With the rise of Bitcoin and other blockchain coins/tokens, the politicians have re-written the tax code to exclude any previous loopholes regarding the trading of cryptos.
An excerpt from: http://bitcoinist.com/cryptocurrency-investors-lose-tax-break/
The new U.S. tax code amends Internal Revenue Code (IRC) Section 1031 (a)(1) regarding “like kind exchanges,” excluding all cryptocurrencies from a previous legal loophole and making all cryptocurrency trades a taxable event.
The 1031 exchange is typically a real estate transaction in which an investor would sell a piece of property and purchase another similar type of property within a certain period of time. This would exempt them from getting taxed on any capital gains on the selling of the initial property.
Starting Jan. 1st, 2018, all cryptocurrency trades will be a taxable event, including swapping one cryptocurrency for another.
Since March 2014, the IRS has treated Bitcoin and other digital currencies as property for tax purposes. I'm not sure why they labeled Bitcoin and other blockchain technologies as 'property' ??? They apparently do not understand it as it is not at all similar to any type of physical property. (But what can we say now? Leave it up to those dipshits to produce new laws even though they do not know exactly what they are doing) Make sense...
So every swap of a crypto is a taxable event in 2018... better keep a spreadsheet of all of your buys, sells and swaps if you want to abide by the law...
My understanding:
I buy .5 of a Bitcoin for $7,000
It rises to $7,300 within 3 hours and I want to purchase Ethereum
I swap the .5 BTC for 18.25 ETH for a total of $7300
Because BTC appreciated by $300 before I executed the swap, that is taxable income.
At this point, I'm not sure how many people in the USA that purchase cryptos are actually going to keep track of every transaction or accurately report them...??? But you should know that the IRS has been using a piece of software named Chainalysis to track Bitcoin transactions. (Do a search to learn more)
I think the new tax law affects avid traders a lot more than the casual purchaser of coins/tokens for a long term hold (more than one year). My understanding is that if you do hold onto a crypto coin for more than a year, the tax rate is lower. This is probably the way to go if you do not want to have 30 pages of transactions to add to your 2018 tax filing...
One last word regarding congress and the law makers: It is fine if they can execute insider trades and profit hundreds of thousands / millions of dollars. But if your a small guy and made a few thousand off of a Bitcoin transaction, your going to get taxed up the ass.
There are several coins in which the transactions are anonymous like Monero, Dash, Zcash, Pivx, Komodo, Zcoin, Nav coin, Verge, ZenCash. I'm sure the interest in these coins will continuously increase as a way to keep the IRS / Government from tracking transactions.
Nice post, beautifully presented and explained. detail oriented with nice pics. thank you for sharing this with us, Upvoted. . .
Check out my latest post in my blog @kingjan
https://steemit.com/finance/@kingjan/bitcoin-a-fool-s-virtual-gold-in-general-view
Well, I do not consider myself as a very good writer, but try to get a point across. It appears that you enjoy writing based on your post.
The problem with that:
Without you converting your crypto to fiat, the words without strike through are the only relevant parts.
Btc and eth have an exchange pairing, and this doesn't involve fiat.
Also, what happens if you start spending your crypto? Is every coffee purchase of btc going to be considered a capital event? What if your money never makes it back to fiat?
They can pass all the laws they want, they can run whatever software they want, but when the laws are obsolete before they even get passed then there isn't much point.
I just had a meeting with my CPA. He informed me that every crypto trade, whether crypto to crypto or crypto and fiat is a taxable trade. The author is correct.
so how are they going to go when you start actually spending your crypto? is every $3 coffee that i use VTC to pay for going to be a capital event?
and the fact of the matter is - there is no record of these crypto trades. Once you're in the blockchain you're pretty much untrackable - unless start to expect exchanges to report activities - and then it gets even trickier because you can use almost any exchange in the world.
Yeah, we can think whatever we want, but the politicians/IRS think differently than us and force laws and unjust taxes on us. I can see more people moving out of the US to escape the taxes...
I'm not sure how they will track the amount of tax regarding the purchase of a cup of coffee. This whole thing is a clusterf**k... A money grab by the government so they can squander it on useless crap that we do not need...
I pretty much made a comment like this on a similar post.
For governments to effectively tax crypto, they'd need to throw out their tax laws and start over.
They can try, but they'll fail.
At this point the vast majority of Americans have so far declined to learn more than the bare minimum about Bitcoin, cryptocurrencies and the blockchain. And this includes the politicians who passed this new law without understanding the potential of the blockchain and how our investing in ICO's advances technology and improves our everyday lives.
Too bad some of the brilliant minds that are working on these ICO's are not our politicians.
https://gizmodo.com/survey-most-americans-remain-blissfully-unaware-of-the-1820027828
When it comes to profits by a select group with a new technology, politicians do not need to understand it, they just make laws on how much they want to steal in taxes.
This was obvious, it was only matter of time.
Thank you for the info.
Resteemed!
Yes, we will see what happens in 2018...
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