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unless you change your holdings into fiat thats not the case. You can rebalance with exchanging among your coins

Klathmon 9y ago
This is a somewhat debated topic in cryptocurrency. IMO what you said is not the case. If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? I'm not a tax professional, but I did consult with one, and they confirmed my hunch.
- derefr 9y ago
  > If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? I.e., those other things you listed exist “within” the US financial system. Cryptocurrencies exist outside of it, similar to the way assets held in other countries do. If one of these countries had multiple active currencies (say, the GBP and the Euro in the UK), a US citizen telling their UK proxy-holder to start moving money from one into the other has nothing to do with US financial regulation, only UK financial regulation. It just so happens that moving money from one cryptocurrency to another has to do only with the financial regulation of the country known as “the Internet”—which has no capital-gains regulations. (Of course, things are slightly different if the management company exists as a US corporation—in either case. Ask yourself what a US company offering GBP+Euro management would do in this case. The answer should be obvious.)
  - JumpCrisscross 9y ago
    > a US citizen telling their UK proxy-holder to start moving money from one into the other has nothing to do with US financial regulation, only UK financial regulation This would be reported to the IRS by the UK financial institution under FATCA [1]. [1] https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca https://www.irs.gov/businesses/corporations/foreign-account-...
  - s73v3r_ 9y ago
    "I.e., those other things you listed exist “within” the US financial system. Cryptocurrencies exist outside of it" No, they don't. They're no more "outside it" than gold or silver are.
    - derefr 9y ago
      Your intuition is coming from seeing things as being in an equivalence-class on some axis of comparison—but you're looking at the wrong axis. Gold and silver mined within the US exist within the US financial system, because it's US companies doing the mining, who sell the resulting commodities to other US companies, who then list them on US exchanges, etc. The US government can boss around all of these US companies—because it's the one giving them a right to exist. The US government can also, through this regulation of US companies, also enforce regulations on the activity of private citizens to some extent. Gold and silver that never existed within the US at all, were never possessed by US corporations, and were otherwise never part of the US economy, are not regulated by US law. Crucially, if an exchange of gold for silver occurs entirely outside of US jurisdiction—i.e. no interested parties in the transfer have anything to do with the US—then there is no US capital-gains event. Consider, for example, if your great uncle is a UK citizen, while you are a US citizen. You are the recipient of his legal estate upon his death per his will. He exchanges silver for gold, and then immediately dies. Do you have to report the exchange to the IRS? Of course not. You didn't do it. You didn't even cause it. It just happened, somewhere outside the US, by non-US parties, and then eventually the money generated by this exchange made its way to you. Now, consider another example: I buy BTC from a crypto exchange in Bermuda. This exchange is scared of the volatility of BTC, and so actually operates by holding ETH, and then using ETH to buy BTC the moment someone sends them e.g. USD. You send USD to the exchange, and receive BTC. Do you need to pay capital gains on the exchange of BTC (which you temporarily "owned", in the "what you'd get as a creditor if they went bankrupt that instant" sense) for ETH? Of course not, for the same reason as above. You never held any ETH, despite being temporarily owed ETH. Now, let's say you go to an exchange and "buy in" to their trading system by buying some random crypto-token of theirs. You own this token. You then ask the system to allocate a portfolio of other things to you, temporarily, in exchange for loaning the system back this token. If those things do well, you get paid... in more of this token. The system might rebalance your virtual portfolio, but you never hold any of the portfolio assets. You know what I'm describing? Why, it's an investment savings account! The "random crypto-token" is "USD held in a TFSA."
  - patmcc 9y ago
    >>For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? If there's a currency change, it absolutely does trigger a capital-gains event, unless you have a truly terrible accountant. Just like when any other asset is disposed of, the value is calculated at that point. If you move USD from one bank to another that's different, but try to move USD - EURO - CAN - USD and you'll absolutely be taxed on any gains that happen (if they catch it).
    - derefr 9y ago
      I think you're talking about currency changes that happen by moving around within US banks, or by moving money between countries where one of those countries is the US or has a specific treaty supporting US foreign taxation. If it wasn't possible for a US entity to move money between (at least a few) countries that aren't the US without paying US capital-gains, US corporations wouldn't love holding money in Ireland nearly as much as they do. :)
      - patmcc 9y ago
        Two things on that: first, moving money between banks but in a single currency wouldn't generate a taxable event - there's no possibility of profit or loss like there is with a currency exchange (i.e. you're not buying euros and then selling them, you're just moving dollars). Second, all the Irish and Dutch craziness relies on multiple corporations (all owned by the parent, of course), which complicates the tax situation a bunch.
asdsa5325 9y ago
Actually not true. You have to pay gains from coin to coin transactions. For example, let's say you buy 1 BTC with $10k. Then you turn the 1 BTC into 10 ETH. Then, later you convert 10 ETH into 1.2 BTC after the conversion rate between the two changes. At that point you have to pay capital gain on the dollar amount of 0.2 BTC, even if you don't convert any BTC back into USD.
greyface- 9y ago
This may have been true in 2017 and prior, as a 1031 like-kind exchange. However, these are no longer allowed under the new tax law.

This is a somewhat debated topic in cryptocurrency. IMO what you said is not the case. If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? I'm not a tax professional, but I did consult with one, and they confirmed my hunch.

derefr 9y ago
> If gold and silver aren't treated "like kind", and facebook and google stocks aren't treated "like kind", why would bitcoin and ethereum be treated like kind? For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? I.e., those other things you listed exist “within” the US financial system. Cryptocurrencies exist outside of it, similar to the way assets held in other countries do. If one of these countries had multiple active currencies (say, the GBP and the Euro in the UK), a US citizen telling their UK proxy-holder to start moving money from one into the other has nothing to do with US financial regulation, only UK financial regulation. It just so happens that moving money from one cryptocurrency to another has to do only with the financial regulation of the country known as “the Internet”—which has no capital-gains regulations. (Of course, things are slightly different if the management company exists as a US corporation—in either case. Ask yourself what a US company offering GBP+Euro management would do in this case. The answer should be obvious.)
- JumpCrisscross 9y ago
  > a US citizen telling their UK proxy-holder to start moving money from one into the other has nothing to do with US financial regulation, only UK financial regulation This would be reported to the IRS by the UK financial institution under FATCA [1]. [1] https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca https://www.irs.gov/businesses/corporations/foreign-account-...
- s73v3r_ 9y ago
  "I.e., those other things you listed exist “within” the US financial system. Cryptocurrencies exist outside of it" No, they don't. They're no more "outside it" than gold or silver are.
  - derefr 9y ago
    Your intuition is coming from seeing things as being in an equivalence-class on some axis of comparison—but you're looking at the wrong axis. Gold and silver mined within the US exist within the US financial system, because it's US companies doing the mining, who sell the resulting commodities to other US companies, who then list them on US exchanges, etc. The US government can boss around all of these US companies—because it's the one giving them a right to exist. The US government can also, through this regulation of US companies, also enforce regulations on the activity of private citizens to some extent. Gold and silver that never existed within the US at all, were never possessed by US corporations, and were otherwise never part of the US economy, are not regulated by US law. Crucially, if an exchange of gold for silver occurs entirely outside of US jurisdiction—i.e. no interested parties in the transfer have anything to do with the US—then there is no US capital-gains event. Consider, for example, if your great uncle is a UK citizen, while you are a US citizen. You are the recipient of his legal estate upon his death per his will. He exchanges silver for gold, and then immediately dies. Do you have to report the exchange to the IRS? Of course not. You didn't do it. You didn't even cause it. It just happened, somewhere outside the US, by non-US parties, and then eventually the money generated by this exchange made its way to you. Now, consider another example: I buy BTC from a crypto exchange in Bermuda. This exchange is scared of the volatility of BTC, and so actually operates by holding ETH, and then using ETH to buy BTC the moment someone sends them e.g. USD. You send USD to the exchange, and receive BTC. Do you need to pay capital gains on the exchange of BTC (which you temporarily "owned", in the "what you'd get as a creditor if they went bankrupt that instant" sense) for ETH? Of course not, for the same reason as above. You never held any ETH, despite being temporarily owed ETH. Now, let's say you go to an exchange and "buy in" to their trading system by buying some random crypto-token of theirs. You own this token. You then ask the system to allocate a portfolio of other things to you, temporarily, in exchange for loaning the system back this token. If those things do well, you get paid... in more of this token. The system might rebalance your virtual portfolio, but you never hold any of the portfolio assets. You know what I'm describing? Why, it's an investment savings account! The "random crypto-token" is "USD held in a TFSA."
- patmcc 9y ago
  >>For the same reason that, say, transferring your wealth from an Irish bank account to a German bank account doesn’t trigger a capital-gains event in the US? If there's a currency change, it absolutely does trigger a capital-gains event, unless you have a truly terrible accountant. Just like when any other asset is disposed of, the value is calculated at that point. If you move USD from one bank to another that's different, but try to move USD - EURO - CAN - USD and you'll absolutely be taxed on any gains that happen (if they catch it).
  - derefr 9y ago
    I think you're talking about currency changes that happen by moving around within US banks, or by moving money between countries where one of those countries is the US or has a specific treaty supporting US foreign taxation. If it wasn't possible for a US entity to move money between (at least a few) countries that aren't the US without paying US capital-gains, US corporations wouldn't love holding money in Ireland nearly as much as they do. :)
    - patmcc 9y ago
      Two things on that: first, moving money between banks but in a single currency wouldn't generate a taxable event - there's no possibility of profit or loss like there is with a currency exchange (i.e. you're not buying euros and then selling them, you're just moving dollars). Second, all the Irish and Dutch craziness relies on multiple corporations (all owned by the parent, of course), which complicates the tax situation a bunch.

asdsa5325 9y ago

Actually not true. You have to pay gains from coin to coin transactions. For example, let's say you buy 1 BTC with $10k. Then you turn the 1 BTC into 10 ETH. Then, later you convert 10 ETH into 1.2 BTC after the conversion rate between the two changes. At that point you have to pay capital gain on the dollar amount of 0.2 BTC, even if you don't convert any BTC back into USD.

greyface- 9y ago

This may have been true in 2017 and prior, as a 1031 like-kind exchange. However, these are no longer allowed under the new tax law.