3 ms·

1) If I held xxx bitcoins in a foreign exchange, having bouhgt y% of those xxx coins there; and transfered z% of the coins there; then later turned into cash w%

by eof 13y ago

1) If I held xxx bitcoins in a foreign exchange, having bouhgt y% of those xxx coins there; and transfered z% of the coins there; then later turned into cash w% of those coins and withdrew it to my USA bank account; then transfered the remaining xxx-w% coins to my local wallet; what do i do about taxes. 2 ) additionally, of those xxx-w%; i lost a password protecting all of the coins and paid 10% of xxx-w% (measured in bitcoins) for someone to crack the wallet passphrase, then what do i do about taxes? 3) then, my computer got hacked and someone stole the remaining bitcoins leaving me with 0 on my local machine and n (where n is << xxx-w%) in a different, us based wallet, then what do i do about taxes? to be clear, i have 3 questions what happens if 1) happens. what happens if 1) THEN 2) happens. what happens if 1) THEN 2) THEN 3) happens? edit: the z% of coins transferred into the foreign exchange came from services rendered at a fair market value of `d`

Guvante 13y ago
I am not a tax expert, so take this with a grain of salt, but I believe these are accurate answers. 1. Once you mix your coins the value of a coin from your perspective becomes the average cost of a coin. So if you paid $1 for a coin and $100 for another coin, put both into something that made the distinction impossible, and then sold a coin for $150, you would have to pay taxes on $150 - ($100 + $1)/2 or $99.5 of income. Note that turning into non-Bitcoin is the event, type of Bitcoin does not matter, but anything but a Bitcoin does. 2. Technically you would have an income on your gains of xxx-w%. I don't know offhand if you could write off the expense, but I doubt it. 3. You are talking about bitcoins being bitcoins, so no taxable event. Whether it counts as an expense for writing off purposes is another point I don't know. This would likely be a loss so could be deducted. Your edit: Assuming you account for the value of the bitcoins gained at the time you gained them as income (which you should have) then you can consider that as the cost of the bitcoins. If you never counted the value of the bitcoins when you gained them then your cost basis is $0, so the entire value of the cash out is income. There may also be penalties involved in that but they likely won't care for small amounts of original value.
gamblor956 13y ago
1) You pay them! Gain is measured the same way it is with any other asset (including any non-USD currency): sale price less acquisition cost (aka "cost basis" in tax parlance) and certain maintenance expenses. There are other adjustments which probably aren't applicable to digital currency. In this case, it doesn't appear that w was entirely y or z coins, and probably includes coins from both groups. Since the z have a different acquisition cost, generally the calculation is split into smaller sub-calculations to the extent the data is available (gain on sale of the y coins sold, and gain on sale of the z coins sold). The cost basis of goods acquired as compensation is generally the amount treated as income for other tax purposes, usually the fair market value. If a = y coins sold and b = z coins sold, then gain should be... =[sales price allocable to a coins - purchase purchase allocable to a coins] + [sales price allocable to b coins - purchase purchase allocable to b coins] =[[a/w * w sales price - [a/y* y purchase price]] + [b/w * w sales price - [b/z* z purchase price] 2) It should be possible to add the cost of the cracker into the "cost basis" of the xxx-w coins, which should affect the amount of taxable gain on a later sale of some or all of those coins. However, there should not be any immediate or current year tax implications. 3) There are some write-offs for lost or stolen goods. Don't know how applicable they would be to digital goods like Bitcoin since nobody has actually gotten to that point yet! It's not really been established whether digital goods can be "lost" for tax purposes. If analogizing the tangible property, its likely that a court would eventually say they can be lost and thus written-off, but no courts actually gone out and said it...yet. (There have been cases dealing with this on non-tax grounds.) However, in this situation, the tax from #1 is still there, at best there could be a deduction for the losses incurred in #3.

by eof 13y ago

Guvante 13y ago

I am not a tax expert, so take this with a grain of salt, but I believe these are accurate answers. 1. Once you mix your coins the value of a coin from your perspective becomes the average cost of a coin. So if you paid $1 for a coin and $100 for another coin, put both into something that made the distinction impossible, and then sold a coin for $150, you would have to pay taxes on $150 - ($100 + $1)/2 or $99.5 of income. Note that turning into non-Bitcoin is the event, type of Bitcoin does not matter, but anything but a Bitcoin does. 2. Technically you would have an income on your gains of xxx-w%. I don't know offhand if you could write off the expense, but I doubt it. 3. You are talking about bitcoins being bitcoins, so no taxable event. Whether it counts as an expense for writing off purposes is another point I don't know. This would likely be a loss so could be deducted. Your edit: Assuming you account for the value of the bitcoins gained at the time you gained them as income (which you should have) then you can consider that as the cost of the bitcoins. If you never counted the value of the bitcoins when you gained them then your cost basis is $0, so the entire value of the cash out is income. There may also be penalties involved in that but they likely won't care for small amounts of original value.

gamblor956 13y ago

1) You pay them! Gain is measured the same way it is with any other asset (including any non-USD currency): sale price less acquisition cost (aka "cost basis" in tax parlance) and certain maintenance expenses. There are other adjustments which probably aren't applicable to digital currency. In this case, it doesn't appear that w was entirely y or z coins, and probably includes coins from both groups. Since the z have a different acquisition cost, generally the calculation is split into smaller sub-calculations to the extent the data is available (gain on sale of the y coins sold, and gain on sale of the z coins sold). The cost basis of goods acquired as compensation is generally the amount treated as income for other tax purposes, usually the fair market value. If a = y coins sold and b = z coins sold, then gain should be... =[sales price allocable to a coins - purchase purchase allocable to a coins] + [sales price allocable to b coins - purchase purchase allocable to b coins] =[[a/w * w sales price - [a/y* y purchase price]] + [b/w * w sales price - [b/z* z purchase price] 2) It should be possible to add the cost of the cracker into the "cost basis" of the xxx-w coins, which should affect the amount of taxable gain on a later sale of some or all of those coins. However, there should not be any immediate or current year tax implications. 3) There are some write-offs for lost or stolen goods. Don't know how applicable they would be to digital goods like Bitcoin since nobody has actually gotten to that point yet! It's not really been established whether digital goods can be "lost" for tax purposes. If analogizing the tangible property, its likely that a court would eventually say they can be lost and thus written-off, but no courts actually gone out and said it...yet. (There have been cases dealing with this on non-tax grounds.) However, in this situation, the tax from #1 is still there, at best there could be a deduction for the losses incurred in #3.