4 ms·

Ehh, technically any transfer to another where full consideration is not received in return (in either money or money's worth) is a gift. And taxes on gifts ar

Ehh, technically any transfer to another where full consideration is not received in return (in either money or money's worth) is a gift. And taxes on gifts are presumptively payable by the donor, not the recipient. Disclaimer: not tax advice, YMMV etc.

kwertyoowiyop 5y ago
I love this thread! And what are the rules for unintended gifts?
- ars 5y ago
  The same. You can return or throw out the gift if you don't want it. If you keep it, and it's over the taxable limit, you have to report it and pay tax.
  - NovemberWhiskey 5y ago
    Please explain why you think the recipient of a gift is the one that has to pay tax on it.
    - dnautics 5y ago
      is this generally not understood? For example, if you go on price is right, and you win a nice trip to tahiti, you still have to pay tax on it.
      - NovemberWhiskey 5y ago
        If it's generally understood, then it's wrongly understood: https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes https://www.irs.gov/businesses/small-businesses-self-employe... "Who pays the gift tax? The donor is generally responsible for paying the gift tax." >For example, if you go on price is right, and you win a nice trip to tahiti Those are prizes or winnings, not gifts. Totally different tax treatment.
      - stonemetal12 5y ago
        Gameshow winnings are not a gift. I think it is considered gambling and taxed accordingly.
        kbenson 5y ago
        Well, most people might think any sort of Crypto is gambling too...
    - 0x0 5y ago
      Because otherwise you can come and build me a website and I can gift you $10k and wow nobody needs to pay income tax anymore?
      - NovemberWhiskey 5y ago
        No, because when you give me $10K because I made you a website, you're obviously paying me for my work. The IRS is not stupid, and doesn't look at the form you claim, it looks at the actual factual situation.
        throw123123123 5y ago
        The IRS doesn't look at any factual situation, its clerks in an administration building..
PragmaticPulp 5y ago
This is an interesting case because presumably they would want to write this off as a loss (in a theoretical world where they were paying US taxes) so it’s not a gift. Technically the profits are a result of the computer code of the system, though. If they want to stick to their arguments that smart contracts are the law, then it’s just a regular payout from the system according to the rules of the system. Business as usual. However, I suspect when the losses are in the tens of millions they’ll drop the pretense of “code is the contract” and start pursuing other legal avenues. The loss was about 1% of the total money locked in Compound.
l33tman 5y ago
You can make erroneous money transfers and it doesn't automatically count as a gift, the receiver can be liable if the amount makes it obvious it's an error for example and she won't return it. I'm sure this differs between jurisdictions in the details though..
- NovemberWhiskey 5y ago
  No, of course a mistaken payment isn't a gift, and there's an appropriate mechanism for retrieving mistaken payments through the civil courts (if necessary). But a mistaken payment is also not income and threatening willfully to mis-file a 1099 is completely inappropriate. If they want to get the mistaken payments back, they can ask nicely, they can send threatening letters, they can sue in court; but they can't use the IRS as their cat's paw because the only tax situation that fits the facts here is gift.
  - mindslight 5y ago
    It's not a gift - if you take the position that a smart contract is a binding contract, then the payment is pursuant to a contract that itself was entered into for full consideration. Nobody knew how the contract would develop, but the same applies for many contracts - eg options trading. If one wants to claim it's a mistaken payment, then the recipient needs to return the tokens - their legal ownership was never conveyed. Additionally, you can tell the intent is not that of a gift because the transferrer immediately wants it back.
    - porknubbins 5y ago
      But does anyone take the position that a smart contract is a binding contract? I believe even Nick Szabo regrets coining the term since its just a program that can transfer value so including it term “contract” is misleading.
      - mindslight 5y ago
        To me, that's the entire point of them - a single source of truth in an extremely formal language.
deleted 5y ago
[deleted]

kwertyoowiyop 5y ago

I love this thread! And what are the rules for unintended gifts?

ars 5y ago
The same. You can return or throw out the gift if you don't want it. If you keep it, and it's over the taxable limit, you have to report it and pay tax.
- NovemberWhiskey 5y ago
  Please explain why you think the recipient of a gift is the one that has to pay tax on it.
  - dnautics 5y ago
    is this generally not understood? For example, if you go on price is right, and you win a nice trip to tahiti, you still have to pay tax on it.
    - NovemberWhiskey 5y ago
      If it's generally understood, then it's wrongly understood: https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes https://www.irs.gov/businesses/small-businesses-self-employe... "Who pays the gift tax? The donor is generally responsible for paying the gift tax." >For example, if you go on price is right, and you win a nice trip to tahiti Those are prizes or winnings, not gifts. Totally different tax treatment.
    - stonemetal12 5y ago
      Gameshow winnings are not a gift. I think it is considered gambling and taxed accordingly.
      - kbenson 5y ago
        Well, most people might think any sort of Crypto is gambling too...
  - 0x0 5y ago
    Because otherwise you can come and build me a website and I can gift you $10k and wow nobody needs to pay income tax anymore?
    - NovemberWhiskey 5y ago
      No, because when you give me $10K because I made you a website, you're obviously paying me for my work. The IRS is not stupid, and doesn't look at the form you claim, it looks at the actual factual situation.
      - throw123123123 5y ago
        The IRS doesn't look at any factual situation, its clerks in an administration building..

PragmaticPulp 5y ago

This is an interesting case because presumably they would want to write this off as a loss (in a theoretical world where they were paying US taxes) so it’s not a gift. Technically the profits are a result of the computer code of the system, though. If they want to stick to their arguments that smart contracts are the law, then it’s just a regular payout from the system according to the rules of the system. Business as usual. However, I suspect when the losses are in the tens of millions they’ll drop the pretense of “code is the contract” and start pursuing other legal avenues. The loss was about 1% of the total money locked in Compound.

l33tman 5y ago

You can make erroneous money transfers and it doesn't automatically count as a gift, the receiver can be liable if the amount makes it obvious it's an error for example and she won't return it. I'm sure this differs between jurisdictions in the details though..

NovemberWhiskey 5y ago
No, of course a mistaken payment isn't a gift, and there's an appropriate mechanism for retrieving mistaken payments through the civil courts (if necessary). But a mistaken payment is also not income and threatening willfully to mis-file a 1099 is completely inappropriate. If they want to get the mistaken payments back, they can ask nicely, they can send threatening letters, they can sue in court; but they can't use the IRS as their cat's paw because the only tax situation that fits the facts here is gift.
- mindslight 5y ago
  It's not a gift - if you take the position that a smart contract is a binding contract, then the payment is pursuant to a contract that itself was entered into for full consideration. Nobody knew how the contract would develop, but the same applies for many contracts - eg options trading. If one wants to claim it's a mistaken payment, then the recipient needs to return the tokens - their legal ownership was never conveyed. Additionally, you can tell the intent is not that of a gift because the transferrer immediately wants it back.
  - porknubbins 5y ago
    But does anyone take the position that a smart contract is a binding contract? I believe even Nick Szabo regrets coining the term since its just a program that can transfer value so including it term “contract” is misleading.
    - mindslight 5y ago
      To me, that's the entire point of them - a single source of truth in an extremely formal language.

deleted 5y ago

[deleted]