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Title: What documents are required in-person cash -> BTC transactions? (buying BTC) Post by: smoothie on February 13, 2015, 11:34:42 PM Please give me your take on the following scenario...
(This is assuming everything in red below is true for person A as well as: person A sends bitcoins to -> licensed bitcoin exchange person A has an exchange account in person A's name and sells for USD and sends USD to a bank account in their name as well.) DIAGRAM for simplicity: CASH PERSON A gives ---------> Person B in person BTC PERSON B sends --------> Person A's BTC address (personal wallet or exchange address) BTC PERSON A converts ---------> at a profit or loss to USD on licensed exchange USD PERSON A sends ----------> to PERSON A's bank account Question: What documentation would person A be required to have for tax purposes for capital gains losses aside from exchange transactions for person A's account with said exchange and bank statements showing incoming ACH/wire transactions? Moreso...Are there any MSB registering requirements for the Person A? Here is something FINCEN posted in Jan 2014. LINK: http://www.fincen.gov/news_room/nr/html/20140130.html Quote The second states that a company purchasing and selling convertible virtual currency as an investment exclusively for the company’s benefit is not a money transmitter. The rulings further interpret FinCEN’s March 18, 2013 Guidance to address these business models. Any input? Title: Re: What documents are required in-person cash -> BTC transactions? (buying BTC) Post by: The00Dustin on February 14, 2015, 11:14:47 AM While I am neither a lawyer nor an accountant and my post should not be taken as legal nor financial advice, I would assume that you would simply need a ledger with purchase prices. My reasoning here is that hours and miles that are deductible only need recorded in a journal. In theory, I could be wrong and an auditor may request a bill of sale in an audit. In that case, when you didn't have a bill of sale, the auditor may treat the bitcoin as if it had a $0 cost basis. Surely you would go to tax court at this point, and only after that would the answer truly be known. That having been said, some sellers might have no trouble signing a bill of sale for you, and currently, this would only be for your records (the IRS wouldn't see it unless you were audited). This is based on my understanding of current tax law (wherein there is an option in capital gain/loss forms for gains/losses not reported to the IRS on a 1099) and operating under the same assumption that you already have made (that you are investing and not transmitting money for others). That having been said, to clarify:
While I cannot guarantee my knowledge is up to date, and I am not an accountant, so my post should not be taken as financial advice, the following is my opinion with some links to help back it up and understand it: In the US, bitcoin is a capital asset for tax purposes, and you report income and losses on it the same way you report income and losses on any asset. For more specific guidance, see these links: http://www.irs.gov/pub/irs-drop/n-14-21.pdf - This document confirms what I am saying (but could be superseded by new guidance or regulation in the future if it hasn't been already). It also references other IRS documents you can search for. http://www.irs.gov/pub/irs-pdf/p17.pdf - Until/unless the classification of virtual currency is changed this document is a good reference because it talks about capital gains and losses in depth, chapter 14 of the 2014 tax year version of this document is where the meat is, although there may be definitions earlier in the document. Note I include this document because it is not referenced in the previous document (although it may be referenced in the other documents that are referenced in the first link). Title: Re: What documents are required in-person cash -> BTC transactions? (buying BTC) Post by: smoothie on February 18, 2015, 01:07:12 AM While I am neither a lawyer nor an accountant and my post should not be taken as legal nor financial advice, I would assume that you would simply need a ledger with purchase prices. My reasoning here is that hours and miles that are deductible only need recorded in a journal. In theory, I could be wrong and an auditor may request a bill of sale in an audit. In that case, when you didn't have a bill of sale, the auditor may treat the bitcoin as if it had a $0 cost basis. Surely you would go to tax court at this point, and only after that would the answer truly be known. That having been said, some sellers might have no trouble signing a bill of sale for you, and currently, this would only be for your records (the IRS wouldn't see it unless you were audited). This is based on my understanding of current tax law (wherein there is an option in capital gain/loss forms for gains/losses not reported to the IRS on a 1099) and operating under the same assumption that you already have made (that you are investing and not transmitting money for others). That having been said, to clarify: While I cannot guarantee my knowledge is up to date, and I am not an accountant, so my post should not be taken as financial advice, the following is my opinion with some links to help back it up and understand it: In the US, bitcoin is a capital asset for tax purposes, and you report income and losses on it the same way you report income and losses on any asset. For more specific guidance, see these links: http://www.irs.gov/pub/irs-drop/n-14-21.pdf - This document confirms what I am saying (but could be superseded by new guidance or regulation in the future if it hasn't been already). It also references other IRS documents you can search for. http://www.irs.gov/pub/irs-pdf/p17.pdf - Until/unless the classification of virtual currency is changed this document is a good reference because it talks about capital gains and losses in depth, chapter 14 of the 2014 tax year version of this document is where the meat is, although there may be definitions earlier in the document. Note I include this document because it is not referenced in the previous document (although it may be referenced in the other documents that are referenced in the first link). Good to know for future reference. Title: Re: What documents are required in-person cash -> BTC transactions? (buying BTC) Post by: crazyearner on February 21, 2015, 07:42:20 PM Nice way of not paying tax on too lol person gives coin for cash in hand like cash in hand jobs getting paid in cash can easily not pay duties but many dont want to pay anything on them and remain hidden from the tax man but also handy to know with the details and information provided too.
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