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Author Topic: Defer Taxes: Buy BTC before NYE, sell just after?  (Read 1030 times)
Cubic Earth
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December 31, 2013, 11:43:01 AM
 #1

I am wondering if this would be a viable, legal strategy.  Say you bought 100 coins at $10 per coin over a year ago, then sold 50 coins at $1000 each.  You're capital gains for this year would $49,500.

But then, at 11:55 PM on new years eve, you but 30 coins at $800 each ($24,000), and then just a few minutes later in 2014, you sell them again for the same amount of cash.

Nothing offset 20 of the 50 coins you first sold, so that would be $20,000 profit.

The other 30, I would think you'd have realized $200 of long term gain on each one.  So another $6,000.

$26,000 in long term captial gains for 2013,

30 x $800 = $24,000 in long term capital gains to start off 2014.

I wonder if there will be little spikes and crashes as different time zones approach midnight.

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mgio
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December 31, 2013, 08:43:57 PM
 #2

I am wondering if this would be a viable, legal strategy.  Say you bought 100 coins at $10 per coin over a year ago, then sold 50 coins at $1000 each.  You're capital gains for this year would $49,500.

But then, at 11:55 PM on new years eve, you but 30 coins at $800 each ($24,000), and then just a few minutes later in 2014, you sell them again for the same amount of cash.

Nothing offset 20 of the 50 coins you first sold, so that would be $20,000 profit.

The other 30, I would think you'd have realized $200 of long term gain on each one.  So another $6,000.

$26,000 in long term captial gains for 2013,

30 x $800 = $24,000 in long term capital gains to start off 2014.

I wonder if there will be little spikes and crashes as different time zones approach midnight.

No, this would not work.

Your capital gains for the year is $49,500.

You don't take a loss when you buy coins, regardless of the price you buy them at. You only take a loss when you SELL coins at a price less than what you paid for them.

I recommend you get an accountant.

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December 31, 2013, 08:53:28 PM
 #3

^+1 to the advice there.

The new purchase and sale in no way affect the taxable event which occurred with the prior sale. Buy 1 BTC @ $600, sell @ $1,200 you locked in a $600 taxable gain (short term if the time between buy and sell is less than 365 days).  Future tx can't modify that gain (and taxes due).  In your example you would have the same $49,500 capital gain for 2013 and in 2014 you would have a separate capital gain one the gain (if any) on the 20 BTC you bought and resold.

However at one time the reverse was true (but is no longer so only read on if you want to know another reason the IRS sucks).   At one time you could intentionally sell to lock in a paper loss (and thus reduction in taxes) and then immediately rebuy and thus continue to stay long the asset.  Say you bought 1 BTC @ $1,200 and then the market crashed, you believe BTC will go higher so you don't want to sell permanently down here but you would love a tax break.  So you would sell 1 BTC @ $600 and then immediately buy 1 BTC @ ~$600.  You still have 1 BTC but on paper you took a $600 loss (bought at $1,200 sold at $600) which at one time you could use to reduces your taxes.  The IRS introduced rules called "wash sale" rules which eliminate this "loophole" (smart strategy).   Today if you sell and rebuy an asset within 30 days it is considered a wash and you can't deduct any capital loss (although you still owe any capital gain).  To avoid a wash the time between sell and rebuy would need to be 31 days or more which would be very risk for Bitcoin.
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January 01, 2014, 12:21:01 AM
 #4

Thanks for the feedback.  I do need to find a good accountant.

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January 01, 2014, 02:08:06 AM
 #5

If anything we see a crash after new years since suddenly everyone can close their position and take capital gains in 2014 instead of 2013.
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