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Keep in mind: - Trading cryptocurrencies produces capital gains or losses, with the latter being able to offset gains and reduce tax. - Exchanging one token f
by bringtheaction 9y ago
Keep in mind:
- Trading cryptocurrencies produces capital gains or losses, with the latter being able to offset gains and reduce tax.
- Exchanging one token for another — for example, using Ethereum to purchase an altcoin — creates a taxable event. The token is treated as being sold, thus generating capital gains or losses.
- Receiving payments in crypto in exchange for products or services or as salary is treated as ordinary income at the fair market value of the coin at the time of receipt.
- Spending crypto is a tax event and may generate capital gains or losses, which can be short-term or long-term. For example, say you bought one coin for $100. If that coin was then worth $200 and you bought a $200 gift card, there is a $100 taxable gain. Depending on the holding period, it could be a short- or long-term capital gain subject to different rates.
- Converting a cryptocurrency to U.S. dollars or another currency at a gain is a taxable event, as it is treated as being sold, thus generating capital gains.
- Air drops are considered ordinary income on the day of the air drop. That value will become the basis of the coin. When it's sold, exchanged, etc., there will be a capital gain.
- Mining coins is considered ordinary income equal to the fair market value of the coin the day it was successfully mined.
- Initial coin offerings do not fall under the IRS's tax-free treatment for raising capital. Thus, they produce ordinary income to individuals and businesses alike.
https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-wha...
- saosebastiao 9y ago> Exchanging one token for another — for example, using Ethereum to purchase an altcoin — creates a taxable event. The token is treated as being sold, thus generating capital gains or losses. Which is absurdly difficult for the average person to account for. If I buy 60000 XRP for 4 BTC, what is my cost basis? Do I have to keep track of how much those bitcoins were worth on a different exchange with Fiat pairings at the moment I traded on a pure crypto exchange? What if I don't have that data? How is that calculation supposed to account for actual liquidation costs if I liquidate to pay my taxes?
- kentm 9y ago> If I buy 60000 XRP for 4 BTC, what is my cost basis? For the BTC? The USD value at the time you bought them. > Do I have to keep track of how much those bitcoins were worth when I traded? Yes > What if I don't have that data? You can get the transaction date via the block chain or your exchanges reporting and then lookup the USD value at the time. > How is that calculation supposed to account for actual liquidation costs if I liquidate to pay my taxes? Liquidating to pay taxes is another taxable event. That’s the same as if you did this with equities.
- saosebastiao 9y ago> You can get the transaction date via the block chain or your exchanges reporting and then lookup the USD value at the time. What if the exchange I traded on doesn't have a USD Fiat pairing? Can I use any price from any exchange that day? Can I report $0.06/BTC for an xrp sale on 4/16, the date of the major coinbase flash crash? Does it have to be the exact price at the exact time? Can I choose the USD value of the KRW/BTC market on Bithumb?
- bringtheaction 9y ago> Can I use any price from any exchange that day? You should use the fair market value.
- saosebastiao 9y agoSo any price from any exchange at any time during the day? You haven't clarified a thing by telling me to use the fair market value, because there is no standardized way to determine fair market value. These aren't stable mature markets, a blink of the eye and the market may be transacting at +/-10%. Determining fair market value is the primary problem with cryptocurrency taxation. If you're lucky enough to be trading in USD paired currencies, great...you can use actual transaction values. But the vast majority of crypto trades aren't with any fiat pair.
- kombucha2 9y agoIf I keep reinvesting am i fine as long as I am not taking out profits?
- carbocation 9y agoEvery trade produces a taxable event, so no.
- kombucha2 9y ago
- pwinnski 9y agoThey are. If you liquidate your position in one stock to buy shares of another stock, that's also a taxable event.
- kombucha2 9y agoMaybe I just wasn't trading enough with stocks to notice. I remembered always closing short potions to initiate long positions and not paying taxes until closing the long. Clearly, I've been confused this whole time.
- letitgrowx 9y agoI have wondered about the mining rule, that coins are treated as income at the time they are mined. If I have a chicken and it lays an egg, is that a taxable event? If I have a 3D printer machine and it produces a widget, is that taxable also? From my understanding those are not taxable events even though the egg and widget have known market values at the time produced; only when you sell the egg or widget do have ordinary income tax. Even though cryptocurrency is property like the egg or widget, it is not treated the same way when mined. If I understand correctly, mined crypto is double taxed: once when mined and again when you sell/exchange it.
- heed 9y agoOne thing I haven't been able to figure out is how to treat cryptocurrency gained via a fork. Any idea?