This post is specifically for U.S. citizens if you are not one this won't apply to you.

I've seen a lot of confusion on how capital asset taxation works, and specifically in the crytopcurrency realm. The strategy of "buy on the way up, sell on the way" has legitimate tax implications.

Let's start with the basics. The IRS has made specific stances that cryptocurrency is considered property and subject to capital asset taxation. It is not treated as stocks. This has some fairly serious implications for trading/buying/selling around here.

1. Gains are considered short-term or long-term based on how long the asset is held. Any assets held less than one year are taxed as ordinary income. If you buy in January (on the way up) and sell in March (on the way down). You technically have to report this as an increase in ordinary income. This does not matter if you don't transfer back to fiat. It is still a taxable event. Meaning it raises your federal tax bracket rate and you have to pay the ordinary income tax rate (as high as 39.6%). If you happen to be a jerk-off and live in California or New York, you are ALSO subject to state income tax rates - top rate is 13.3% in California. This is in addition to your federal tax obligation. The IRS just recently issued a John Doe summons to subpoena the transaction records on Coinbase. Unreported gains will not be handled nicely.

2. Gains held longer than one year are taxed as capital gains, at a much reduced rate, 20% if you are in the 39.6% federal tax bracket. Try as much as you can to hold for one year the tax savings are huge.

3. If you exchange one currency for another this is not eligible for what is known as a like-kind exchange (1031). Like-kind exchanges are not considered taxable events and you are able to transfer you original basis to the new asset at transfer. What does this mean? If you transfer BTC into ETH you have a taxable event. Talk about fucked in the ass.

4. If you are margin trading in which you borrow one currency immediately sell it, then buy back the initial currency at the end of the trade for a gain. Guess what every transfer is a taxable event. Luckily, if you buy the second currency almost right when you borrow it the fair market value will not be much different than your cost basis, thus no taxable gain. But when you sell back to the original currency and have a gain, technically that is a short-term gain and is taxed as ordinary income. Any interest you use to finance this loan, however, is considered investment interest and is able to be deducted.

So people should be considering the potential tax implications. Of course, it is quite hard to enforce this as the exchanges are not issuing 1099s. But don't expect to wire yourself $10k a week and the IRS won't find out about it. You can certainly plead ignorance and not do anything, but you may get Sniped, as in Wesley Snipes. Unless you were in the move Blade, your stay in jail will be much different. You may have to go bluepill just to survive.

Don't get Sniped. If we are talking under $20,000. I would worry a lot less, there are plenty of BTC ATMs, or local meetups where you can exchange for cash, even though its 3% below the spot. I'm not saying to do this, as it is illegal, I'm just saying people have been known to do this.

As the old adage goes, "The only certainties in life are faking your own death and taxes". It's clear which route I'm going, Alphabay has some interesting offers.

(05-25-2017 05:12 PM)Travel Museums Wrote:  It takes a week to have the bit coins in your wallet for Coinbase. So that's next week. It's just a weird transaction to me. Right after that trade I went on my brokerage and traded several ETFs (for no fee nor commission). It was executed in a few seconds. The shares are in my portfolio showing a realtime percentage in less than ten seconds.

What is your point?

You seem to be a bitcoin newbie.

Of course, if you are a newbie in creating an account, then you are going to have limitations.

Also, bitcoin is not an ETF.. If someone sells you a bitcoin, then you sell the bitcoin, your transaction is not reversible.. so cautionary measures have to be taken in order to ensure that you are not either engaging in fraud or that you are not going to run off with the money.

Coinbase has made this choice about how to balance its interests.. You can use other services besides coinbase or other ways to get bitcoins, and some of those ways can be instant and they can be with little to no verification.. you hand over the cash and another person sends you bitcoin, directly. No third party, and Powerful.

(05-25-2017 05:13 PM)Armogan Wrote:  Unless you were in the move Blade, your stay in jail will be much different. You may have to go bluepill just to survive.

lol you had to throw at least one quip in there, huh? Good info and I've noted before many pages back that some of these guys making incremental trades back/forth over multiple accounts on exchanges are likely going to have a bitch of a time reporting every taxable event.

Are you 100% sure that BTC to altcoin transactions and vice versa can't be considered like-kind exchanges? I don't recall seeing any response from the IRS about this matter, unlike their solid position on BTC as a capital asset. It seems like a possibility that this can slip through.

https://www.tyracpa.com/like-kind-exchan...urrencies/

https://klasing-associates.com/possible-...urrencies/

(05-25-2017 05:24 PM)booshala Wrote:  

(05-25-2017 05:13 PM)Armogan Wrote:  Unless you were in the move Blade, your stay in jail will be much different. You may have to go bluepill just to survive.

lol you had to throw at least one quip in there, huh? Good info and I've noted before many pages back that some of these guys making incremental trades back/forth over multiple accounts on exchanges are likely going to have a bitch of a time reporting every taxable event.

Are you 100% sure that BTC to altcoin transactions and vice versa can't be considered like-kind exchanges? I don't recall seeing any response from the IRS about this matter, unlike their solid position on BTC as a capital asset. It seems like a possibility that this can slip through.

https://www.tyracpa.com/like-kind-exchan...urrencies/

https://klasing-associates.com/possible-...urrencies/

Yes. I am sure. I actually consulted with one of the attorneys from the link you posted, he indicated it will likely not qualify as 1031, and if it does it will be a test case. Meaning you will probably go to court.

Edit: I read the first article, and clearly they have conflicting views. But the first article indicates that is his opinion, and not very certain the IRS will agree. The second guy believes 1031 will not be allowed.

Complete newb here. Been saying I'd get into Bitcoin since 2012/2013? and finally decided F-it just jump in and learn as you go. Bought ETH on Monday (right before a 18% drop..YAY) on coinbase. Looking to buy more in the future (maybe some BTC too) but want to get away from coinbase's fees and maybe have the convenience of setting up some buy at $xxx (not sure what they are called). Don't get me wrong coinbase is simple and I got my crypto, just looking for a better exchange for me personally. I want to transfer funds in from my bank account and not have to procure crypto from somewhere else first and Im in the U.S.(minnesota). So far I am leaning towards Gemini, possibly Kraken; awaiting verification from both. Anything better out there or differences between the two?

GDAX - Can't use (one of 3 states that they don't service)
Poloniex - I believe they only allow you to transfer in crypto to buy with

Anything else out there I should be looking at? Thanks in advance guys!

(05-25-2017 05:12 PM)JayJuanGee Wrote:  In the meantime... BUY, BUY, BUY!!!!!!! haahahaha don't consider my excited utterance as investment advice.

Here is a good read for you: https://safe-network-explained.github.io...bitcoiners

One of the things that annoys me the most about using bitcoin is having to wait for the blocks. Some sites require six conformations. That could take anywhere from ten minutes to three hours depending on luck. This is still quite good, comparing to bank transfers. But I know how long a bank transfer takes, I have no idea how long it will take for my bitcoin transaction to clear. And I never have to wait for credit cards transactions. There are also some other centralized systems that do instant transactions but mostly domestic and not international.

(05-25-2017 05:32 PM)Armogan Wrote:  

(05-25-2017 05:24 PM)booshala Wrote:  

(05-25-2017 05:13 PM)Armogan Wrote:  Unless you were in the move Blade, your stay in jail will be much different. You may have to go bluepill just to survive.

lol you had to throw at least one quip in there, huh? Good info and I've noted before many pages back that some of these guys making incremental trades back/forth over multiple accounts on exchanges are likely going to have a bitch of a time reporting every taxable event.

Are you 100% sure that BTC to altcoin transactions and vice versa can't be considered like-kind exchanges? I don't recall seeing any response from the IRS about this matter, unlike their solid position on BTC as a capital asset. It seems like a possibility that this can slip through.

https://www.tyracpa.com/like-kind-exchan...urrencies/

https://klasing-associates.com/possible-...urrencies/

Yes. I am sure. I actually consulted with one of the attorneys from the link you posted, he indicated it will likely not qualify as 1031, and if it does it will be a test case. Meaning you will probably go to court.

Edit: I read the first article, and clearly they have conflicting views. But the first article indicates that is his opinion, and not very certain the IRS will agree. The second guy believes 1031 will not be allowed.

Thanks for clarifying that. Unsure of how to proceed, probably gonna have to talk to my CPA about this as well.

Regarding taxes, can't you just download transaction history and plug it into some kind of software that crunches your taxes?

I haven't seen any CSV data export options on the exchanges and even if they did have that, it'd almost certainly be up to you to figure out what the $USD equivalent was at purchase/sales time. i.e. hunting down BTC prices for every transaction you made. It's not impossible, but what a fucking hassle, especially if you weren't on top of this from the get-go.

I bet the first guy that figures out specialized tax software for cryptocurrency transactions will do very well for himself.

I've heard good things about this.

https://bitcoin.tax/

I think you can dump transaction history directly from GDAX, Kraken, Poloniex, Gemini, etc.

Haven't used it myself, but probably will look into it. I've kept detailed records from day one because I need to know my cost-basis in order to figure out what kind of balls deep insane risk I want to take everyday when I wake up.

Poloniex definitely has a .csv export, I think Kraken as well. Figuring out the daily BTC prices should't be too hard. Can get a dump daily last 3 years from google.

Just pay a tax attorney to do it for you. Shouldn't take more than 4 hours.

You guys should just forget this tax stuff. Fake your own death like me, I can get a group rate on Alphabay.

(05-25-2017 08:27 PM)Armogan Wrote:  I've heard good things about this.

https://bitcoin.tax/

Yeah that looks like it will make my life a whole lot easier.

I can try to dump it all on my tax accountant since I'm already paying him to do my taxes.

If he can't figure it out and IRS starts cracking down, I'll take you up on faking my own death.........

(05-25-2017 08:27 PM)Armogan Wrote:  I've heard good things about this.

https://bitcoin.tax/

I think you can dump transaction history directly from GDAX, Kraken, Poloniex, Gemini, etc.

Haven't used it myself, but probably will look into it. I've kept detailed records from day one because I need to know my cost-basis in order to figure out what kind of balls deep insane risk I want to take everyday when I wake up.

Poloniex definitely has a .csv export, I think Kraken as well. Figuring out the daily BTC prices should't be too hard. Can get a dump daily last 3 years from google.

Just pay a tax attorney to do it for you. Shouldn't take more than 4 hours.

You guys should just forget this tax stuff. Fake your own death like me, I can get a group rate on Alphabay.

Nice link, you're full of great info today, Armogan...

I guess my problem with BitCoin is that it's a purely speculative play, and that's why it's a bubble. That doesn't mean I don't have BTC but that I don't really consider it a "real" asset.

BitCoin is intended as a currency. You still can't buy anything with it - sure some computer hardware, and black market guns - but that's it. It's not being used for anything other than speculation, and that's the reason I believe it's a bubble.

I think it's different than other bubbles because it's global and can be more easily bought from anyone in any country than anything else. So it has far more market penetration than say the the US tech stock market bubble or 2007 US real estate - those had a limited # of buyers, whereas altcoins have no such limit - except for the 2-3 billion people capable of buying it in the world.

(05-25-2017 11:01 PM)monster Wrote:  I guess my problem with BitCoin is that it's a purely speculative play, and that's why it's a bubble. That doesn't mean I don't have BTC but that I don't really consider it a "real" asset.

BitCoin is intended as a currency. You still can't buy anything with it - sure some computer hardware, and black market guns - but that's it. It's not being used for anything other than speculation, and that's the reason I believe it's a bubble.

I think it's different than other bubbles because it's global and can be more easily bought from anyone in any country than anything else. So it has far more market penetration than say the the US tech stock market bubble or 2007 US real estate - those had a limited # of buyers, whereas altcoins have no such limit - except for the 2-3 billion people capable of buying it in the world.

There seems to be some kind of oversimplification going on here, no?

You say what bitcoin was intended to be (a currency) and then suggested that it is failing at its intention. I challenge you to consider whether that is the only use case for bitcoin and if folks might be trying to ascribe that to bitcoin in a kind of premature status? Sure, there is plenty of discussion of peer to peer currency in the white paper, but the actual application of bitcoin has become variations on what we consider as currency..

Then you say bitcoin is a world wide speculation phenomenon... World wide?

Well, the more world wide it becomes, the more of a networking effect that it can have and the more use cases that it can have - but even the most basic and central use case of bitcoin that allows you to securely store and transfer value that is decentralized and immutable - must have some kind of utility beyond mere speculation, no?

Sure the price goes up, in part, based on speculation, but how come bitcoin went from about 6 exchanges in 2013 to 150 exchanges in 2017? Only for speculation?

We have more and more people buying it (speculating on it), trading it, more and more companies going into developing it. Those concepts do not matter, but you are suggesting that there is some kind of technical sophistication to this bitcoin bubble because of its global presence?

O.k. bubble or not? are you going to invest in it? If it is a bubble, then you suggest NOT investing in it? correct?

Something is missing in your assessment. Are you warning us that the price is going to collapse? That we have a house of cards?

Do you think that all crypto are pure speculation? Do you think some of them have some utility (or some more than others)? Have you ever heard of the byzantine general's problem? Bitcoin solved that through Cryptography and proof of work. No utility in solving the Byzantine general's problem?

(05-25-2017 03:52 AM)Satoshi Wrote:  

(05-25-2017 03:48 AM)Skank_Hunt Wrote:  Why is Poloniex price for BTC now lower than Stamp and Kraken?

Poloniex is trading Tether USD it should be one USD to one USDT but apparently people are losing confident in USDT because now it's $1.04

No, for a long time now BTC/USDT was trading at 2-4% higher than Stamp. This was because there was not confidence in USDT that 1USDT = 1USD. It traded at 0.95, 0.96 etc. So Poloniex nearly always had far higher price than Stamp, where you can withdraw actual fiat.

Now, that situation has reversed. I've looked into it and the reason is because Poloniex has frozen the withdrawal of some coins, and there is a perceived increased risk of Poloniex going down. If you have balls of steel you could do about a 2-3% arbitrage multiple times, but that's assuming you can get your BTC out.

As far as the correction in BTC goes, it's very good in scaling terms that BTC can drop $500 and bounce back up. Some exchanges were down to near $2000. If the drops are higher, the increases are higher, and that's good news for me. I didn't even notice the drop as I was asleep.

Thoughts on LiteCoin? It's on Coinbase and will be added to BitStamp in June.

(05-26-2017 10:46 AM)exitus Wrote:  Thoughts on LiteCoin? It's on Coinbase and will be added to BitStamp in June.

For long term or short term speculation? For long term it's trash. Short term perhaps it will get pumped and dumped and someone skillful and/or lucky could perhaps make or lose some money trading it.

Relevant

   

I don't know why anyone would get into LiteCoin given the multiple alternatives with genuine quality. Should be dead already but somehow it's still alive.

So based on the huge drops looking at coinmarketcap...If I just want to be holder and not trader, do I buy in at the dip or wait to buy in when the market stabilizes and buy high. What is the general rule of thumb here? Please and thank you lol.

(05-26-2017 03:17 PM)Armogan Wrote:  Relevant

You're gonna love my nuts...

(05-26-2017 03:17 PM)Armogan Wrote:  Relevant

What does it mean? Not funny.

(05-26-2017 04:41 PM)raveking Wrote:  So based on the huge drops looking at coinmarketcap...If I just want to be holder and not trader, do I buy in at the dip or wait to buy in when the market stabilizes and buy high. What is the general rule of thumb here? Please and thank you lol.

Buy high sell low is general rule of thumb here.

(05-26-2017 01:10 PM)Satoshi Wrote:  

(05-26-2017 10:46 AM)exitus Wrote:  Thoughts on LiteCoin? It's on Coinbase and will be added to BitStamp in June.

For long term or short term speculation? For long term it's trash. Short term perhaps it will get pumped and dumped and someone skillful and/or lucky could perhaps make or lose some money trading it.

Why is it trash? They're adding it to bitstamp next month.

(05-26-2017 06:15 PM)exitus Wrote:  

(05-26-2017 01:10 PM)Satoshi Wrote:  

(05-26-2017 10:46 AM)exitus Wrote:  Thoughts on LiteCoin? It's on Coinbase and will be added to BitStamp in June.

For long term or short term speculation? For long term it's trash. Short term perhaps it will get pumped and dumped and someone skillful and/or lucky could perhaps make or lose some money trading it.

Why is it trash? They're adding it to bitstamp next month.

Sounds like a great opportunity to pump that shit.

(05-26-2017 06:15 PM)exitus Wrote:  Why is it trash? They're adding it to bitstamp next month.

Please, explain to us all the value prop for investing in Litecoin over Bitcoin, Ethereum...hell, I was going to list other quality projects, but let's just stick with the first two for now. Persuade me.