4 ms·

If you were interested in tax free trading of cryptocoins, one hack is to set up a self-directed IRA LLC, so you have checkbook control. Then you could fund th

If you were interested in tax free trading of cryptocoins, one hack is to set up a self-directed IRA LLC, so you have checkbook control. Then you could fund the LLC through your IRA and the LLC crypto trades are tax free (subject to IRA compliance of course).

mattferderer 7y ago
No tax loss harvesting either though, which for most people I've talked to seems to be the better value.
- Ambele 7y ago
  Only if you're losing money on your cryptocurrency trades... in which case it's probably better to stay in the U.S. Dollar and tape off your trading finger. If your cryptocurrencies finally turn positive after you've harvested your losses then you'll owe it all back in taxes. If your trades never go south, then you'll be better off with tax-free gains.
LiquidSky 7y ago
A good general rule of thumb is if you think you've found some clever simple "hack" to get around tax or other regulations, it's probably not as clever as you think and has already been accounted for.
- lonelappde 7y ago
  It's not getting around regulations, it's using IRA regulations as intended.
- throwaway_tech 7y ago
  Another good general rule, especially when law is concerned, is there are always exceptions to the rule. Self-directed IRA LLCs are nothing new, but using them for tax free crypto trading is (obviously)...though I welcome any specific concerns.
- mc3 7y ago
  Unless you are a unicorn tech company
semi-extrinsic 7y ago
https://xkcd.com/1494/ https://xkcd.com/1494/
Ambele 7y ago
That sounds incredibly smart because crypto taxes are a huge headache to do yourself and crypto-tax preparers charge $500-$1000/year. Does having the LLC increase your tax complexity? If so, by how much?
- throwaway_tech 7y ago
  > Does having the LLC increase your tax complexity? Based on the verbiage of your question, I would simply say this isn't something you would try to structure without tax counsel/IRA counsel. Note, what I am referencing is known as a self-directed IRA LLC (sometimes called a special purpose LLC). If structured properly the IRA LLC should not need to file a federal tax return (it should be a single member LLC, so it is considered a disregarded for tax purposes, with the IRA being the sole member). That said if you dip into a tax free retirement account, you will likely trigger significant taxes, so again this is where the tax counsel/IRA counsel would guide you to avoid those potential liabilities. There are some other potential issues with IRA LLCs concerning disqualified persons and prohibited transactions, to avoid triggering taxes (all pretty simple and navigable once you are informed and aware of the issues)

mattferderer 7y ago

No tax loss harvesting either though, which for most people I've talked to seems to be the better value.

Ambele 7y ago
Only if you're losing money on your cryptocurrency trades... in which case it's probably better to stay in the U.S. Dollar and tape off your trading finger. If your cryptocurrencies finally turn positive after you've harvested your losses then you'll owe it all back in taxes. If your trades never go south, then you'll be better off with tax-free gains.

LiquidSky 7y ago

A good general rule of thumb is if you think you've found some clever simple "hack" to get around tax or other regulations, it's probably not as clever as you think and has already been accounted for.

lonelappde 7y ago
It's not getting around regulations, it's using IRA regulations as intended.
throwaway_tech 7y ago
Another good general rule, especially when law is concerned, is there are always exceptions to the rule. Self-directed IRA LLCs are nothing new, but using them for tax free crypto trading is (obviously)...though I welcome any specific concerns.
mc3 7y ago
Unless you are a unicorn tech company

semi-extrinsic 7y ago

https://xkcd.com/1494/ https://xkcd.com/1494/

Ambele 7y ago

That sounds incredibly smart because crypto taxes are a huge headache to do yourself and crypto-tax preparers charge $500-$1000/year. Does having the LLC increase your tax complexity? If so, by how much?

throwaway_tech 7y ago
> Does having the LLC increase your tax complexity? Based on the verbiage of your question, I would simply say this isn't something you would try to structure without tax counsel/IRA counsel. Note, what I am referencing is known as a self-directed IRA LLC (sometimes called a special purpose LLC). If structured properly the IRA LLC should not need to file a federal tax return (it should be a single member LLC, so it is considered a disregarded for tax purposes, with the IRA being the sole member). That said if you dip into a tax free retirement account, you will likely trigger significant taxes, so again this is where the tax counsel/IRA counsel would guide you to avoid those potential liabilities. There are some other potential issues with IRA LLCs concerning disqualified persons and prohibited transactions, to avoid triggering taxes (all pretty simple and navigable once you are informed and aware of the issues)