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RE: Valuing Steem Rewards As Taxable Income Is A Vast Overstatement Of Tax Liability - Part 2 - The Thin Order Book & Flash Crashes

in #taxes • 7 years ago (edited)

Super technical but great points! Let me try to connect this with something else that I can't get my head around... are bitcoin or monero or any other mined coins, taxable at the value when received?

If so, then effectively, we will be under the money if the mined coins or steem rewards will be sold less than the effective taxes. What do you think?

Thank you for sharing your valuable thoughts. Upvoted resteemed and following you :)

7 years ago in #taxes by
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     7 years ago 

    I read this article yesterday, you might find it of interest.

    https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/#44d521a9e3d8

    Here is an excerpt:

    The IRS considers cryptocurrencies, including Bitcoin, to be “intangible property.” Investors and traders holding cryptocurrency as a capital asset should use capital gain or loss tax treatment on sales and exchanges, with the realization method. For example, if you buy Bitcoins with U.S. dollars and later sell them for U.S. dollars, a capital gain or loss needs to be reported on that transaction.

    Americans also trade Bitcoins or leveraged Bitcoin contracts on Bitcoin exchanges, and they should report realized capital gains and losses on each trade, even if the trader doesn’t convert underlying Bitcoin back into U.S. dollars.

    It’s similar to having a foreign-based brokerage account, denominated in a foreign currency (i.e., Euros), where a trader buys and sells European equities held in Euros, and does not convert Euros back to U.S. dollars during the year. Two choices for tax reporting: Convert Bitcoin to U.S. dollars on each purchase and sale transaction using the Bitcoin market price that day denominated in U.S. dollars, or use Bitcoin as a functional currency, using an average Bitcoin vs. U.S. dollar conversion rate for the tax year.

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     7 years ago 

    Good one @heroic15397! Thanks for sharing. Just followed you as well.

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     7 years ago (edited)

    Yes, at least the IRS has (I believe) released a statement saying that mined cryptocurrencies are to be considered income subject to normal deductions. So, the situation you described where you can end up owing more tax than what you "earned" is not only possible, but likely exactly what the IRS is hoping will happen.

    I'm writing this series of posts to, hopefully, reason these exact sorts of questions out and provide a reasonable tax strategy that will hold up to scrutiny under the good faith clause.

    [-]
     7 years ago 

    Thank you @lexiconical. I am looking forward to it!

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