RE: The Tax & Legal Implications Of Steem Rewards: Under What Jurisdiction & Definitions Do They Fall (And What Loopholes Could Save Us From Our Rewards Being Forced Into Government Pockets)?
I can only speak as to US federal tax law. Under such law, all "income" is taxed unless specifically exempted, regardless of how it comes about. It's not necessary that the income be "earned" via a job or otherwise to be taxable. For instance, if I stumble upon $10,000 in gold coins buried in my back yard, that actually counts as "income" to me under federal tax law, and I owe taxes on that amount.
The IRS has issued clarifying rules related to cryptocurrencies. As I understand it, those rules work as follows:
(1) "mined" steem is taxable income to miners when mined. The amount of taxable income depends upon the market value of the steem when mined. I believe they can use the closing value of Steem each day to value their mining rewards.
(2) When miners sell or spend their steem, they will recognize capital gain or loss to the extent that the value of the coins spent/sold varies from the value of the coins when they were originally mined.
(3) Authors and curators are taxed on the fair market value of steem awarded to them calculated on the day of each award. When they then sell or spend those Steem, they will have capital gain or loss to the extent that the value of the Steem on the day sold/spent varies from the day it was awarded to them.
couple thoughts:
if the Steem accounts are under a personal name, how might it be possible to transfer into a business/incorporated account, so as to run any profits through a business for purpose of tax reductions, write offs, etc?
regarding your third point - tax accounting could get quite complicated in that case... does Steemit already have a system in place to track such cumulative daily profit/losses that could generate reports for accounting purposes? if not, that might be a feature of value to users who did want to go the route of reporting to the IRS (or other governmental tax body)
You know I had a big rambling write up written out, went back and read it and thought, "hmm that is long and ambiguous" so maybe I should just post source material instead. So that's what I'll do I'm gonna post links to essentially the three best sources I've used to teach myself about trusts and how to untilize them and then if you have any questions I can go from there.
I will try and quickly anwer now though, ok I believe any private trust can be used, it would depend on where you're located I'm guessing some areas of the world don't let trusts set up bank accounts some do, some areas you must provide more information and details of the trust itself and some you don't have to. So area depending but basically the private trust will work for a "holding trust", it may need some tweaking to work as the "operating trust".
Yes they remain as crypto's in the trust, merely controlled by a different entity that isn't the person I posses, so govt has no claim. You can also use silver (law of the land all that bullshit) as that is where I was headed before the beautiful world of decentralized digital currency came into play. It cannot be in legal tender AT ALL, it just can't legal meaning acts and statutes and tender meaning an offer. So using legal tender is an offer to be under their clubhouse rules because you're using their shit, simple.
Ok, as for write offs, they don't exist, accepting a benefit also comes with liability so stop accepting the benefits the govt provides. However by using crypto's and an entity that isn't govt created you have no tax obligation in the first place to accept write offs. That's why when I do electrical on the side if I get paid in legal tender then the person has a tax obligation, if I get paid in crypto's the person doesn't because it is not involved in the transaction... People really haven't grasp the absolute magnitude that crypto's bring yet at least in my opinion. They're still looking at them as investments, they're so much more.
If I use legal tender to acquire crypto's I transfer the fiat to crypto's then transfer those crypto's up through the operating trust and then into the holding trust. If I want to move them I transfer them out into a DIFFERENT operating trust and that funnels down into a different bank account, one controlled by corporation or public benefit, or LP, or LLC or ect what ever works best where you're from (probably many others as well). Then I have a tax obligation as well.
In the states I've heard of people using LLC's as flow through entities and from what I hear it works phenomenally, I've been trying to find something similar up in Canada and I'll I've found are "income trusts" which the govt stopped recognizing in 2011 because they were losing billions in tax revenue and all the big corporations were either switching over or already had so that stopped real quick.
As for the feature, I don't know if they have it, I doubt It but hot diggity would that be a handy feature. I'm hoping I kinda answered your questions, I tried to rewrite this and make it shorter and more concise but I feel I've failed in that goal so I'll go grab some links and post them as well.
http://highfrequencyradionetwork.com/wp-content/uploads/2015/06/new-trustee-handbook-2008.pdf
https://assistingvessels.files.wordpress.com/2010/03/those-who-mistrust.docx
http://highfrequencyradionetwork.com/wp-content/uploads/2015/06/trustees-in-commerce.pdf
http://passingbucks.com/vol2/index.html
http://www.mindserpent.com/American_History/reference/trusts/1907_loring_a_trustees%20handbook.pdf
Some of the sources I've used.
do you know if these all are equally as applicable in Canada as in the U.S.?
The us has jurisdiction over their money and their citizens that's it. If I'm not using either one I could care less about THEIR tax laws. I don't pay taxes on any crypto's I use flowing in and out of private trusts, if I transfer them from an account into my citizens bank account while being converted to legal tender then I have obtained a tax obligation.
cool.
can ANY type of private trust be used - or what specific details must the trust be setup for this to work?
do the cryptos remain AS cryptos while in the trust?
I'm quite curious as to how you've set this up successfully, and whether you still have full usage of the currency while in the trust as though it were in a bank account...
a challenging part comes, however - if someone has been collecting Steem Power into a pool over months, how can it be determined what the capital gain or loss is once taken out, given all one's Steem goes into the same pool?
i.e. I earned Steem at 20 cents, 4 dollars, and everywhere in between. If I take some out now, how can it be calculated which Steem I'm taking out of the pool, which was earned at what point...?
as far as I know, it's not possible to determine. thus, this is something of a dilemma...
personally, I'd love to say I was taking out the Steem earned at $4 and declare a capital loss, but don't know how to back that up so it'd fly...
These same challenges often apply with stock, and the IRS has a solution. In most cases you can use the average cost method of determing basis/cost. So, if you have a total of 100 Steem currently worth $100 that, in total, were worth $50 when you earned them, and you sell 10 of them, then your gain on those 10 is $5. You don't have to figure out exactly which ones you sold and how much those particular ones were worth when you earned them. You can just take the average. But check with your accountant to be sure.
Challenging part is determining the average, if various amounts earned while price was fluctuating from 25 cents to 4 bucks and back down. Though I suppose, might be worth the extra effort to get detailed if it'd end up saving a few thousand bucks in taxes if could declare capital losses...
Agreed. It's a huge pain.