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After I buy a grilled cheese sandwich with Kong, how do I handle my taxes? It makes every transaction have possible capital-gains tax implications. The taxati

by ISL 7y ago

After I buy a grilled cheese sandwich with Kong, how do I handle my taxes? It makes every transaction have possible capital-gains tax implications. The taxation difficulty is the single biggest reason why I stopped making small transactions with Bitcoin. The paperwork, come April, was awful.

Twixes 7y ago
It should be just like normal, non-blockchain backed currency, should it not?
- nostromo 7y ago
  It’s more like selling stock to buy a sandwich. If you bought the stock for $100, and now it’s worth $200, and you sell $10 worth to buy a sandwich, you have $5 of income to be reported.
  - Twixes 7y ago
    Would that be the case if you were to buy that sandwich with, say, euros instead? They too could appreciate between purchases.
    - hanniabu 7y ago
      If you're in the US and pay with euros then yes it would technically be the same.
      - iudqnolq 7y ago
        No. The issue is because cryptocurrencies aren't classified as currencies like euros are by the IRS.
        hanniabu 7y ago
        Actually yes because there's still capital gains.
        iudqnolq 7y ago
        I could not find a single reference about individuals paying cap gains tax on foreign transactions to buy goods & services in foreign countries, because that's absurd. Here's a quote that shows even companies don't have to pay it if they're using the normal currency of where they are and aren't doing anything weird with it > To reduce the number of currency conversions required, the tax code uses the standard of FAS 52, which is the Financial Accounting Standards Board standard for foreign currency conversions. This allows the business to record most of its transactions in terms of its functional currency (FC), which is the currency that is generally used by businesses in the locale of the foreign unit or entity. Generally, under FAS 52, fluctuations in currency rates do not have to be accounted for unless the fluctuations change the cash flow for the business. In most transactions of a foreign business unit in a foreign country, cash flows are not affected by currency fluctuations. However, transactions between the parent company and its foreign subsidiary will result in a change of cash flow. As a consequence, gain or loss on the currency exchange will have to be included when calculating net income. https://thismatter.com/money/tax/foreign-currency-transactions-taxation.htm https://thismatter.com/money/tax/foreign-currency-transactio...
        hanniabu 7y ago
        First off this references businesses not individuals, but regardless: > do not have to be accounted for unless the fluctuations change the cash flow for the business If there is a change in value then it needs to be reported. It's the same concept as if you were forex trading.
        iudqnolq 7y ago
        You are right on both counts. I realize in retrospect my source is inadequate. I am trying to prove a negative, however. Do you have any evidence for your claim individuals should report profits and losses on their foreign currency transactions abroad?
        bananabreakfast 7y ago
        Still up for debate actually. IRS does consider them property but other agencies consider it currency
        iudqnolq 7y ago
        Future may be up for debate, current tax status isn't. And that's what matters for what you have to pay right now.
- kcole16 7y ago
  This is due to how cryptocurrencies are classified by the IRS. Currently, they are classed as assets (property) as opposed to currencies, and thus any "realized gains" are taxable events. This includes the above example, where you may have technically "realized a gain" while buying a grilled cheese with Bitcoin. https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies https://www.irs.gov/businesses/small-businesses-self-employe...
newguy1234 7y ago
I just never reported any of that crap. I don't care. Still waiting on that IRS tax notice.

by ISL 7y ago

Twixes 7y ago

It should be just like normal, non-blockchain backed currency, should it not?

nostromo 7y ago
It’s more like selling stock to buy a sandwich. If you bought the stock for $100, and now it’s worth $200, and you sell $10 worth to buy a sandwich, you have $5 of income to be reported.
- Twixes 7y ago
  Would that be the case if you were to buy that sandwich with, say, euros instead? They too could appreciate between purchases.
  - hanniabu 7y ago
    If you're in the US and pay with euros then yes it would technically be the same.
    - iudqnolq 7y ago
      No. The issue is because cryptocurrencies aren't classified as currencies like euros are by the IRS.
      - hanniabu 7y ago
        Actually yes because there's still capital gains.
        iudqnolq 7y ago
        I could not find a single reference about individuals paying cap gains tax on foreign transactions to buy goods & services in foreign countries, because that's absurd. Here's a quote that shows even companies don't have to pay it if they're using the normal currency of where they are and aren't doing anything weird with it > To reduce the number of currency conversions required, the tax code uses the standard of FAS 52, which is the Financial Accounting Standards Board standard for foreign currency conversions. This allows the business to record most of its transactions in terms of its functional currency (FC), which is the currency that is generally used by businesses in the locale of the foreign unit or entity. Generally, under FAS 52, fluctuations in currency rates do not have to be accounted for unless the fluctuations change the cash flow for the business. In most transactions of a foreign business unit in a foreign country, cash flows are not affected by currency fluctuations. However, transactions between the parent company and its foreign subsidiary will result in a change of cash flow. As a consequence, gain or loss on the currency exchange will have to be included when calculating net income. https://thismatter.com/money/tax/foreign-currency-transactions-taxation.htm https://thismatter.com/money/tax/foreign-currency-transactio...
        hanniabu 7y ago
        First off this references businesses not individuals, but regardless: > do not have to be accounted for unless the fluctuations change the cash flow for the business If there is a change in value then it needs to be reported. It's the same concept as if you were forex trading.
        iudqnolq 7y ago
        You are right on both counts. I realize in retrospect my source is inadequate. I am trying to prove a negative, however. Do you have any evidence for your claim individuals should report profits and losses on their foreign currency transactions abroad?
      - bananabreakfast 7y ago
        Still up for debate actually. IRS does consider them property but other agencies consider it currency
        iudqnolq 7y ago
        Future may be up for debate, current tax status isn't. And that's what matters for what you have to pay right now.
kcole16 7y ago
This is due to how cryptocurrencies are classified by the IRS. Currently, they are classed as assets (property) as opposed to currencies, and thus any "realized gains" are taxable events. This includes the above example, where you may have technically "realized a gain" while buying a grilled cheese with Bitcoin. https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies https://www.irs.gov/businesses/small-businesses-self-employe...

newguy1234 7y ago

I just never reported any of that crap. I don't care. Still waiting on that IRS tax notice.