I think it's delusional to claim they don't care about the origin, otherwise people would be selling illegal stuff on the darknet and then putting it into some exchange, making some gains and reporting it as capital gains.
Let's say you put 1 BTC in some exchange, and this BTC was made with signature campaign posting for instance, across a couple of years or so. You then x100 that in some exchange, and then you put your 100 BTC back into your Bitcoin Core wallet or whatever.
In 5 years Bitcoin goes past $100k, so you are sitting on 10 $million now, and you want to buy a million dollar house. When you cash out this million, they will obviously ask where the money came from.
You may have screenshots and whatever proving you got paid to post in some internet forum, but then, if you lost your altcoin trading history in the exchange, you cannot prove how you made this BTC go x100.
How this isn't a problem?
Al Capone got busted for tax evasion. He didn't get busted for inability to prove where his income was derived from. That's not a coincidence. The IRS does not ask for the origin. They only ask for very general categories of income (including itemized capital gains).
You're veering off into paranoia when you say that
possessing money automatically means the presumption of illegal activity, and further that this warrants investigation by law enforcement agencies besides tax authorities. Do you have anything to support these theories, besides hypotheticals?
It's been explained already that the threshold (at least in the US) is whether reporting was "reasonable" and in "good faith." For example, see
this answer from a licensed CPA:
Question: "If I have non-covered capital gains. and do not have a record of investment cost, how can I arrive at a cost for tax?"
Answer: "You need to enter a reasonable and good-faith estimate of cost basis. The IRS is receiving the 1099-B information from the broker, but is relying on you to report the correct category and/or cost basis. Otherwise the entire proceeds will be considered gain.
(It would be unreasonable for the IRS to claim you did not pay anything for the investment (Cost basis = "0", total proceeds taxable). It would be unreasonable for you to claim the total proceeds as the cost basis (no taxable income)."
I'm really not sure where guys get these ideas about
proof -- "if you can't prove the source, you'll lose everything or get dragged off to prison" etc. That sounds very outlandish to me. I've been filing tax returns on behalf of clients for many years as well as my own, and I deal with CPAs and tax authorities regularly.
Anyway, personally, I would avoid talking to the IRS directly about your own case. Consult a qualified tax professional (or two) and follow their advice. That way, if the IRS ever comes after you -- highly unlikely IMO if you pay your taxes with reasonable accuracy -- you'll have formed the basis for a "reasonable cause and good faith" defense.
Im not sure about the IRS, but you can ask about people from Europe, in certain countries you are by default a criminal unless proven otherwise (basically).
You are delusional if you think you can put $100k worth of bitcoin in your bank account, and they aren't going to ask you were the money came from and you better be able to prove it. For instance, if you get paid in bitcoin for selling some product or service, they will ask for invoices, proof that the money doesn't come from illegal activity, or if you get paid to post on forums and your coins are eventually worth $100k, you can't put them on your bank and say some vague explanation, im sure they will want deeper details. Im not sure what exactly, perhaps screenshots of the threads or whatnot, I've never known anyone that cashed out big signature campaign-derived amounts.
Also check this out US related:
https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United_StatesYou have your excuse already. If the government will really require your reports then tell them what happen, that the trading site should be held responsible for the transactions records that lose. Anyway, you are legal person and you hide nothing. In our country, we are not oblige to submit reports but the government will just review all of our transactions records in the exchanges.
Yeah the problem is governments don't see us as humans, but numbers, so "my excuse" (even if the truth) may not work out well. In my case it's the truth, but actual criminals could just claim that it happened to them too, so I understand that from that PoV. However what im supposed to do then, if not just hold these coins forever (alternative being to gamble my legal-activity earned money in some vague definition of "good or bad faith")
