IRS After Bitcoin???

Abstract
Hello all, my pseudo name is Cryptotron and I’m new to the phenomena of cryptocurrency. I am, however, a graduate student, perusing a degree in cybersecurity. This evening, (12/27/2017), I had my usual crypto talk with my colleague and friend, discussing the unthinkable possibilities of cryptocurrency utilization. Being information security students, my colleague and I critique and analyze many of the alternate coins reported on coinmarketcap.com, attempting to figure out their security posture, and whether the ideas brought forth by “alt-coins” will benefit society. This friend of mine came up with the crazy idea of putting my writing and research skills to the test, by challenging me to conduct a brief research paper, then reporting my findings to the world via Steemit.com, within three hours. I was up to the challenge, hence this short research paper. This is not an extensive research, but I have acquired some valuable information from well-known companies like TD Ameritraide, Fortune, the like. This paper’s intention is to not to make the reader a tax attorney, but to make the average “Cryptolite” aware of the changes occurring in their cyberpolitical world.

Keywords: Crytplite: Made up name for anyone who believes in the blockchain technology.

                                    Introduction

The topic of taxes is a very boring topic to people like myself and many others. On the other hand, taxes will be a very important conversation for those United States citizens with Bitcoin worth $20,000 or more. I am not a trading expert by any means; in fact, this I did my very first investment. As I conducted my research on Bitcoin, I came across some of the most exciting information, including, “No government interference, and you don’t have to pay taxes to the Damn! IRS.” Well, my research uncovered some interesting information, which disproves such claims reported on social media, and troll chats within alternate coin market exchanges.

                                  They Are Watching Us

There seem to be a consensus that many Cryptolites believe that the government has no dealings with cryptocurrencies. While that may be the belief of the ill-informed, that sentiment shared by many is not entirely accurate. As of today, the government cannot regulate virtual currencies directly (TDameritrade.com, 2017). On the other hand, the government can indirectly regulate exchanges and third-party wallet providers (TDameritrade.com, 2017). Moreover, if a fellow Cryptolite has Bitcoin equivalent of $20,000 or more, you are required to pay taxes to the IRS. Coinbase, one of the largest exchanges for buying and selling Bitcoin, was recently ordered to hand over information to the IRS for their customers who had Bitcoins worth $20,000 or more, and didn’t pay taxes between 2013 and 2015 (Berr, 2017). Prior to these government demands, Coinbase fought back, claiming that the IRS probe was unreasonable and too broad (Roberts, 2017). The IRS, as you can see in the previous paragraph didn’t stop, and eventually, the IRS narrowed down their search to the high earners of Bitcoin (Berr, 2017).

                                    IRC Code Section 1031

Whenever I see headings like, “IRC Code Section 1031”, I immediately lose interest. This should not be the case for my fellow Cryptolites. The IRC Code Section 1031, should be of particular interest to any cryptocurrency investor, residing in the United States of America. Without getting into the politics of the newly overhauled tax plan, the Like-Kind Exchanges under IRC Code Section 1031 has been amended. According to Suzanne Walsh a partner at the law firm Murtha Cullina, “The tax act in Sec. 13303 amends IRC Section 1031(a)(1) to delete “property” and replace it with “real property” (Roberts, 2017). Now, what does all that gibberish mean? According to the IRS, IRC Section 1031 provides an exemption and allows one to postpone paying taxes on the gain if they reinvest the proceeds in similar property as part of a qualifying like-kind exchange (IRS.gov, 2008). In simple terms, a fellow Cryptolite, under the previous tax plan, was able to use a loophole known as the “like-kind”, to evade taxes. Cryptolites were able to exchange their Bitcoin to Litecoin without any tax obligations (Roberts, 2017). Since the loophole is now closed, the “like kind” exchanges only apply to real estate transactions (Roberts, 2017). Under the new rule, all cryptocurrency transactions are taxable events (Roberts, 2017).

                                    Conclusion

As I stated earlier, I am not expert in trading or blockchain technology; I am just sharing credible information which I acquired during my brief research, and decided to share with the cryptoworld. Bitcoin has been very noisy for the past two months, and many investors, especially the early investors are super excited. While the excitement cannot be ignored, my fellow Cryptolites need to pay close attention to the political and geopolitical world. Regardless of your geographical location, you should get acquainted with your current tax laws concerning cryptocurrencies, in order to avoid issues with government agencies like the IRS in the United States. This research has proven that the United States government is indirectly involved with regulating cryptocurrency exchanges and third-party wallets. Moreover, Coinbase finally succumb to pressure from the IRS, after a long fight in trying to protect the privacy of its many members. With all the buzz surrounding Bitcoin, I urge all my fellow U.S. Cryptolites to seek legal assistance this tax season, because things have changed for the worst in “Cryptolia”

NOTE: I do apologize for being so formal, but I figured this was a very serious topic for many, especially in the United States. All comments and critiques are welcome. If you need me to uncover some juicy information worth knowing, I will be more than happy to conduct another short research paper.

Sincerely,
Cryptotron

                                    References

Berr, J. (2017). Bitcoin exchange Coinbase ordered to hand over customer data to IRS. Retrieved December 27, 2017, from https://www.cbsnews.com/news/bitcoin-coinbase-ordered-to-hand-over-customer-data-to-irs/
IRS.gov. (2008). Like-Kind Exchanges Under IRC Code Section 1031. Retrieved December 27, 2017, from https://www.irs.gov/newsroom/like-kind-exchanges-under-irc-code-section-1031
Roberts, J. J. (2017). Only 802 People Told the IRS About Bitcoin, Coinbase lawsuit shows. Retrieved December 27, 2017, from http://fortune.com/2017/03/19/irs-bitcoin-lawsuit/
TDameritrade.com. (2017). Bitcoin and Cryptocurrency 101: Understanding the Basics. Retrieved December 27, 2017, from https://tickertape.tdameritrade.com/investing/2017/12/bitcoin-cryptocurrency-basics-101-86376