US person buys home abroad with bitcoin. What about taxes?

[zeroday]

US citizen, who lives abroad, wants to buy expensive home abroad paying with bitcoin. The price in contract will be in BTC.
Does it trigger any US taxes?

P.S. his dumb lawyer is not sure  

[Lethn]

I'm trying to find out all about this kind of shit from people and there's very few clear answers or simple "I don't know" I've literally just sent an email to the Bank of England so I'll be sure to let you guys know if I get any reply on laws regarding Bitcoin in the UK any time soon, I've basically tried asking them the legal position of it.

[Foxpup]

He would owe capital gains tax on the difference between the present value of the coins and the value of them at the time he obtained them (exactly the same as if he had sold the coins and bought the house with the proceeds). This tax must be paid to the country in which he bought the house, and, quite possibly, also to the U.S. If that's the case, he may want to ditch his U.S. citizenship before he buys.

Either way, he definitely needs to hire a smarter lawyer.

[zeroday]

He would owe capital gains tax on the difference between the present value of the coins and the value of them at the time he obtained them (exactly the same as if he had sold the coins and bought the house with the proceeds). This tax must be paid to the country in which he bought the house, and, quite possibly, also to the U.S. If that's the case, he may want to ditch his U.S. citizenship before he buys.

Either way, he definitely needs to hire a smarter lawyer.

He never sells bitcoins but just exchanges bitcoins for a house. How to find out the value of bitcoin if there are no official exchange rate yet?
What if the seller of house just accepts bitcoins at $50/btc which he thinks is fair price since in their country there is no even a single btc exchange?

P.S. all the lawyers in seller's country have agreed that there will be no taxes locally but they don't know about US taxes. On the other hand, a few US lawyers he contacted cannot give clear answer but asked $5k-$10k just "for research".

[Soros Shorts]

He never sells bitcoins but just exchanges bitcoins for a house. How to find out the value of bitcoin if there are no official exchange rate yet?

You need to make a reasonable attempt to compute the mark-to-market fiat value of the coins on the date (or dates) they were acquired, as well as on the date they were exchanged for the property. A 24-hour average of the Mt. Gox and Bitstamp prices on those dates would probably be adequate. This is what my tax accountant and myself have decided upon, even though we are not 100% sure. At least that is what you'd do under GAAP if the bitcoins were some other type of commodity, e.g. bars of gold.

[Aswan]

He would owe capital gains tax on the difference between the present value of the coins and the value of them at the time he obtained them (exactly the same as if he had sold the coins and bought the house with the proceeds). This tax must be paid to the country in which he bought the house, and, quite possibly, also to the U.S. If that's the case, he may want to ditch his U.S. citizenship before he buys.

Either way, he definitely needs to hire a smarter lawyer.

In germany you don't have to pay capital gains after holding the bitcoins for 1 year, it depends on the laws of the jurisdiction where he buys it.

[bitcool]

US foreign asset declaration form (8938) excludes real estates. How do you report?

[zeroday]

Quotation from IRS FAQ:

Q3. Does foreign real estate need to be reported on Form 8938?

Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938.  For example, a personal residence or a rental property does not have to be reported.

If the real estate is held through a foreign entity, such as a corporation, partnership, trust or estate, then the interest in the entity is a specified foreign financial asset that is reported on Form 8938, if the total value of all your specified foreign financial assets is greater than the reporting threshold that applies to you.  The value of the real estate held by the entity is taken into account in determining the value of the interest in the entity to be reported on Form 8938, but the real estate itself is not separately reported on Form 8938.

Also the following foreign assets are not required to be reported in both 8938 and FBAR:

- Foreign real estate held directly
- Foreign currency held directly
- Precious Metals held directly
- Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles



So, it seems that the deal will be legally under radar.

[maurya78]

Sigh!

we are going to see an increasing number of such cases where nobody knows how tax works

Just the tip of the iceberg...

[bassjoe]

Taxation for US citizens living abroad is tricky. You will have to declare capital gains and you MAY have to pay it, as well. Pay for an hour of a tax lawyer's time that specializes in income realized abroad.

[spontainer]

You should consult a tax specialist.  In general it may be worthwhile to setup a trust or even multilayer corporation (depending upon the home value, expensive is a subjective term).  Say for instance you setup a Delaware or Las Vegas corporation that then owns a subsidiary company in BVI or Cayman Islands and that subsidiary purchases the home.  Even upon sale of the home with capital gains there will be no US taxes due.  US taxes under current law will only become due when you actually transfer dividends or proceeds from capital gains back to the Delaware company (repatriation of profits).  This is how Google, Apple, IBM, etc. all get away with not paying taxes on foreign gains legally.  Yes, this is all legal.

US citizen, who lives abroad, wants to buy expensive home abroad paying with bitcoin. The price in contract will be in BTC.
Does it trigger any US taxes?

P.S. his dumb lawyer is not sure  

[beetcoin]

He would owe capital gains tax on the difference between the present value of the coins and the value of them at the time he obtained them (exactly the same as if he had sold the coins and bought the house with the proceeds). This tax must be paid to the country in which he bought the house, and, quite possibly, also to the U.S. If that's the case, he may want to ditch his U.S. citizenship before he buys.

Either way, he definitely needs to hire a smarter lawyer.

then wouldn't it be better to just cash out in his home country and then transfer it over to the new home country?

[1.btcwonder]

He would be in debt of capital gains tax on the difference amongst the present value and the value of the coins at the time he got them. This tax must be compensated to the country in which he got the house, and, rather possibly, also to the U.S. If that's the case, he might want to ditch his U.S. nationality before he purchases. Moreover, he absolutely has to hire a cleverer lawyer.