New Tax Law Closes Bitcoin Loophole- Fortune.com
Bitcoin has defied financial gravity in 2017 but, in one respect, it’s just like any other investment: Uncle Sam expects a cut of the profits when you sell it. And starting in 2018 it will get a little harder to avoid paying up.
That’s because the major tax reform passed in Congress this week contains a tweak that eliminates an exemption for many “like kind exchanges,” which lets people swap an asset for a similar one without triggering a tax obligation.
Until now, some investors have relied on the law to exchange one digital currency for another without paying taxes. For instance, someone who owned Bitcoin could diversify their holdings into Ethereum or Litecoin, and plausibly tell the IRS it created no tax obligations.
As Suzanne Walsh, a partner at the law firm Murtha Cullina, explained to Fortune, this is no longer the case because of a tweak to definition of property eligible for the exemption:
The tax act in Sec. 13303 amends IRC Section 1031 (a)(1) to delete “property” and replace it with “real property” … So, you can see that now I can no longer take the position that my Bitcoin to Litecoin exchange was a like kind one under Sec. 1031, and I have to recognize the gain when I do it.
Walsh added that the “in kind” exemption can now only apply to real estate transactions, effectively closing a loophole that has been open to other sort of property transaction such as those involving Bitcoin.
Digital currency owners are currently obliged to pay taxes when they exchange it for dollars or physical goods, but the new rule now effectively means all crypto transactions are a taxable event.
This doesn’t mean, of course, that everyone will heed the rule, especially as an IRS investigation revealed that only 802 customers of Coinbase, a popular digital currency exchange, filed a 8949 form related to Bitcoin-related activity in 2015.
For law-abiding investors, however, the process of reporting digital currency profits—which are taxed as ordinary income in the short term and as capital gains in the long term—will be arduous since Bitcoin exchanges have yet to provide customers with a 1099 form. These forms, which are used by brokerage firms like Fidelity, provide a summary of investment income and are given both to customers and the IRS.
Meanwhile, the tax headaches for digital currency investors are only going to increase as they must figure out how to account for spin-off currencies like Bitcoin Cash, and as the IRS deploys special software to identify Bitcoin tax cheats. While elected officials like Rep. Jared Polis (D-Co.) proposed an amendment to lighten the reporting requirements for digital currency, the measure did not get included in the final bill.
President Trump is expected to sign the major tax overhaul, which passed both houses of Congress this week, in the next few days.
By JEFF JOHN ROBERTS December 21, 2017
READ MORE HERE:
http://fortune.com/2017/12/21/bitcoin-tax/
oh that means people trading at a loss would also need to pay tax.. haha I thought tax was only taken from profits but oh well soon they will ask to pay tax for oxygen as well
Great post. Resteemed and Upvoted.
Thank you! Also- thank you for all you do. You make Steemit more sociable and fun.
Dang it!
I feel ya.... ugh.
seriously...tax on bitcoin!!
Tax on transactions on the exchange... profit or not. That is how I understand it.
The government makes the rules so vague they want to just make sure they can get the hard earn profits from every citizen they can.
My experience even in crypto trading is as though as it can get. To stomach 20% day loses only realize the same amount of gains is not easy. Very difficult to really earn much without investing a lot in crypto today than in the past, but all government see is there is money so we must tax and get our "fair" share. What a ripoff.
Agree. Governments are not good for the people.
I get why they're doing this, though. It was too easy to launder money through cryptocurrency. Maybe this will help give crypto the legitimacy boost it needs, and possibly even take it back to what it was meant to be: a currency meant for the exchange of goods and services
I appreciate your positive outlook and do hope that is the case. The gov't and big banks are the biggest money launderers around- so we'll see how all of this goes.
My fears regarding Blockchain & Bitcoin are starting to happen. The "government" will try & screw blockchain up if they can.
Indeed. Governments are not good for people. All gov't does is to control and plunder people.
it was only a matter of time before the government stepped in.
Oh yeah- Our gov't of the people, by the people, for the people. All this freedom feels like tyranny.
Hello colleague , I hope you feel very well :D. Very good post, I voted for it. I would like to invite you to follow me on my page @emmanuel250998 where I will be uploading every day the latest news about the world of cryptocurrencies. I also invite you to vote for my last post:
https://steemit.com/bitcoin/@emmanuel250998/anonymous-developers-promote-potential-scam-with-segwit2x-mask.
I would very much appreciate your support. A big hug and greetings from Venezuela ;)
Thank you! Followed you. Look forward to reading your posts.
What are the tax rates on real property?
I'm not sure at this point. Still researching. Here is a post @theclear put together on this.
https://steemit.com/taxes/@theclear/warning-the-new-us-tax-bill-can-and-will-screw-up-many-crypto-traders-lives
Thank you for spreading the knowledge
I resteemed the article too, hopefully, more people will be made aware of it.
I found out how to calculate real property taxes on a house, but I could not find the answer on any website yet.
I read the article, and after doing so, investing into crypto's just lost it's appeal.
I think I will stick with precious metals, those are projected to make decent gains over the next few years.
Yes- You have to go with what makes you feel comfortable. You could just look at it like going to Las Vegas. Put in a little play money and sit on it.