Give Away Bitcoin To Avoid Estate Tax

[stompix]

Let's say Satoshi wanted to avoid the estate tax, set to go back to 45% on all amounts over $6.8 million beginning in 2025. Assuming he is alive, that would be quite the tax bill. Government would be salivating at the prospect.

Is it theoretically possible if you were Satoshi to just give away $17,000 worth of Bitcoin randomly to 4 million addresses, utilizing the legal annual per-person gift tax loophole? Would such an event even be workable if Satoshi (or anyone else) wanted to give away $17k each randomly? Could the choosing of addresses be achieved by a computer program? Would there be any way to know if the incoming .25 Bitcoin per giveaway was legit and not some scam if you saw it waiting for you?

Thoughts?

The estate tax is not capital gains tax.
You have a limit on how much you can send in gifts before the gift tax gets triggered, that's around 12 million, and you're planning on gifting 68 billion.
You make a lot of assumptions on what can and what would be tax but Satoshi won't even need to send those transactions, there is no need for it since nobody knows and nobody can prove x or y own those coins. Also, ok he sends those coins as gifts, how does he explain the extra millions he and his heirs will end up with?

If Satoshi sell his coins and he use bank account,

If that ever happens it will be the biggest blow to Bitcoin that it could ever receive!

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[kryptqnick]

I think this all depends on a jurisdiction and on enforcement of laws. In my country, there's no tax-free gift loophole, but there are tax-free (very small) sums and closest relatives can also be tax-exempt. That being said, taxation isn't taken seriously in my country, so unless you're a public official or something, nobody cares whether you pay your gift taxes or not. I don't know Satoshi's jurisdiction, but I don't think Satoshi wanted to avoid taxation or whatever, or that it would best be done via such a distribution.

[m2017]

Let's say Satoshi wanted to avoid the estate tax, set to go back to 45% on all amounts over $6.8 million beginning in 2025. Assuming he is alive, that would be quite the tax bill. Government would be salivating at the prospect.

This is probably why Satoshi decided not to touch the over 1 million bitcoins in his wallet for now.

I'm sure BTC-millionaires will be able to find loopholes and ways to avoid paying inheritance taxes. Do traditional millionaires somehow manage to do this, or do you really believe in their selflessness with their charitable activities?  

I suspect someday a billionaire might try something just like this to avoid the estate tax and spread the money out, instead of paying the government, while keeping some degree of anonymity for the receiver and sender.

There is a simpler solution: if you are a BTC-millionaire and don't want to pay taxes on it, then simply don't cash out bitcoin (don't convert it into traditional money) and pass it on as an inheritance in the form of bitcoin.

In my opinion, the nature of bitcoin so far allows to avoid any taxes (no tax on ownership of bitcoin and inheritance).

[Eddie Sockittome]

The estate tax is not capital gains tax.
You have a limit on how much you can send in gifts before the gift tax gets triggered, that's around 12 million, and you're planning on gifting 68 billion. 

Sigh, here we go again. There is NO limit on how many people one can give the $17,000 gift to, per year. It is a workaround of the lifetime gift-tax/estate exemption. If I gave away the entire lifetime exclusion today, I can still give away up to $17,000 per year to anyone I choose, any time I want, to as many people as I want.

For a group I am trying to rely on for Bitcoin advice, especially around privacy and government, there is a shocking lack of understanding of how the tax code works.

[Asuspawer09]

I've always wondered whether giving away Bitcoin randomly to addresses might be a way some ultra-rich avoid estate taxes, someday.

Let's say Satoshi wanted to avoid the estate tax, set to go back to 45% on all amounts over $6.8 million beginning in 2025. Assuming he is alive, that would be quite the tax bill. Government would be salivating at the prospect.

Is it theoretically possible if you were Satoshi to just give away $17,000 worth of Bitcoin randomly to 4 million addresses, utilizing the legal annual per-person gift tax loophole? Would such an event even be workable if Satoshi (or anyone else) wanted to give away $17k each randomly? Could the choosing of addresses be achieved by a computer program? Would there be any way to know if the incoming .25 Bitcoin per giveaway was legit and not some scam if you saw it waiting for you?

A relative of mine gave away all money to charity above the estate tax limit to avoid the estate tax a few years back when he passed. But with Bitcoin, it seems there would be interesting wrinkles possible as an alternative to formal charities.

I suspect someday a billionaire might try something just like this to avoid the estate tax and spread the money out, instead of paying the government, while keeping some degree of anonymity for the receiver and sender.

Thoughts?

I mean giving away your Bitcoin is not going to make sense at all since it's not going to be your money at all, it's going to be a better move to pay tax since it still going to be a huge amount after paying taxes, even though the taxes are going to be huge as well. I mean a giveaway some of kind or something like airdrops might actually work for sure but it's going to be a lot of work, plus there was for sure some potential of seeing this as a strategy on avoiding tax but it surely might work. We can surely look at charity where it doesn't really take taxes I mean that could easily be a way for sure, It just way too noticeable to see this kind of strategy especially if you're going to transaction millions and billions of dollars worth of Bitcoin. But I guess with that kind of amount of money it is better to pay taxes just to be safe because surely it will be a huge lawsuit and worst you gonna get criminal charges for tax evasion which as a billionaire you don't want to happen because it can easily cause you everything as soon as they find it out.

Personally, with thousands of dollars of transactions so far I didn't get any notice, when I was just a student I had a lot of big income transactions of thousands of dollars which is for sure not going to be achievable for someone who is just a college student, surely is questionable, especially on the banks. But so far I didn't have issues converting my Bitcoin to fiat money. But I have a friend who got his account frozen with a much higher amount in the bank. So I guess it's better to do it on multiple micro-transactions than just cashing out at once since it is going to attract attention for sure.

[iceland2k14]

Random gifting is improbable.
Someone with that much BTC can easily change country to move to Tax heaven, rather than throwing away.
If he really inclined to gift, he would most probably give it to bitcoin active development, puzzles, widespread usage and security projects.

[PX-Z]

It's true that donating your money to charity foundations will lessen your tax. But you need to donate it to charities, non-profit/non-government organizations, anything that is registered as charity foundations. Your example of satoshi giving away its bitcoin is just giving away, plus only a few countries taxed bitcoin, or i don't think it's necessary to declare all your bitcoin holding to revenue office just to become a law abiding citizen,  you will probably just declare a few just like most of us and businesses.

[Dickiy]

I suspect someday a billionaire might try something just like this to avoid the estate tax and spread the money out, instead of paying the government, while keeping some degree of anonymity for the receiver and sender.

Thoughts?

If it were me, it would be better to pay taxes to keep the wealth I have safe, rather than having to divide it into random addresses because it doesn't make sense, for example I have a large amount of Bitcoin, the calculation is still clear. This method is very unreasonable and as a citizen, taxes are still a responsibility that must be paid, even though there are ways to avoid this, in the end the disbursement into fiat needs to be done through official channels. So, if the nominal value is not large and to avoid tax, you can still get around this by withdrawing it in stages.

[Su-asa]

I think the key word in your story of your relative is he ‘passed’. I don’t think any alive person would willingly give away their assets and money just to avoid some tax. Let’s be honest, There are plenty of ways billionaires do to avoid tax without having to cut on their spending or money in general.

Though it's true, I don't think a millionaire or a billionaire will be happy to lose its assets by giving out to people just because of tax in future. IMO the billionaires are very smart and they do things smarter ways because that's how they make their money. There is always another alternatives to pass through those state even when you don't want to pay taxes. By the way, given out your wealths to people is not a way to manipulate in a way for you not to pay tax, I believe that there's other ways, besides if you are a billionaire that makes legit money there's is harm in paying tax because he tax you pay today will not stop you from making more money.

[Vladv26]

The government can collect taxes on Bitcoin and ceyptocurrencies only if you exchange it to fiat. It's not a great idea to try and avoid paying taxes, but let's be honest, most rich people use all kind of tricks to make sure they pay as low taxes as possible. Therefore, just keep your Bitcoin where it is or spend it directly to buy or invest into something. This way, government cannot claim their taxes since you have not sold any of your Bitcoin and theoretically you have not made any profits.

[aoluain]

The government can collect taxes on Bitcoin and ceyptocurrencies only if you exchange it to fiat. It's not a great idea to try and avoid paying taxes, but let's be honest, most rich people use all kind of tricks to make sure they pay as low taxes as possible. Therefore, just keep your Bitcoin where it is or spend it directly to buy or invest into something. This way, government cannot claim their taxes since you have not sold any of your Bitcoin and theoretically you have not made any profits.

Agree, the super rich have ways to avoid paying tax pay as little tax as they
can manage. They have the wealth to employ specialist accountants with the knowledge
they need. They also are able to purchase high value items as a business liability and with
profits and therefore pay less tax. They would rather change their car every year from
profits rather than pay that tax. Investing and trading in Bitcoin can also be classed as
part of a business activity I'm sure.

The last thing the wealthy do is "give away" wealth other than for charitable donations.

[coolcoinz]

This is the first time that I heard about this estate tax and it seems that it exists in the UK. I used to live there but I wasn't a citizen, so I couldn't care less about inheritance laws there. I guess it's similar in the US, with the difference that it applies to assets over $13 million, so I wouldn't be subject to this, since I own much less and I don't live in a country where such tax exists.

Anyway, lets speculate. One could divide his wealth between children before death, making sure that none of them exceed the required amount. Even if they do, you have to pay 40% on whatever is above the threshold, so having 14m isn't really a big deal. It starts to get worse when you have over 20m and no children, but in such case you should give the money to whoever you want before you die. Nonoe of us really lives alone and it's better to give it to your distant family, neighbors, whatever, than leave it to the government.

[KingsDen]

I think the key word in your story of your relative is he ‘passed’. I don’t think any alive person would willingly give away their assets and money just to avoid some tax. Let’s be honest, There are plenty of ways billionaires do to avoid tax without having to cut on their spending or money in general.

People are just different. Some are willing to give out to charity which most of the world billionaires are doing. There are ways to avoid tax but some people wouldn't want to cut ways. Besides, there are different tax rules for different countries. While some are strict, some are flexible.

Random gifting is improbable.
Someone with that much BTC can easily change country to move to Tax heaven, rather than throwing away.
If he really inclined to gift, he would most probably give it to bitcoin active development, puzzles, widespread usage and security projects.

Not many people will like to move from the country of their origins and the source of their wealth, maybe for security reasons.