cryptocurrency gift tax

[Unsaint32]

If I buy some bitcoin worth $1K, including fee and cost, then one year later it is worth $2K.  At that time, I give it to my friend.  My friend then sells it for $2K.  Then, does my friend have to pay tax?

[1715242476]

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[1715242476]

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[DaveF]

Without knowing what country you are in it's impossible to give you an answer.
In most of them they would have to pay tax on the $1000 that it went up.
Some tax gifts above a certain amount.
Others never tax gifts.

Best advice is to contact a local tax professional.

-Dave

[Unsaint32]

Without knowing what country you are in it's impossible to give you an answer.
In most of them they would have to pay tax on the $1000 that it went up.
Some tax gifts above a certain amount.
Others never tax gifts.

Best advice is to contact a local tax professional.

-Dave

sorry, I am in the United States.  Thanks.

[odolvlobo]

sorry, I am in the United States.  Thanks.

Yes. You friend must pay tax on any capital gains. In this simple case, the basis for them is your cost.

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home#collapse-6

[teosanru]

If I buy some bitcoin worth $1K, including fee and cost, then one year later it is worth $2K.  At that time, I give it to my friend.  My friend then sells it for $2K.  Then, does my friend have to pay tax?

First of all you need to tell the country in which you are residing and doing this transaction. If it's the US please tell the state too as taxes differ for each state. But yes one thing is constant which I have seen in the tax laws of a lot of countries. In case of such a transaction either the gift that you have made is taxed at its Fair Market Value in hands of your Friend at the time of receipt, it's not a gift but a sort of income for him. So he would end up paying tax on receiving and then will pay tax when he sells it(If he sells for profit) but this time the profit will be the amount of sale minus the fair value at time of the gift.

Some countries practice a different system. In those countries when your friend sells the bitcoin ultimately, he will be taxed on profits and in this case, the purchase price will be taken as a difference between sale proceeds and your purchase value(In this case which is $1K).

So in my opinion Either ways you will end up paying tax.

[Theb]

Since I'm not familiar with the Donor and/or Donee Tax you have in your country I would only assume that the donees are typically not the ones paying any kind of tax but it is the Donor's obligation which means it is you who will have a tax liability just search if you have laws covering donations and which amount is considered to be tax exempt or not. Other than that the one who will be receiving the gift will most certainly be subject to capital gains tax depending on what he/she will do with it and how much was their gain when they sold it.

[tabas]

If there's a gain, usually the government will tax you for that unless you're in a country that's not really strict in taxation with crypto profits.
But as mentioned above, in US, your friend has to.

[zasad@]

This question has hidden implications. It is impossible to avoid paying taxes through donation. I know that donations to close relatives (children, parents, brothers) for certain amounts are not taxed.
In a year you will pay capital gains tax and then your friend will pay the sales tax.

[Streets 2.0]

I do not quite understand what kind of tax we are talking about. There is an income tax - so if you declare cryptocurrency in this case - bitcoin as a means of accumulation, then this is one tax and one percentage rate, if you sold it and received income - then it will be income tax. Or are you asking whether you will BOTH pay your taxes? It is very important to understand in which jurisdiction the final and financial result of this transaction takes place.

[stomachgrowls]

I do not quite understand what kind of tax we are talking about. There is an income tax - so if you declare cryptocurrency in this case - bitcoin as a means of accumulation, then this is one tax and one percentage rate, if you sold it and received income - then it will be income tax. Or are you asking whether you will BOTH pay your taxes? It is very important to understand in which jurisdiction the final and financial result of this transaction takes place.

Here's some good guide about Tax: https://www.coindesk.com/crypto-tax-2021-guide

You can see on how much US do charge up on;
Short-term capital gains
Long-term capital gains

and you can see
Capital gains tax events involving cryptocurrencies & Income tax events

USA is really strict when it comes to this manner.I dont know on other countries though.

[icopress]

As far as I know, gifts are tax-free, including gifts in Bitcoin ... but it all depends on the specific situation, for example, if you work together and your friend is subordinate to you, then the tax service may perceive this gift as a bonus. Although, depending on your jurisdiction, the bitcoins you donated may be taxed after being converted to fiat, (in any case for this "free" transaction don't forget to sign the b'message).

[countryfree]

If I buy some bitcoin worth $1K, including fee and cost, then one year later it is worth $2K.  At that time, I give it to my friend.  My friend then sells it for $2K.  Then, does my friend have to pay tax?

You made the gain, so you and only you have to pay capital gain tax if there's one where you are.

[ModelT]

sorry, I am in the United States.  Thanks.

Yes. Your friend must pay tax on any capital gains. In this simple case, the basis for them is your cost.

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home#collapse-6

This is correct for the US. I'll add that the amount of capital gains tax depends on your friend's income/tax bracket and could be 0 at the federal level if their income is low enough. If your income was lower than your friend's, it could make sense to sell yourself and give him the net after tax. A less appealing way to reduce taxes is to die- assuming your estate is less than the threshold (11.7 M in 2021 https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax), then you could leave your BTC to your friend and they would get a basis that is stepped up to the value on the day of your death meaning they could sell without having to pay taxes (unless it appreciated between the time you died and the time they sold). When Yankee owner George Steinbrenner died in 2010, there was no tax on his $1 B+ estate AND his family got a stepped up basis meaning that nobody ever had to pay tax on the increased value of the Yankees and his other investments (at the Federal level). Had he died in 2009 or 2011, there could have been a $400 M+ tax bill.

Each state has its own tax laws so there may or may not be tax to be paid there also.

Its good that Trump simplified the tax system, otherwise it might not be so easy to understand   Personally, I think we should do away with most income taxes and replace them with taxes on pollution and lies for profit.