like kind transaction. Accountants have been asking for this clarification for years. SEC treating ICO as a security. IRS needs to come out with more guidance, but doing taxes is going to be a pain with crypto to crypto. Not looking for trouble with IRS, especially when gains were plentiful for so many this year. Pay your taxes, you don’t want to be the example the IRS makes. PR not going to look good for people in crypto, “majority of crypto owners refusing to pay taxes”.
- antitax 9y agoTaxes are paid by less intelligent people to more intelligent ones. That is the reason why YOU must pay them.
- 1053r 9y agoWhat? The IRS gave guidance for this in 2014! It's right there under item Q-6 in Notice 2014-21. https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf "Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property?" "A-6: Yes." (quote continues, but there you go). I have no idea how folks came to the conclusion that 1031 swaps were ever acceptable, but it's always been clear that the IRS did not think they were. TL;DR Don't get your tax advice from Reddit. (Or random commenters on hacker news, for that matter.)
- gojomo 9y agoThat would have been so much clearer if they'd just written "…upon an exchange of virtual currency for other property, including other virtual currency." But they didn't, and thus the 'other' can easily be read as "other kind of property" – leaving 'virtual currency' to 'virtual currency' unaddressed.
- jandrese 9y agoThere is a segment of the crypto-currency community who got into it explicitly to avoid paying taxes and to be away from government oversight. They aren't going to be happy with the exchanges playing nice with the IRS.
- sneak 9y agoMan, like-kind doesn’t even allow silver to gold. I can’t imagine even the most liberal interpretation would allow trading between different blockchains. This article seems to have an agenda.
- Gargoyle 9y agoHN has spent the better part of a decade repeatedly telling me these things are both worthless, so I'm sure this is fine.
- sixdimensional 9y agoCan somebody explain something to me... I haven't been participating in the Bitcoin/cryptocurrency movement for better or worse, just following it from afar: I thought the premise of these currencies was to avoid government and banking oversight/control... but with both the SEC and IRS putting controls around virtual currency (which I think we all expected to happen), how does that change the original inspiration? Do these virtual currencies become relegated to the same fate as all other currencies? Was seeing this happen part of the experiment of crypto-currency as well? I keep trying to figure out the real motivation behind the basically unknown origins of the inventors (e.g. Satoshi Nakamoto).
- nemild 9y agoThere's lot here, but I'll make it short: - The fed does not exercise control over Bitcoin directly, so Bitcoin is still fundamentally different than fiat currencies - All fiat onramps into crypto are controlled by governments, which is one way to regulate it (KYC, AML) - You still have to follow the rules for your country, and if the government finds out you haven't, it can censure you; with crypto, it can be harder to see if someone followed the rules, but it's not impossible with the pseudonymous approaches used by most cryptocurrencies today
- sixdimensional 9y agoFair enough, maybe this falls apart when we started talking about fiat currencies being exchanged directly for Bitcoin (i.e. when "real" money got involved). Prior to that really happening, it seemed like one could create new Bitcoin through mining, which was a conversion of computing power/electricity/time directly into crypto-currency value - not a direct conversion of fiat currency into crypto-currency value. With mining now being cost prohibitive, it's not as reasonable of an avenue of gaining Bitcoin.. and "real" money has entered the game - and with that, comes regulation.
- zxcmx 9y agoNearly all fiat onramps have AML/KYC. There's also localbitcoins.com, one way to meet parties who are interested in transacting person to person. Naturally you are still supposed to pay your taxes if you do this.
- mancerayder 9y agoI don't mind being taxed at all. What I find stressful is calculating - not just the 'what was the USD price at the time of the exchange' that has to be manually entered and looked up into the exported CSV spreadsheet... BUT tying that to the movement of coin from Coinbase to the exchange. It's a pain. I regret using Bittrex, as there's almost no tooling for this available.
- kristallizer1 9y agohttps://bitcoin.tax/ https://bitcoin.tax/ might be what you are looking for.
- throwaway30yo 9y agoI on the other hand, mind being taxed.
- simonswords82 9y agoNot saying I disagree with you, but I'd like to understand your reasoning...
- kareldonk 9y agoIf i may: https://blog.kareldonk.com/on-money-bitcoin-and-cryptocurrencies-in-general/ https://blog.kareldonk.com/on-money-bitcoin-and-cryptocurren...
- etherael 9y agoI also mind being robbed. And for exactly the same reason.
- BearGoesChirp 9y agoCan't speak for them, but for me the issue isn't all taxation, but it is the extent of taxation and what it is spent on. I mind being taxed when that money is going to corrupt government contracts, being used to kill innocent people, and a number of other positions which I would get varying levels of agreement with. Taxes used for ensuring murderers aren't free on the street is a lot different than taxes used to put people in prison for pot. This is especially true since we are at a point where most people are taxed without representation, because their vote buys so little in comparison to lobbying or other factors (such as us having first past the poll system of election in the US).
- deleted 9y ago[deleted]
- kareldonk 9y agoThe government mafia always wants a cut. This is exactly why Satoshi came up with Bitcoin -- to prevent people getting robbed and enslaved by the financial elite and their Governments. https://blog.kareldonk.com/on-money-bitcoin-and-cryptocurrencies-in-general/ https://blog.kareldonk.com/on-money-bitcoin-and-cryptocurren...
- plazmatic 9y agoWatching all you little trump supporters say things like "i don't mind taxes" now that the GOP is in control and is in fact RAISING YOUR TAXES is absolutely hysterical to me. Guess you ole boys picked the hill you want to die on...with a fat orange cheetoh leading you to the gates of hell. Good luck!
- justblendin 9y agoPersonally, I see the rise of cryptocurrencies as the beginning of a capital singularity, whereby vast flows of capital begin to outpace and outmaneuver any other collective human organizational mechanism of restraint, eventually and increasingly beyond even the perception of such structures. I recommend all cryptoholders of a few years consider their long game regarding which coins will be declared, and which will remain in the shadows. Cryptocurrencies allow for freedom beyond the practical control of agencies such as the IRS, IF you are willing to put in the time and effort. Think very carefully before voluntarily clipping your own wings.
- yks 9y agoIf I buy N btc every month for different price and then sell some fractional amount, what would be the cost base? It appears to be possible to name the lot being sold but I can't find the consensus, internet in general advises FIFO.
- froindt 9y agoIf it's like stocks, I reckon you can specify which lot is getting sold. That was one of the things up for debate under the GOP proposed tax reforms. FIFO requirement for sales didn't make it into the final bill. This is the best resource I have found at a quick search. The answer is simply it depends on how you setup your cost basis. https://www.investopedia.com/terms/a/averagecostbasismethod.asp https://www.investopedia.com/terms/a/averagecostbasismethod....
- yks 9y agobut can I switch between different cost basis methods per transaction basically? exchanges don't provide any tax info anyway.
- tinus_hn 9y agoSo you do the trading offshore? It's a virtual currency after all.
- Zentgraf 9y agoCan someone please explain to me huw the government wants to track trading in Anonymous currencys? They don't know it's me whi traded btc for eth
- EthanHeilman 9y agoNeither one is anonymous. In many ways they are less private than traditional currencies or assets.
- vertex-four 9y agoThe Government also "tracks" large amounts of cash, which are about as anonymous, through audits - both random and based on red flags. Basically, they send round someone with the ability to lock you up if they can prove you've intentionally hidden assets from them, and they're very, very good at seeking out inconsistencies in your books. Taxes existed before credit cards, you know.
- donjoy 9y agoToday Ripple (xrp) has passed 1$ price mark
- fpisfun 9y agoAlready been thinking about moving abroad, this is a great reason to push me further in that direction
- IIAOPSW 9y agoI have a spanner to throw at this. I'm American. I used to live in China. I bought some bitcoin in China. Later I changed some of that bitcoin for an altcoin. I now live in Japan and sometimes do more alt coin exchanges. How if at all am I taxed?
- notjesse 9y agoYou should honestly consult a tax professional about this, as it's not a good idea to get tax advice from strangers on the internet. But according to the IRS, you are only taxed at time of disposal when capital gains were realized. I am not at all familiar with Chinese or Japanese tax law, so I couldn't tell you what your liabilities might be there.
- throwaway312367 9y agoThe funny thing is all this regulation will probably serve to make cryptos more legitimate.
- Dominique_8 9y agoThe fastest place to buy/sell bitcoins and other cryptocurrencies at ease which I am currently using is furcoins. com, they are prompt and efficient!
- Dominique_76 9y agoNice place to buy/sell bitcoins and other cryptocurrencies at ease which I am currently using is furcoins.com, they are prompt and efficient!