Bitcoin Attorney Will Answer All Questions:

[apoorvlathey]

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.

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[Amph]

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

there 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

[AttorneyBitcoin]

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
 

[AttorneyBitcoin]

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

there 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

[dru7941]

Hi,

Kudos for what you're doing here! I got paid with a couple btc sometime back. I was thinking of selling for cash using localbitcoins but I was reading earlier today, bitcoin.com I think, that increasingly sellers are being arrested for "illegal money transmission" by law enforcement posing as buyers. At least two of them involved illegal drugs so that may explain some of it. My question is should I be concerned?

Also, way back, we're talking 80s-90s, Lambda Legal had a self-help manual out at a time when homosexuality was criminalized by sodomy laws in many states. One piece of advise it had was, if you were going to pick up someone in any place that wasn't inside an LGBT commercial establishment or private property, like the sidewalk outside a bar where you met this person, to ask before any physical contact occurred - do you work for any law-enforcement? To avoid getting arrested for solicitation/whatever. I don't see this being a viable protective tactic for a drug dealer (otherwise we wouldn't have a show called The Wire), but what about if you are selling a couple btc?  Is there a magic number of transactions that sets apart a "trader" from a joe/schmoe occasional seller/buyer? Or anyone who sells even half a coin counts as engaging in "money transmission"? (I didn't think I would be asking questions like this in 2017!) Does it matter that I am not even advertising a trade on localbitcoins but will be answering an ad of a buyer?

Thanks in advance.

[AttorneyBitcoin]

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

[dru7941]

Thanks, the broker function definition is a very useful and reassuring distinction. Taxes - yes, that and death.

[AttorneyBitcoin]

I'm happy to have helped you.

Best:

George D. Greenberg, Esq.

www.attorneybitcoin.com

[CryptoJuan]

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.

[MostHigh]

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

[AttorneyBitcoin]

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.

[AttorneyBitcoin]

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.

[achillez]

It is my understanding that if you bought the Monero with BTC then you have not made a conversion to fiat and it is not a taxable event.

Best:

George D. Greenberg, Esq.

www.attorneybitcoin.com

This is brilliant and the first time that I've seen a good answer on the crypto -> crypto currency conversion. Just to break this down further let's say someone does the following:

1) Acquire DCR (so cost basis is $10)  
2) Trades the DCR for BTC after 1 year
3) Trades the BTC for ETH within 1 week
4) After 1 week sells the ETH for $500

Using the concept of "like kind" transaction is the only taxable event (4), when you convert the crypto over to $ for a profit of $490? Also since the period from (1) to (4) is >1 year is it seen as long-term capital gains?

thanks!

[AttorneyBitcoin]

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

[achillez]

Ok - it's odd we can't get a real tax attorney, or CPA on this board to answer these questions .

[AttorneyBitcoin]

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.

[mzforfree]

Hello Mr. Greenberg J.D. I am planning on starting up a business using bitcoins by essentially making money through the good pricing and robust exchange of goods to btc (such as having a good ratio on btc to walmart card, or btc to said property etc). I live in a relatively small/medium (pop 300,000) town with a lot of good old boys and money. I want this to be legitimate as my family are rather neophytes in this very small and established community and I feel like me and mine still have dues to pay "before we're full members of the club", if you get my drift sir.

I have done some fair/surface amount of diligence into federal and state laws but it seems like everything is in its infancy stages with all three branches of government confused as to what to do and no judges wanting to determine important precedents yet. From my understanding you should report your BTC as property to the IRS but there is no commercial law.. how are my earnings taxed? How is this fair financially from my viewpoint when another federal judge defined BTC as "funds" (vague) and the currency itself is regulated by the futures trading commission. Wouldn't the FTC have the final say in what will happen next? And from an honest fiduciary standpoint if it's already being regulated as "digital currency" why should I be taxed on currency I've already earned fairly through my salary and file it as property? Honestly it sounds like a lot of passing the buck to me and there is no definitive legal framework even in place on any level.. federal or state.


Also on a more concrete practical note if I may get in a 2nd more simple question.. this business will essentially be providing a service. I will be providing my knowledge of the market as well as the BTC system to act as portfolio manager and broker. I am confident in this system and with amounts of more than $5000 I'm sure  me as well as my clients would like a legal retainer agreeing to some fixed amount of risk that kinda covers my end but also legally gives me some type of fiduciary responsibility with the man's money so that I am covered and in the event I make a profit of more than $100k or something like or lose whatever difference that ill guarantee that as to attract attention I would have proof of said responsibility for services rendered and that I'm doing everything by the book.

BTW you may have guessed but that state is GA... would registering it as an llc or something like that be MORE RISKY practically in that it would draw attention or less in that it would appear i have been completely transparent. 

[mzforfree]

It is my understanding that if you bought the Monero with BTC then you have not made a conversion to fiat and it is not a taxable event.

Best:

George D. Greenberg, Esq.

www.attorneybitcoin.com

This is brilliant and the first time that I've seen a good answer on the crypto -> crypto currency conversion. Just to break this down further let's say someone does the following:

1) Acquire DCR (so cost basis is $10)  
2) Trades the DCR for BTC after 1 year
3) Trades the BTC for ETH within 1 week
4) After 1 week sells the ETH for $500

Using the concept of "like kind" transaction is the only taxable event (4), when you convert the crypto over to $ for a profit of $490? Also since the period from (1) to (4) is >1 year is it seen as long-term capital gains?

thanks!

But eventually you will have to declare it as something or turn it into fiat or straight deposit into an exchange if you want easier liquidity of your assests.. Am I missing something where?

[AttorneyBitcoin]

You may PM me.

George D. Greenberg

www.attorneybitcoin.com

[AttorneyBitcoin]

Hello Mr. Greenberg J.D. I am planning on starting up a business using bitcoins by essentially making money through the good pricing and robust exchange of goods to btc (such as having a good ratio on btc to walmart card, or btc to said property etc). I live in a relatively small/medium (pop 300,000) town with a lot of good old boys and money. I want this to be legitimate as my family are rather neophytes in this very small and established community and I feel like me and mine still have dues to pay "before we're full members of the club", if you get my drift sir.

I have done some fair/surface amount of diligence into federal and state laws but it seems like everything is in its infancy stages with all three branches of government confused as to what to do and no judges wanting to determine important precedents yet. From my understanding you should report your BTC as property to the IRS but there is no commercial law.. how are my earnings taxed? How is this fair financially from my viewpoint when another federal judge defined BTC as "funds" (vague) and the currency itself is regulated by the futures trading commission. Wouldn't the FTC have the final say in what will happen next? And from an honest fiduciary standpoint if it's already being regulated as "digital currency" why should I be taxed on currency I've already earned fairly through my salary and file it as property? Honestly it sounds like a lot of passing the buck to me and there is no definitive legal framework even in place on any level.. federal or state.


Also on a more concrete practical note if I may get in a 2nd more simple question.. this business will essentially be providing a service. I will be providing my knowledge of the market as well as the BTC system to act as portfolio manager and broker. I am confident in this system and with amounts of more than $5000 I'm sure  me as well as my clients would like a legal retainer agreeing to some fixed amount of risk that kinda covers my end but also legally gives me some type of fiduciary responsibility with the man's money so that I am covered and in the event I make a profit of more than $100k or something like or lose whatever difference that ill guarantee that as to attract attention I would have proof of said responsibility for services rendered and that I'm doing everything by the book.

BTW you may have guessed but that state is GA... would registering it as an llc or something like that be MORE RISKY practically in that it would draw attention or less in that it would appear i have been completely transparent. 



You have some misunderstandings as to the characterization of BTC  It sounds like you want to do the right thing, provide a service, pay your taxes and comply with laws and regulations. It is true that regulation of crypto currencies is confusing. Virtual currency is a tough thing to understand and therefore, to regulate. I don't know your sources but you do not have to report your BTC to the IRS as property. It is only when you convert the same to fiat that you would declare the income. You should probably PM me before you go any further.

Best:

George D. Greenberg, Esq.
www.attorneybitcoin.com