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I hardly think it is odd. You have asked a complex question. If you can't find a tax attorney or CPA on this board who will answer your question, go hire one.
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I appreciate the question and example however I am not a tax attorney and am not a CPA. You will have to go to one of them to figure this one out. Best: GDG
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In developing countries bitcoin transactions are not taxable since the government does not have structures in place to regulate the sector. How can this be an advantage to miners in this parts of the world and what could be the possible illegalities after new laws are introduced
I don't advise on laws and strategies in other countries. |
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Hi Mr. Greenberg,
This is a tax related question. I'm not looking for legal counsel or financial counsel so you will not be bound in any way from your response.
Scenario... (using rounded numbers just to keep the math simple)
On Jan. 1, 2017 I purchase 250,000 bitshares (BTS) at a cost of $27,500
I begin trading BTS for BTC then back to BTS for a gain of $1,000 daily
On Jan. 2, 2018 I begin withdrawing $1,000 daily to fiat as a "Long Term Capital Asset" since it was held for more than one year.
Having no taxable income the capital gains tax is 0% for the lowest IRS income tax bracket.
Question 1) Do I have to report the $1,000 daily gain as taxable income?
Question 2) If the answer to Q1 is "yes", then that puts me in the $365,000 annual income tax bracket. When I begin withdrawal of the $1,000 net daily (after a year and one day)... do I also have to pay "capital Gains Tax"?
Question 3) If I have to claim the $1,000 daily gain as "income" AND ALSO pay "capital gains tax", isn't this double taxation?
I hope this is clear.
In summary... Is the $1,000 daily gain considered taxable "income" or if held more than a year considered "capital gains"?
Thank you.
You need a Certified Public Accountant to answer these questions. |
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As long as you are doing it for yourself and not acting as a broker for other people then there is no problem. You are not acting as a money transmitter under these facts. You have nothing to worry about. Now, when you receive the cash for the BTC, then that is considered income and should be reported as such on your year end tax return. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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Hello, Yesterday I came across the post claiming that the person bought a house using bitcoins. I would like to learn more about legal formalities to be followed while dealing using bitcoins especially for real estate. Since bitcoin is not recognised by the law, what if seller claims that he has not received any payment? How to make sure that the deal is legally binding to both the involved parties? Best, Dudeperfect Assurance of payment is normally handled by an escrow company. Now finding an escrow company that will be a go between with BTC is another story. Yes, I have seen houses for sale for BTC. Most are not in the United States. You had better make sure that the person who says they are the owner is indeed the owner because once you transmit BTC, if that person is a fraud then he is gone along wit your BTC. I don't see the advantage of buying real property in BTC. There are too many things that can go wrong in a property sale. Even if the seller is legit, he may disappear if he is not tied to the community as in job, bank account etc. There would be no recourse if for example it were not disclosed that there was asbestos, that the house was used as a meth lab, that there were murders in the house or that the foundation was sinking and so on and so forth. Many using BTC for as many transactions as they can want to be off the grid and to beat the system. I'm just saying there is an increased risk of not having recourse. So many want to be cute and clever and avoid paying taxes and fees. They think they can avoid those things by using BTC. I'm sure there will be those responding and bragging about how they don't pay taxes and fees and buy everything in BTC. While this may be useful in some transactions the whole attitude of trying to avoid responsibility of being a citizen by being clever rubs me the wrong way. Of course I may also get responses about how taxes and fees are a rip off and that they don't go to proper use. It is true, many taxes are used for things that are wasteful in my opinion. But that is often in the eye of the beholder. For example, I think that the U.S. spends far too much on military and tax breaks for large corporations. That more money should be put into infrastructure in our country. However I respect others right to disagree and to make a reasonable counter argument. But nothing excuses our responsibility to our community and country to pay what the law says to pay. Back to real property. Can someone please tell me the advantages of using BTC? I personally and as an attorney do not get it. In fact I think it might be foolish. Respectfully: George D. Greenberg, Esq. www.attorneybitcoin.com |
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i have another question regarding minig, what is considerer a business activity, there is a threshold to overcome to make your activity a business level one?
for example there must be a difference between someone running a RIG for mining and someone else running a 10-100 rig farm, the first one as i see it should not be considered a business operation right?
otherwise buy this logi everyone with a gpu is someone running a business activity because he can mine and generate an income, and it doesn't make any sense...
If I am using a cpu, gpu or asic to mine bitcoin, when I convert it to fiat it is then considered income. In filing taxes you would be well advised to itemize and deduct everything that went into that mining including hardware, software, electricity, consultants and fees in the transfer and selling of the coins. I can call it a hobby, recreation or business, it doesn't matter, I am engaged in money making activity that brings me income. Income is taxable. There are of course always exceptions, but not in the example given. A threshold based on the volume of the activity is not really a good measure as to whether or not a business is being operated. Big or small it is all business. But typically those involved in a business venture have a business entity such as a corporation, although you can be a sole proprietor or have a joint venture or general partnership, and also generally have a tax payer identification number and a license or licenses to conduct the business . Best: George D. Greenberg, Esq. www.attorneybitcoin.comthere must be a threshold where the IRS ignore the amount, just to avoid wasting time with peanuts money, and with this kind of situation that i explained for chasing someone that is not going to declare his little income, they need to have money themselves, i mean it's not free, to trace someone who is alleged to be a evasor I think you have answered your own question. But getting away with it does not make it the right thing to do. I'm not a FinCEN investigator so I don't have an answer as to what raises red flags. But the more red flags there are, the more suspicious they get. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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Hi, I have a question. What happens to the taxes if I buy amazon gift cards online by re-seller or purse.io and then use them to buy actual goods off amazon ? Also what if I have a virtual bitcoin debit card, and use it to buy online.
Excellent question. Yes, this has been an ongoing discussion with several people and a question I posed in general a few weeks ago. I believe that in the context of this current discussion what you are referring to is using BTC to purchase goods or services instead of converting to fiat, and whether there is any difference in the tax treatment. My short answer in no, there is no difference. Let us discuss. If I make furniture and then sell it, after the costs involved have been deducted, if I make a profit, then that profit is income and I would pay income tax on that profit. (As a caveat, costs and expenses are deducted in different ways at different times, but most are itemized at the end of the year on my tax return.) It is the same if I mine BTC, or earn it in another way from my efforts. It becomes income in the eyes of the tax men whenl I convert it to fiat. What if I use the BTC earned to purchase something that I would otherwise have paid fiat for? Ah, that is the question then. I say at that point you have done the same thing as you would have done had you converted it to fiat. It then becomes income and is subject to income tax. I am always pushed on this point by people. Some argue that it is a barter and it may very well be and that may change the taxation dynamics. What is your risk tolerance? That is always the question. How do you feel about paying your taxes? Are you a citizen? Do you and your family benefit from the things that our taxes pay for? There is an implied imperative as a citizen to participate and to follow the rule of law. I hope I have answered your question or at least given you something meaningful to ponder. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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i have another question regarding minig, what is considerer a business activity, there is a threshold to overcome to make your activity a business level one?
for example there must be a difference between someone running a RIG for mining and someone else running a 10-100 rig farm, the first one as i see it should not be considered a business operation right?
otherwise buy this logi everyone with a gpu is someone running a business activity because he can mine and generate an income, and it doesn't make any sense...
If I am using a cpu, gpu or asic to mine bitcoin, when I convert it to fiat it is then considered income. In filing taxes you would be well advised to itemize and deduct everything that went into that mining including hardware, software, electricity, consultants and fees in the transfer and selling of the coins. I can call it a hobby, recreation or business, it doesn't matter, I am engaged in money making activity that brings me income. Income is taxable. There are of course always exceptions, but not in the example given. A threshold based on the volume of the activity is not really a good measure as to whether or not a business is being operated. Big or small it is all business. But typically those involved in a business venture have a business entity such as a corporation, although you can be a sole proprietor or have a joint venture or general partnership, and also generally have a tax payer identification number and a license or licenses to conduct the business . Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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Question: If I don't own a business and Bitcoin is my 'hobby' so to speak, how do I file my taxes when the profit is generated online, there is no record of that, and is on the basis of “for sport or recreation, not to make a profit". This would mean mostly Bitcoin sportsbetting and very rarely freelancing (which is basically doing odd jobs for people on this forum like many others do.)
Thank you in advance!
First of all, wagering online, unless it is legal in your state and conducted in your state, is not a legal activity whether you use BTC or fiat. I think that the tax man would view the calling of making a profit with BTC trading or BTC businesses a hobby or recreation and therefore not subject to taxation as a thinly veiled attempt to avoid paying taxes. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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The answer is: Not likely. However, that does not make it right. I'm a Citizen of this Country. Taxes are not the enemy. Concentration of wealth and power and failure to fairly tax the upper one half of one percent is the problem. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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How ownership of bitcoins is defined? I mean technically it is just a knowledge of the private key. What if many people has/know the wallet private key but not all of them ever used it?
For example:
Some non-US person John (he is not very good with computers) ask his son Sam to buy some bitcoins for him, and Sam is a US tax resident.
Now assume that a Sam traded some time after that and earn more bitcoin/altcoins from his father bitcoins assuming that he manage his father capital. Does Sam need to pay US taxes in this case?
Whomever claimed ownership of the coins would have to pay taxes on any gains, but ONLY when the owner converts (or has someone on his behalf convert,) the BTC to Fiat. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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George, thanks for this. NH looks like it will explicitly define BTC as not a MSB https://legiscan.com/NH/bill/HB436/2017 once governor signs. Sounds like Nevada is in same boat. For these states, if one were to operate a cash>bitcoin ATM, drawing from a hot wallet (not an exchange), I assume one still needs to register with Fincen. In doing so what is the simplest way to comply with AML/KYC? For example requiring all transactions above a certain $ amount to supply a phone number or ID? Would like it to be simple from the customer and the ATM owner perspective. Does below a certain $ amount require no KYC procedure that the customer must supply? That's a lot of questions, lol! There are answers to all of them that have been researched and labored over Yes, you would still need to register with FinCEN and make a good faith effort to comply with AML and KYC. As to the other information, well, I paid dearly to get it so I charge to share it. You are welcome to contact me via PM. BTW, I'm not convinced that exchanging cash for BTC and the reverse is not acting as a money transmitter. Yes, there are some educated guesses that have to be made as the regulator's are not sure either. However there are steps that can be taken preemptively to give you some cover, at least for awhile. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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Your question is too general for me to answer effectively. Assuming you have a gaming web site in a state that allows it, you will need a business license and perhaps other types of licenses related to gaming. Let's assume your gaming web site is legal and you have all the licenses required; is your question then whether or not laws related to gaming apply to BTC as the medium of wager? There have been many such sites closed down by the Feds and by States so I do not believe it is an escape hatch. Best: George D. Greenberg, Esq. www.attorneybticoin.com |
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Dear BTC Talk Community: I have been involved in BTC/Cryptos and BTC/Crypto Law for the past 3 years and was also on a speaker panel at Inside Bitcoin convention in Las Vegas. I have been an attorney here in Las Vegas for 25 years. It is tax time so I have had some opinions about cryptos and taxes. It is my legal opinion that Bitcoin earnings only become taxable when they are converted to fiat. However there is a variation I would like to discuss. If I have Bitcoin, and I make profit (for example) trading Bitcoin, and I then use those earnings to purchase goods or services from a vendor or service provider that/who accepts Bitcoin.....are the earnings that I made on the BTC that I spent for those goods/services taxable? I'd like some opinions please. It is my opinion that they would be taxable at the time I spent them as it would be the equivalent to converting to fiat. What about converting to a pay card? gold? Interesting isn't it? I'm very much looking forward to the diversity of opinions. Please keep in mind that I believe in paying my taxes and reporting my income and am not here to advise on how to get out of paying taxes, but rather to help us all understand when there is a taxable event, and how to legally minimize the taxes I am responsible to pay. Thank you BTCTALK community. George D. Greenberg, Esq www.attorneybitcoin.comThis is indeed a very intriguing topic out here and I have within me two sides, one side of me says since Bitcoins is neither a currency nor is it accepted as one why should I pay taxes, second side says we should pay tax as normal Fiat usage. However after considering a lot, I decided not to pay any taxes, as I do not purchase Bitcoins I earn them online and I convert for a value of digital currency and I don't see any reason to pay taxes. We are already over taxed in life and last thing need is to pay taxes on Bitcoins. I do pay taxes on all my income, but don't agree that one should pay tax. A very interesting analysis. So to describe it in another fashion; If I build chairs and then sell them and make a profit, do I need to pay taxes on my profit? My profit would be income so I think yes. What if I build chairs and take one of those chairs and trade it for a server? Let's say the server is the same value as the chair. Have I made a profit? I don't think so, therefore logic tells me I would not need to pay taxes on that transaction. Everyone seems to forget that you report your income but then AT THE END OF THE YEAR, YOU TAKE ALL PROFIT, AND ITEMIZE AND DEDUCT ALL COSTS AND EXPENSES THAT WENT INTO ACHIEVING THAT PROFIT. As to the chair example; the cost of wood, tools, electricity, the rental for the structure that they are built in, utilities, phones, computers, insurance, transportation, any employees or independent contractors used, book keeper, certified public accountant, attorney, shipping costs, continuing education, and so on and so forth. These things are all deducted in one way or another from the total profit as business expenses as well as whatever personal exemptions you claim such as dependents, and then only what is left is what is subject to income taxes. This same analysis holds true if you are conducting any business related to crypto currencies. Play it safe but play it smart. Then you won't have to look over your shoulder for years. George D. Greenberg, Esq. www.attorneybitcoin.com |
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As to whether Bitcoin is a commodity or currency is a matter left to the sound discretion of State laws or ordinances; and, in the absence of the latter, to the best judgment of courts or proper governmental agencies. As of this writing, there has been confusion as to how Bitcoins should be treated especially so that it can substantially affect the payment of taxes. Thus, it is best to wait on a definitive ruling about the aforesaid issue. When that time comes, it is best to abide by the laws or rules of the nation concerned so as to deter faulty assumptions resulting to legal liabilities.
Well put about faulty assumptions. Just as a general analysis; practically BTC has elements of personal property or commodities and elements of currency. It is being used by many as a form of trade for goods or services. There are states that have ruled on these matter to varying degrees and others that just don't seem to care. As to the Feds, the guidelines are more clearly defined. Consult with an attorney and a CPA if you are or intend to be engaged in the business of crypto currencies. George D. Greenberg, Esq. www.attorneybitcoin.com |
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I don't see a legal problem with investing in whatever coins you might find on Yobit or other smaller exchanges. We can't be certain that any given coin is legit in and of itself and not being used for some illegitimate purpose but I doubt we have a duty to investigate that. The smaller exchange itself might have that duty. As to investment strategy I strongly encourage you to investigate the coins announcement pages and other sources. Many coins simply fail, others drop in price at the slightest bit of bad news. George D. Greenberg, Esq. www.attorneybitcoin.comhow can someone know if those small coins were not used for illegal activity like monero in the deepweb for example? monero is also not traceable? this could lead to a problem of supporting without knowing criminal activity and put you in trouble, if they ever find out i guess tainted bitcoin also apply for altcoin... the same can apply to many other coins, there are simply to many to keep trak of all of them As a purchaser at arms distance paying valuable consideration, in good faith, for a product, unless you have reason to believe that the product or the company selling the product is engaged in some sort of nefarious activity I think you are fine. There would be no duty to search further. Best: George D. Greenberg, Esq. www.attorneybitcoin.com |
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I don't see a legal problem with investing in whatever coins you might find on Yobit or other smaller exchanges. We can't be certain that any given coin is legit in and of itself and not being used for some illegitimate purpose but I doubt we have a duty to investigate that. The smaller exchange itself might have that duty. As to investment strategy I strongly encourage you to investigate the coins announcement pages and other sources. Many coins simply fail, others drop in price at the slightest bit of bad news. George D. Greenberg, Esq. www.attorneybitcoin.com |
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