5 ms·

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

by Twixes 7y ago

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?
        hanniabu 7y ago
        It really doesn't matter if it's spent in the US or abroad. At the time it is spent, you need to take the difference in transaction rates. It's the same concept as if you are making payments in something like Bitcoin. Unfortunately I don't have any sources on hand, but I have a friend that forex trades and I myself have been following the cryptocurrency regulation scene and the same rules transfer to here. However, this is one of those things where the government isn't going to come knocking your door down for since it's petty cash.
        iudqnolq 7y ago
        What you say makes logical sense but I couldn't find any supporting sources for the idea that spending money abroad on foreign goods is equivalent to forex trades for tax purposes.
      - 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...

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

by Twixes 7y ago

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

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?
        hanniabu 7y ago
        It really doesn't matter if it's spent in the US or abroad. At the time it is spent, you need to take the difference in transaction rates. It's the same concept as if you are making payments in something like Bitcoin. Unfortunately I don't have any sources on hand, but I have a friend that forex trades and I myself have been following the cryptocurrency regulation scene and the same rules transfer to here. However, this is one of those things where the government isn't going to come knocking your door down for since it's petty cash.
        iudqnolq 7y ago
        What you say makes logical sense but I couldn't find any supporting sources for the idea that spending money abroad on foreign goods is equivalent to forex trades for tax purposes.
    - 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...