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A major use of USDT is that you can sell your cryptos when they're high, converting them to USDT, which holds it's value. Then, when the crypto prices drop, you
by bmh 8y ago
A major use of USDT is that you can sell your cryptos when they're high, converting them to USDT, which holds it's value. Then, when the crypto prices drop, you buy in again, and repeat.
By keeping it entirely in the crypto space, your country's tax system can't charge you for capital gains.
- charlietango92 8y agopardon my ignorance, but wouldn't you eventually convert your USDT to 'real'/fiat currency at some point? It would be taxed then as 'other income' right?
- vidarh 8y agoI'm guessing the theory (which may or may not be tax evasion depending on your local tax code) is that you're not taking the profit until you sell for fiat or take it out of the exchange.
- JumpCrisscross 8y ago> By keeping it entirely in the crypto space, your country's tax system can't charge you for capital gains This is blatant, willful and permanently-documented tax evasion, an amusing combination of illegality and stupidity.
- teilo 8y agoNo, it’s not. It means you don’t pay capital gains when you’re merely exchanging one form of crypto for another. You have not realized any gains until you have converted your crypto into real assets. Converting from one form of crypto to another for the purposes of arbitrage only delays the taxes. It never eliminates them. This is really no different than selling and buying stocks in an IRA account.
- JumpCrisscross 8y ago> You have not realized any gains until you have converted your crypto into real assets You transacted into (what you believed was) a proxy for cash. That's obviously selling. Every tax jurisdiction has rules about this because every tax jurisdiction has idiots who thought they'd found a clever workaround. (I think the first American one involved a guy in the 19th century selling property for the key to a lockbox full of cash.)
- RobLach 8y agoI feel that people believe that they can get away with things because they imagine a situation where you can argue on a technicality and get away with it. In reality if they want to punish you for this they'll see right through it. Loopholes are only loopholes because there's an established history of authorities not willing to enforce it (brown paper bags around liquor bottles, "Suggested Donations").
- ceejayoz 8y ago> This is really no different than selling and buying stocks in an IRA account. This is an insane assertion. One of the main points of an IRA is that the trades within it aren't taxable events. Trades made outside an IRA are taxable events.
- teilo 8y agoI understand the difference. All I meant is that in an IRA the trades are not taxed but the withdrawals are. But I see the point here regarding a cash proxy. Full disclosure: I have zero exposure to crypto. Not my cup of tea.
- jungturk 8y agoCrypto-crypto trades no longer enjoy the like-kind exchange tax treatment you're describing (in the US, as of 12/31/2017). The recent tax law narrowed that benefit to real estate only. https://www.coindesk.com/owe-irs-crypto-crypto-trades/ https://www.coindesk.com/owe-irs-crypto-crypto-trades/
- teilo 8y agoI stand corrected.
- JumpCrisscross 8y ago> no longer On 31 December 2017, the IRS clarified that § 1031 does not apply to crypt-crypto trades. It did not say § 1031 applied to crypto-crypto trades before then. The article you reference says "traders still may be able to argue that their transactions undertaken in 2017 and prior years were not taxable under the Section 1031 like-kind exchange rules," but that "the application of the like-kind exchange rules to crypto transactions is far from certain" [1, emphasis mine]. [1] https://www.coindesk.com/owe-irs-crypto-crypto-trades/ https://www.coindesk.com/owe-irs-crypto-crypto-trades/
- russdpale 8y agoHavent you heard? In America this is just plain smart!!
- toast0 8y agoYour country may not automatically get tax records, but I'm pretty sure both exchanges would be taxable transactions under US tax rules.
- tomjen3 8y agoMaybe, but whoes to say these people are under the US Tax system?
- gamblor956 8y agoThese same rules generally apply in so major countries.
- rtkwe 8y agoOnly have a cursory understanding of capital gains but shouldn't the exchange out of Tether back into $Crypto have zero gains if it's working as intended since there's no change in value of your holding?
- freeone3000 8y agoCapital gains tax on securities (like tether) is assessed on the difference between what you paid for the security and what you sold the security for. You can denominate it in whatever you like (tether, bitcoin, gold, sheep, whatever), but it's assessed in USD at time of sale. Essentially, you're being taxed on the income you got from holding that security, not for trading, it's just assessed when you trade.
- rtkwe 8y agoYeah I'm aware of that much but toast0 said both transactions (which I took to mean for example BTC -> Tether and Tether -> BTC) would both be taxed which doesn't make sense where Tether is working as intended and holds value at $1. Of course the sale of BTC for Tether would be taxed because the market for that is moving but Tether in theory should not have an additional tax exposure just like selling BTC for USD then buying ETH doesn't require you to pay taxes on your ETH purchase with USD.
- lojack 8y agoIn the US you can be charged on those capital gains. Capital gains are assessed at time of sale, this includes both Crypto-Fiat as well as Crypto-Crypto.
- Tsubasachan 8y agoToo bad BMW dealers don't accept Tether. At some point you want to cash out, and who knows if this will be around in 50 years at all?