Bitcoin Forum

If I sold you a banana for 100 dollars and gave you a gift of 99$ worth of bitcoin to sweeten the deal, would I be considered a currency trader and have to comply like everyone else?

Alternative scenario. My banana is super delicious and I charge 100 dollars, they go thru a super complex organic process, are sprinkled with golden flakes and watered with angels urine, this process justify's the 100$ price. On said banana peel the public and private keys to a bitcoin wallet containing 99$ worth of bitcoin are written down. Is that legal?

Thanks for taking the time to answer this question. Disclaimer I do not sprinkle my bananas in angel urine:)

If not... what a sad world we live in.

Is it legal to give bitcoins as a gift? Yes.
Is it legal to falsely claim a transaction is a gift in order to avoid regulation and/or taxes (irrespective of whether bitcoins are involved)? No.

I hope that clears things up.

You wouldn't be avoiding taxes as you still pay the taxes on the 100 dollar banana.
You wouldn't be claiming the transaction as a gift. There was a sale here, I sold you a 100 dollar banana, you got the private and public keys on the peel

There is a project I am marginally involved in addressing this very dilemma.  It is called BitGift - a btc transmutation for jurisdictions regulating Bitcoin gift limits. I wish it were ready to share here, will try to remember to come back and update once [ANN] thread started

Please do remember to add it to this thread:)
So if I understand from your comment, it is legal, but the extent to which it is varies upon jurisdiction? I remember reading somewhere that under 250$ it is ok

To my knowledge, there are no US laws YET regulating free trade/gifting of bitcoins p2p as long as they stay bitcoins. As soon as you convert to dollars then it becomes taxable / booty for state looters. I believe $10k gift is the max deduction per person in the US. 

Ok thanks

Regulatory agencies (and the laws they enforce) in the United States will look past any formalistic attempts to evade the licensing requirements.  Accepting a payment and calling it a "gift" will not remove the transaction from the BSA or any other relevant provision.  The IRS rules on gift taxes are not relevant to this analysis, nor are the yearly exclusion limits.

TL;DR: Don't try to get cute with the regulations.

Bitcoin will make for some very interesting cases, I'm sure. I know of at least one person who is selling a product and allowing customers to overpay in fiat. He then sends the overpaying customer a "refund" in BTC. I'm confident this practice won't fly if it ever comes under investigation but consider another, hypothetical situation:

Instead of bananas, I start selling custom printed t-shirts. Each shirt has a unique QR code printed on the front that, when scanned, reveals a private key to a funded BTC address. I can charge more than one would usually pay for a t-shirt because each one is unique, see.

If I wanted to really be sneaky, I could send two shirts to each customer. One has the QR code the buyer specified upon ordering (a random message, a URL, etc.) and the other has the private key QR code (How did that get in there? My cousin must have accidentally packed a personal shirt of mine! Darn my nepotistic hiring practices. I guess I'll never learn.  ;) ).

Im sure they will shut down the business eventually. the question is wether they can send you in jail for such a scheme, or fine you. As long as its legal before they get around to making it illegal than such a proposition should be golden?

In both your banana scenario and my t-shirt scenario, the bitcoin seller is trying to disguise the fact that he is actually exchanging bitcoins for fiat. Any auditor that can demonstrate this to a reasonable degree would be able to hold you to any rules and/or regulations that then apply.


What they do to you in regards to fines and imprisonment probably depends on how egregious the offense is.

This is an interesting question.
Bitcoin needs more widespread adoption.

What if I made a bitcoin starter kit that included a paper wallet worth 0.25 BTC and sold it - for much more than the 0.25 is worth.

Obviously I would have had to purchase bitcoins to put in the paper wallet and factor that into my cost, but it would be a dumb way to just get 0.25 BTC as it would be over-priced. The target would be people new to it looking for a concise explanation and howto, and that's what they would be paying for. The 0.25 BTC just gives them something to import and play with.

Would that make me a money transmitter?

The banana isn't going to fool anyone.  You're selling both a banana and a number of BTC.

Yes, it's just as legal as buying a banana for $100 from a hooker and then she gives you a blowjob as a gift.

+1

The t-shirt and banana scenario may even be LESS legal than doing it any other way.
By taking willful steps to hide regulated transactions, you may demonstrate your intent to evade and may thereby lose your legal defenses of innocent and harmless mistakes.  The fines may be discretionary and up to the judge, so if they smell a rat they can do more or less accordingly.
http://www.fincen.gov/financial_institutions/msb/definitions/penalties_A.html
Willful intent may encourage a criminal charge.  Without intent, you aren't going to see the prison time.

As always, law is a matter of geography.  Things vary by jurisdiction.

I think it isn't always obvious whether trying to avoid regulations and/or taxes is legal or illegal (and of course it depends on where it occurs).

If it was so simple then there wouldn't be a distinction between tax avoidance and tax evasion, the former is legal but the line between those two is blurred.

Forget the gift.

Donate me some dollars, and you will get a certificate of thanks for the donation. The bottom part contains a string of letters and numbers that look like 5Kb8kLf9zgWQno.... or L6TsZZY36hWXMs....

Is it legal to send $100 bill to your grandson in his birthday card?

Is it legal for third person or institution to interfere with (or parasitize on) voluntary free transaction between two people?

Legal? Usually it is.
Moral? No.

Ludwig von Mises approves  :)

Bitcoin is just a product. You can buy, sell or gift others. So It is legal to do in ethical ways.

 :) yeah it is legal

If you get away with it depends in what country are you located

Bitcoin is the only gift I've given to adult family and close friends for the past 6 months. I love the excuse to send someone a fraction of a Bitcoin.

If it makes you nervous, fund a bunch of paper wallets for cold storage, and "misplace" a couple of them. Maybe a couple of people you like will "find" them.

I'm about to use http://coinapult.com/faq to send my next Bitcoin birthday gift (it's too late to send a paper wallet). I'd always heard of Coinapult as a company associated with Eric Voorhees, nice to finally see a time to try it.

BTW, Tony Gallippi (BitPay co-founder) spoke at a meetup here last week, and he believes giving Bitcoin as a gift does not require a capital gains calculation. So for people with a low cost-basis (who feel the need to go by the books and declare Bitcoin gains on their taxes), giving Bitcoin as a gift could be an especially tax-efficient thing to do. Of course, Mr. Gallippi could be wrong, but I assume he is one of the more informed people on Bitcoin tax implications.

Is there a country or jurisdiction where the legality of such a gift is even legally questionable in small quantities?

How about this scheme then:

I sell you a whole crate of bananas for USD, then buy it back from you for BTC. Both transactions would be at a reasonable market rate (slightly in my favor, natch), and if you want to stop after the first step and keep the bananas, of course you're entitled.

Would that still be too "cute"?

That's just as legal as money laundering.