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RE: Tax AMA - 2018 Tax Season - Ask Me Anything
While I would need to read the detail on the specific programs, My perspective is - the purchase of an upvote (one-time or subscription) using Steem/SBD, this is effectively the purchase of marketing/advertising.
- Gain/Loss on the sale of Steem/SBD - I.e. value of Steem $1, cost basis $0.4, gain $0.6
- Deemed purchase of marketing expense with the proceeds. - I.e. $1 of expense.
Whether the marketing expense is deductible/will benefit your personal income taxes depends on the net income position, and whether the Steem account is a trade/business for you or just a hobby.
On the flip side, compensation for selling/leasing upvotes or SP would be income.
See Notice 2014-21 and Section 83. I have more detailed general guides on Steem earnings taxation in the e-book in my blog.
See general disclaimer above
Thanks!
Thank you for your prompt response @cryptotax. Similar to @josephsavage, you are indicating these are expenses, although you are perhaps classifying them slightly differently. If so, not sure, for tax purposes, that it matters.
On my own, I assumed your first bullet point, in figuring out my taxes this year. The application of it as an expense, from both of you, is very helpful.
It will be quite something to see the "evolution" of how these transactions are accounted for over time unfolds. Specifically, to whom will the IRS assign the responsibility for the (compared to other areas of taxes anyway) remarkable level of detail to track.
With stocks, investment firms are required to track and issue related forms. Hard to see how anything like that responsibility could be assigned to a "decentralized" blockchain ...
P.S. And, yes, for the sake of both of you, I understand and respect the disclaimers.
It's interesting because the IRS came after Coinbase (who now issues Form 1099-K to individuals with significant transactions). In Notice 2014-21, it was established that payments in digital currency are subject to general 1099 reporting, etc. If you have any other questions please feel free to reach out!