Bitcoin Forum
June 21, 2024, 07:55:54 AM *
News: Voting for pizza day contest
 
   Home   Help Search Login Register More  
Pages: « 1 [2]  All
  Print  
Author Topic: "Schrodinger's cat" with bitcoins  (Read 1893 times)
dKingston
Hero Member
*****
Offline Offline

Activity: 482
Merit: 500


LAUNDER BITCOIN: https://BitLaunder.com


View Profile WWW
August 12, 2014, 01:21:01 AM
 #21

The IRS does not require you to declare possession of bitcoins, they require you to declare income from bitcoins.

They don't tax possession of bitcoins, they tax income from bitcoins.
So if I buy something directly for Bitcoins in a shop like overstock, i dont need to pay any taxes and what not?

In the U.S. according to the IRS you do.

There are 2 types of tax you'll pay when you purchase something with bitcoins.

You'll be required to pay a sales tax (or use tax) to the local government (typically to the state) based on the fair market value of the item that you've purchased (typically the retail price). This is not mandated by the IRS, but rather by each individual local government.  There is potential for a city sales tax, a county sales tax, a state sales tax, etc.

According to the IRS, when you purchase something with bitcoins, you are receiving barter income. As such you need to pay tax on the capital gains that you experienced between the price you paid to acquire the bitcoins and the value of the products that you received in exchange for the bitcoins.  This is not a tax for possessing bitcoins, it is a tax for receiving an income (an item or service of value) in exchange for the bitcoins when you transfer them to someone else.
I think what the OP may have been implying (and I may be reading too much into it) is that you could potentially try to "write off" the value of your coins if you had sent your bitcoin to a "void" wallet. If you gave the "wallet service" something of value (your bitcoin) and received nothing in return (the "void" wallet) then by this measure you would have a capital loss.

I think this concept/idea is not a very good one as the reason you pay taxes is because you have earned something and the tax makes it so you have earned a little bit less, but you still have a net benefit.

LAUNDER & ANONYMIZE YOUR BITCOIN:
https://www.BitLaunder.com/?aid=41
DannyHamilton
Legendary
*
Offline Offline

Activity: 3430
Merit: 4669



View Profile
August 12, 2014, 01:30:20 AM
 #22

I think what the OP may have been implying (and I may be reading too much into it) is that you could potentially try to "write off" the value of your coins if you had sent your bitcoin to a "void" wallet. If you gave the "wallet service" something of value (your bitcoin) and received nothing in return (the "void" wallet) then by this measure you would have a capital loss.

In this case, you'd still have a "capital gain" based on the value of the bitcoins at the time that you sent them to the "wallet service".  The bitcoins (the capital you were holding) would have gained in value.  Unfortunately, you would have made a donation to the website, and there is a limit to how much you can "write off" in charitable donations.
dKingston
Hero Member
*****
Offline Offline

Activity: 482
Merit: 500


LAUNDER BITCOIN: https://BitLaunder.com


View Profile WWW
August 12, 2014, 04:09:52 AM
 #23

I think what the OP may have been implying (and I may be reading too much into it) is that you could potentially try to "write off" the value of your coins if you had sent your bitcoin to a "void" wallet. If you gave the "wallet service" something of value (your bitcoin) and received nothing in return (the "void" wallet) then by this measure you would have a capital loss.

In this case, you'd still have a "capital gain" based on the value of the bitcoins at the time that you sent them to the "wallet service".  The bitcoins (the capital you were holding) would have gained in value.  Unfortunately, you would have made a donation to the website, and there is a limit to how much you can "write off" in charitable donations.
Didn't you say that your "sales price" is the fair market value of the good/service that you are exchanging your bitcoin for? I don't think it would be considered to be a charitable donation unless the wallet service was actually a legit charity.

I would argue that you would be able to write off the entire amount as a capital loss. Also, if I understand the tax code regarding donating assets correctly (I probably don't) you do not need to pay capital gains on an appreciated asset if you donate the asset directly to charity and you can claim the entire value as a donation. The example that I am familiar with is you buy 100 shares of XYZ for $10 per share, then four years later, XYZ is trading at $40 per share. You want to donate $4,000 to your church but also want to minimize your tax bill. You also no longer think that you no longer want to own stock in XYZ. You donate the 100 shares to your church directly and can deduct the entire $4,000 donation (subject to other, unrelated limits) and do not need to pay capital gains on the $3,000 that the stock appreciated by.

http://www.programforgiving.org/charitable/pages/donatingAppreciatedAssets.jsp

http://www.fool.com/FoolCharityFund/Donating_Stock.htm

LAUNDER & ANONYMIZE YOUR BITCOIN:
https://www.BitLaunder.com/?aid=41
Mobius
Hero Member
*****
Offline Offline

Activity: 988
Merit: 1000



View Profile
August 12, 2014, 04:12:06 AM
 #24

The IRS does not require you to declare possession of bitcoins, they require you to declare income from bitcoins.

They don't tax possession of bitcoins, they tax income from bitcoins.



So if I buy something directly for Bitcoins in a shop like overstock, i dont need to pay any taxes and what not?
You would likely need to pay some kind of sales tax based on where the items are shipping to. If you would need to pay sales tax in you were to purchase the same item in a store, then yes you need to pay sales tax. From a sales tax perspective, buying something online is no different then buying something at a physical store, and paying in BTC is no different then paying in fiat.
Razick
Legendary
*
Offline Offline

Activity: 1330
Merit: 1003


View Profile
August 12, 2014, 05:37:53 AM
 #25

Imagine you made a device that would get your bitcoins and send it to a wallet that you would only be able to access in 10 years time. Also, there would be a chance they would be sent to a void wallet.
So during 10 years your coins would be half alive, half dead; just like Schrodinger's Cat. That is, they would be half yours, half not.
Only after 10 years you would know if you actually owned those coins.
So, would you have to declare those coins to IRS for tax purposes?
You could then argue that during those 10 years you coun't know if you owned the coins or not...

If that's a tax evasion strategy, I don't think it would work, but even if it did, losing 50% to avoid a ~25% tax makes no sense.

ACCOUNT RECOVERED 4/27/2020. Account was previously hacked sometime in 2017. Posts between 12/31/2016 and 4/27/2020 are NOT LEGITIMATE.
DannyHamilton
Legendary
*
Offline Offline

Activity: 3430
Merit: 4669



View Profile
August 12, 2014, 01:12:42 PM
 #26

I think what the OP may have been implying (and I may be reading too much into it) is that you could potentially try to "write off" the value of your coins if you had sent your bitcoin to a "void" wallet. If you gave the "wallet service" something of value (your bitcoin) and received nothing in return (the "void" wallet) then by this measure you would have a capital loss.

In this case, you'd still have a "capital gain" based on the value of the bitcoins at the time that you sent them to the "wallet service".  The bitcoins (the capital you were holding) would have gained in value.  Unfortunately, you would have made a donation to the website, and there is a limit to how much you can "write off" in charitable donations.
Didn't you say that your "sales price" is the fair market value of the good/service that you are exchanging your bitcoin for? I don't think it would be considered to be a charitable donation unless the wallet service was actually a legit charity.

I would argue that you would be able to write off the entire amount as a capital loss. Also, if I understand the tax code regarding donating assets correctly (I probably don't) you do not need to pay capital gains on an appreciated asset if you donate the asset directly to charity and you can claim the entire value as a donation. The example that I am familiar with is you buy 100 shares of XYZ for $10 per share, then four years later, XYZ is trading at $40 per share. You want to donate $4,000 to your church but also want to minimize your tax bill. You also no longer think that you no longer want to own stock in XYZ. You donate the 100 shares to your church directly and can deduct the entire $4,000 donation (subject to other, unrelated limits) and do not need to pay capital gains on the $3,000 that the stock appreciated by.

http://www.programforgiving.org/charitable/pages/donatingAppreciatedAssets.jsp

http://www.fool.com/FoolCharityFund/Donating_Stock.htm

As you've pointed out, tax law is a complicated mess.  If anyone were going to try remotmass's strategy, it would be very important to discuss their plan with a qualified and knowledgeable tax professional first.

You are correct both that if you are donating to an organization that the IRS recognizes as a charity, then you might not have to pay capital gains taxes (subject to various limitations), and that if you are not donating to an organization that the IRS recognizes as a charity, then it can't be written off as a charitable donation.

I still don't think that you can choose to intentionally send a valuable asset out of your control and write it off as a capital loss.

I'm trying to decide, if an eccentric wealthy person were to purchase an oil on canvas painting for $10,000. Then hold it until it was worth $1,000,000. Then very publicly (news media present, etc) intentionally light it on fire and burn it to ashes declaring their intention to claim it as a capital loss, would such a claim be allowed?  My gut tells me no, but I'd love to hear an opinion from a qualified tax professional.
Mobius
Hero Member
*****
Offline Offline

Activity: 988
Merit: 1000



View Profile
August 12, 2014, 03:46:09 PM
 #27

I think what the OP may have been implying (and I may be reading too much into it) is that you could potentially try to "write off" the value of your coins if you had sent your bitcoin to a "void" wallet. If you gave the "wallet service" something of value (your bitcoin) and received nothing in return (the "void" wallet) then by this measure you would have a capital loss.

In this case, you'd still have a "capital gain" based on the value of the bitcoins at the time that you sent them to the "wallet service".  The bitcoins (the capital you were holding) would have gained in value.  Unfortunately, you would have made a donation to the website, and there is a limit to how much you can "write off" in charitable donations.
Didn't you say that your "sales price" is the fair market value of the good/service that you are exchanging your bitcoin for? I don't think it would be considered to be a charitable donation unless the wallet service was actually a legit charity.

I would argue that you would be able to write off the entire amount as a capital loss. Also, if I understand the tax code regarding donating assets correctly (I probably don't) you do not need to pay capital gains on an appreciated asset if you donate the asset directly to charity and you can claim the entire value as a donation. The example that I am familiar with is you buy 100 shares of XYZ for $10 per share, then four years later, XYZ is trading at $40 per share. You want to donate $4,000 to your church but also want to minimize your tax bill. You also no longer think that you no longer want to own stock in XYZ. You donate the 100 shares to your church directly and can deduct the entire $4,000 donation (subject to other, unrelated limits) and do not need to pay capital gains on the $3,000 that the stock appreciated by.

http://www.programforgiving.org/charitable/pages/donatingAppreciatedAssets.jsp

http://www.fool.com/FoolCharityFund/Donating_Stock.htm

As you've pointed out, tax law is a complicated mess.  If anyone were going to try remotmass's strategy, it would be very important to discuss their plan with a qualified and knowledgeable tax professional first.

You are correct both that if you are donating to an organization that the IRS recognizes as a charity, then you might not have to pay capital gains taxes (subject to various limitations), and that if you are not donating to an organization that the IRS recognizes as a charity, then it can't be written off as a charitable donation.

I still don't think that you can choose to intentionally send a valuable asset out of your control and write it off as a capital loss.

I'm trying to decide, if an eccentric wealthy person were to purchase an oil on canvas painting for $10,000. Then hold it until it was worth $1,000,000. Then very publicly (news media present, etc) intentionally light it on fire and burn it to ashes declaring their intention to claim it as a capital loss, would such a claim be allowed?  My gut tells me no, but I'd love to hear an opinion from a qualified tax professional.

I don't think either lighting a painting or intentionally sending bitcoin to a "void" wallet would be considered a donation under tax law. The IRS has rules about who you can give money to and claim a tax deduction. A "tax exempt" organization (I believe under section 501(c) - although I may be mistaken - it is the same kind of group that is subject to the controversy about conservative groups) is able to take "donations" and not owe any taxes, however the people donating are not able to write off the money they gave this organization on their tax return. If on the other hand someone were to "donate" money to a church (or other organization that allows you to take a deduction on your tax return - I have no idea what part of the code this is) then you can use this donation to reduce your income for tax purposes.

What both of these examples fail to realize is that regardless of if the IRS would allow it to be a valid deduction is that a person who would do this would have a net effect of loosing at least 60% of the value of the property. If in the example about setting fire to the painting a taxpayer could save ~$400,000 (assuming the deduction would be allowable) by taking a million dollar deduction on their tax return. However if the person were to sell the painting for fiat they would owe $400,000 in taxes, and have $600,000 left over from the sale.

I strongly doubt that there are many people that are so opposed to paying taxes that they would actually destroy their own wealth just so they do not pay anything to the government.   
littlewizard
Sr. Member
****
Offline Offline

Activity: 294
Merit: 250



View Profile
August 17, 2014, 03:01:39 AM
 #28

So during 10 years your coins would be half alive, half dead; just like Schrodinger's Cat. That is, they would be half yours, half not.


This assumption is not very appropriate.
BitcoinLlama
Newbie
*
Offline Offline

Activity: 46
Merit: 0


View Profile
August 17, 2014, 04:39:17 AM
 #29

I think I am missing the point of this post. But if you did this, your own thoughts about the situation may ultimately determine whether the coins become yours or not so maybe the IRS will hold that against you.

Pages: « 1 [2]  All
  Print  
 
Jump to:  

Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!