6 ms·

This provision already applies to transactions in foreign currency; that is, if I take a trip to Japan and exchange $1000 for yen, I don’t have to report gains

This provision already applies to transactions in foreign currency; that is, if I take a trip to Japan and exchange $1000 for yen, I don’t have to report gains every time I buy something as the exchange rate has fluctuated since the time I made the initial conversion. This bill would include digital currency under that rule, so buying a cup of coffee with Bitcoin would no longer trigger recognition of capital gains income. I think the headline should be modified to make it clear that 95% of purchases of goods and services using digital currency would be exempt from gains, but that most crypto transactions are for trading and investing purposes anyway so gains would still be recognized.

david_draco 7y ago
If that's true, that makes a huge difference. AFAIK, the fraction of transactions for goods is minuscule.
- jotakami 7y ago
  Yeah I’m not 100% on it, but I seriously doubt that selling your Bitcoin in small chunks to keep the capital gains under $200 in each transaction would fly. The intention of the original law is exactly like the example I provided; we don’t want people to have to account for trivial gains and losses every time they travel overseas and spend in a foreign currency. The law is not intended to provide a loophole to recognize tax-free gains in currency trading, and if you tried that you would probably lose in court.
  - RandomBacon 7y ago
    I imagine if the total was over $10,000 it would violate laws against structuring.
    - jdmichal 7y ago
      Structuring laws are any attempt to evade reporting. There's no dollar limit on it; the limits depend on the reporting laws or policies. You're thinking $10,000 because that is the limit for deposit reporting. But if this law has a limit of $200 for reporting, then that is the limit for structuring.
      - mattferderer 7y ago
        So if someone bought 3 BTC in say 2015 for $200 each, they now would have roughly $25,000. If I understand right, they could then use that without paying any taxes on all transactions under $200? I assume you would still have to account for that somewhere? Even if only in your personal accounts, in case you do some larger transactions or trading. For example if you decide to sell $5,000 of your BTC for US dollars. That now becomes a capital gain tax. You need to list the date you purchased it (date in 2005) & the date you sold it (now). Your accounting software or books would still need to keep record of when you bought/sold/lost/used BTC though to properly mark which ones are long term gains and which are short and which were used for small transactions. Please correct me if I'm wrong.
        deleted 7y ago
        [deleted]
        ska 7y ago
        sort of (if i'm reading you right), the $200 doesn't apply to the basis you bough things at, but the capital gain. So your purchase price is irrelevant. If you bought 3 at 100 and sold them at 150, you would have a net capital gain of 3x(150-100) = 150 and wouldn't have to report it. If you sold them at 1100 gain is 3x(1100-100) = 3000 and you would report as capital gain on your taxes. Right now you have to do this for any amount. Structuring is a separate issue. Typically that would mean that you can't break up a large gain into a bunch of < 200 gains to take advantage of this. Note that the language is pretty specific though, and I don't think it applies to any transaction.
        lonelappde 7y ago
        "Structuring" is only to do with violating the "spirit" of the paperwork rules, tending to avoid detection of taxable or otherwise regulatable activity. It is separate from the rules about what you are legally obligated to pay in taxes, which generally apply to total amount transacted/gained and aren't affected by the size of individual transactions.
- SlowRobotAhead 7y ago
  > AFAIK, the fraction of transactions for goods is minuscule. Yes, it’s a commodity, not currency.... yet, if ever.
  - jki275 7y ago
    The reason for that may be that it is so difficult to use precisely because of these tax policies.
    - Retric 7y ago
      Software can easily track when transactions happened and what the value was, just consider day trading as the extreme version. The real issue was unlike the original proposal transaction fees eventually grew large enough killed off the traction bitcoin was gaining. IMO, there is still a huge opportunity for sub 1 cent transaction fees when buying a soda at a vending machine or at small shops.
      - jki275 7y ago
        Transaction fees were only large for a short time due to the BCH attack. The vast majority of people don't understand doing taxes for day trading. There are plenty of cryptocurrencies with very low transaction fees. That doesn't fix the issue.
        Retric 7y ago
        The 1c per transaction of early bitcoin was compelling. That’s the case I am talking about, once they broke 10c/transaction bitcoin lost and it’s still past that threshold. Don’t forget buying bitcoin’s also has transaction fees and you get real volatility, so it needs very low fees not just seemingly reasonable ones.
        nostrademons 7y ago
        There are still cryptocurrencies with that - Nano, Iota, EOS, Stellar all have basically negligible transaction fees, and even Ethereum isn't that expensive. That Nano hasn't really caught on is an indication that the barrier to mass adoption of cryptocurrencies lies somewhere other than transaction fees.
deleted 7y ago
[deleted]
nostrademons 7y ago
I wonder if market-making or other HFT trading strategies would (accidentally) fall under this law, though. There you naturally end up with lots of very small gains that happen frequently, of essentially random amounts.
- CameronNemo 7y ago
  Isn't there precedent in forex trading? Why not just use that taxation scheme. Cryptocurrencies are quite different from securities.

david_draco 7y ago

If that's true, that makes a huge difference. AFAIK, the fraction of transactions for goods is minuscule.

jotakami 7y ago
Yeah I’m not 100% on it, but I seriously doubt that selling your Bitcoin in small chunks to keep the capital gains under $200 in each transaction would fly. The intention of the original law is exactly like the example I provided; we don’t want people to have to account for trivial gains and losses every time they travel overseas and spend in a foreign currency. The law is not intended to provide a loophole to recognize tax-free gains in currency trading, and if you tried that you would probably lose in court.
- RandomBacon 7y ago
  I imagine if the total was over $10,000 it would violate laws against structuring.
  - jdmichal 7y ago
    Structuring laws are any attempt to evade reporting. There's no dollar limit on it; the limits depend on the reporting laws or policies. You're thinking $10,000 because that is the limit for deposit reporting. But if this law has a limit of $200 for reporting, then that is the limit for structuring.
    - mattferderer 7y ago
      So if someone bought 3 BTC in say 2015 for $200 each, they now would have roughly $25,000. If I understand right, they could then use that without paying any taxes on all transactions under $200? I assume you would still have to account for that somewhere? Even if only in your personal accounts, in case you do some larger transactions or trading. For example if you decide to sell $5,000 of your BTC for US dollars. That now becomes a capital gain tax. You need to list the date you purchased it (date in 2005) & the date you sold it (now). Your accounting software or books would still need to keep record of when you bought/sold/lost/used BTC though to properly mark which ones are long term gains and which are short and which were used for small transactions. Please correct me if I'm wrong.
      - deleted 7y ago
        [deleted]
      - ska 7y ago
        sort of (if i'm reading you right), the $200 doesn't apply to the basis you bough things at, but the capital gain. So your purchase price is irrelevant. If you bought 3 at 100 and sold them at 150, you would have a net capital gain of 3x(150-100) = 150 and wouldn't have to report it. If you sold them at 1100 gain is 3x(1100-100) = 3000 and you would report as capital gain on your taxes. Right now you have to do this for any amount. Structuring is a separate issue. Typically that would mean that you can't break up a large gain into a bunch of < 200 gains to take advantage of this. Note that the language is pretty specific though, and I don't think it applies to any transaction.
        lonelappde 7y ago
        "Structuring" is only to do with violating the "spirit" of the paperwork rules, tending to avoid detection of taxable or otherwise regulatable activity. It is separate from the rules about what you are legally obligated to pay in taxes, which generally apply to total amount transacted/gained and aren't affected by the size of individual transactions.
SlowRobotAhead 7y ago
> AFAIK, the fraction of transactions for goods is minuscule. Yes, it’s a commodity, not currency.... yet, if ever.
- jki275 7y ago
  The reason for that may be that it is so difficult to use precisely because of these tax policies.
  - Retric 7y ago
    Software can easily track when transactions happened and what the value was, just consider day trading as the extreme version. The real issue was unlike the original proposal transaction fees eventually grew large enough killed off the traction bitcoin was gaining. IMO, there is still a huge opportunity for sub 1 cent transaction fees when buying a soda at a vending machine or at small shops.
    - jki275 7y ago
      Transaction fees were only large for a short time due to the BCH attack. The vast majority of people don't understand doing taxes for day trading. There are plenty of cryptocurrencies with very low transaction fees. That doesn't fix the issue.
      - Retric 7y ago
        The 1c per transaction of early bitcoin was compelling. That’s the case I am talking about, once they broke 10c/transaction bitcoin lost and it’s still past that threshold. Don’t forget buying bitcoin’s also has transaction fees and you get real volatility, so it needs very low fees not just seemingly reasonable ones.
        nostrademons 7y ago
        There are still cryptocurrencies with that - Nano, Iota, EOS, Stellar all have basically negligible transaction fees, and even Ethereum isn't that expensive. That Nano hasn't really caught on is an indication that the barrier to mass adoption of cryptocurrencies lies somewhere other than transaction fees.

deleted 7y ago

[deleted]

nostrademons 7y ago

I wonder if market-making or other HFT trading strategies would (accidentally) fall under this law, though. There you naturally end up with lots of very small gains that happen frequently, of essentially random amounts.

CameronNemo 7y ago
Isn't there precedent in forex trading? Why not just use that taxation scheme. Cryptocurrencies are quite different from securities.