Thanks for your response using quotes to follow easily. I’m not that sophisticated yet on here to do that.

The most important issue is your premise that “exchanging” is the same thing as “investing” - I don’t think that’s true. I’m not saying that BTC would get exchanged into membership interest. It would be invested as BTC into the LLC. I know you would be getting membership in “exchange” but your asset denomination is still BTC. That’s what I mean about investing in that currency. Exchanging would be going from BTC to ETH for example (different currency). If it stays BTC and gets invested as such into the LLC, I really don’t think that’s a taxable event. Although, it might be. That’s the key though. If it’s not than you should be able to invest gains tax free given it would be like kind. I’m asking CryptoTaxGirl right now - https://cryptotaxgirl.com/

Any follow ups to that specifically? It’s a really important distinction and comes down to interpreting the tax code.

Hi everyone! I’m a real estate developer and new to the crypto space but definitely have aptitude for it. I’ve been researching the potential of raising Bitcoin or other crypto currencies to develop culturally minded real estate development projects.

I’m really only seeing articles  about investing “in” Bitcoin or other coins meaning just buying them for price speculation over time. I see a huge opportunity to INVEST THE COINS AS CURRENCY especially in vehicles that assist in diversifying, creating more stability and generating income streams (like real estate). The biggest advantage to this would be for those that have realized huge gains from appreciation to potentially avoid a capital gains tax.

From my read of things, you get taxed if you 1) exchange crypto into a fiat like USD, 2) trade one crypto for another, or 3) buy goods or services with it. You get taxed on your “cost basis” depending on your bracket. But this doesn’t seem to cover “investing” the crypto you have into investmwnr vehicles in the same crypto.

I’ve raised USD in a special purpose entity (SPE like an LLC)  multiple times in exchange for membership interest to develop real estate projects. I think this could be done in the same way just raise a fund or for a specific project. I think once I raise the crypto then I can convert that into cash without a tax trigger given that the LLC cost basis would be set at what’s raised. Does that seem right?

I would ideally like to purchase the development opportunity in Bitcoin or Ethereum but it’s an uphill battle probably to convince the seller to do that given that he would be accepting “personal property” in exchange which doesn’t have the same tax benefits like real estate for examples doing a 1031 exchange. There’s only been a couple residential real estate purchases done in Bitcoin and nothing in commercial that I’ve read about.

The other challenge is that I would have to develop the real estate project without the use of a lender (thank god!) but it would not lever the same sort of returns. Unless we have already come up with crypto lenders, have we?

My real estate project in mind is a boutique hostel / hotel in a historic brick building in Philadelphia that would use crypto currency at the heart of the ecosystem to start getting more use cases out there for people actually using it daily.