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The HN thread is also illuminating with another knowledgeable person commenting in the thread directly. https://news.ycombinator.com/item?id=6782839 https://ne

by otoburb 13y ago

The HN thread is also illuminating with another knowledgeable person commenting in the thread directly. https://news.ycombinator.com/item?id=6782839 https://news.ycombinator.com/item?id=6782839

yebyen 13y ago
The bit that I gleaned from this posting is that you may be able to claim only $400 of "capital gain" in the situation I described above, but not unless you held the capital asset for sufficient time between each purchase and sale to claim that income as a capital gain. Otherwise, you're claiming $1250 of income and $950 of expenses, and I would guess if you're lucky, you can write off 75% (wild guess) of that $950 so you pay tax on $538, even though your real gain is only $200. If your tax rate is 33%... After paying taxes on $538, you profit $22 from the sale and pay $178 in taxes. UNLESS you can structure the timing of the exchanges (hold the asset long enough) to frame the activity as a capital gain with a cost basis of $950, in which case you made out a little better. This example may be too small to be real, but I think I have it right. If the gain happened while holding the asset over a longer period of time (how long?) then it's capital asset and capital gains tax. You might not pay 33% in taxes and you also might not be able to deduct 75% of your expenses.
- gamblor956 13y ago
  You're calculating the capital gains incorrectly. Expenses only figure into the calculation when the related asset is sold, i.e., the $850 for the second Bitcoin purchase doesn't affect the taxation of the first bitcoin (which was sold). I also have no idea what you're talking about when you say that you get to "write off 75%" if you're lucky. That would be incredibly unlucky (you want to write off assets/income, not liabilities/expenses, for purposes of determining taxable income).
  - yebyen 13y ago
    When I said "wild guess" I meant it, and same goes for "not an accountant." Thank you for commenting, as someone with some business experience. I am really a person who has never claimed any income outside of what has come in a biweekly paycheck from an employer who does withholding for me, so it's clear, I have no idea what I'm talking about and I'm repeating things I've heard from people smarter than me.

by otoburb 13y ago

The HN thread is also illuminating with another knowledgeable person commenting in the thread directly. https://news.ycombinator.com/item?id=6782839 https://news.ycombinator.com/item?id=6782839

yebyen 13y ago

The bit that I gleaned from this posting is that you may be able to claim only $400 of "capital gain" in the situation I described above, but not unless you held the capital asset for sufficient time between each purchase and sale to claim that income as a capital gain. Otherwise, you're claiming $1250 of income and $950 of expenses, and I would guess if you're lucky, you can write off 75% (wild guess) of that $950 so you pay tax on $538, even though your real gain is only $200. If your tax rate is 33%... After paying taxes on $538, you profit $22 from the sale and pay $178 in taxes. UNLESS you can structure the timing of the exchanges (hold the asset long enough) to frame the activity as a capital gain with a cost basis of $950, in which case you made out a little better. This example may be too small to be real, but I think I have it right. If the gain happened while holding the asset over a longer period of time (how long?) then it's capital asset and capital gains tax. You might not pay 33% in taxes and you also might not be able to deduct 75% of your expenses.

gamblor956 13y ago
You're calculating the capital gains incorrectly. Expenses only figure into the calculation when the related asset is sold, i.e., the $850 for the second Bitcoin purchase doesn't affect the taxation of the first bitcoin (which was sold). I also have no idea what you're talking about when you say that you get to "write off 75%" if you're lucky. That would be incredibly unlucky (you want to write off assets/income, not liabilities/expenses, for purposes of determining taxable income).
- yebyen 13y ago
  When I said "wild guess" I meant it, and same goes for "not an accountant." Thank you for commenting, as someone with some business experience. I am really a person who has never claimed any income outside of what has come in a biweekly paycheck from an employer who does withholding for me, so it's clear, I have no idea what I'm talking about and I'm repeating things I've heard from people smarter than me.