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Offline oldman

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The Taxman Cometh
« on: September 25, 2014, 02:15:13 AM »

Taxation is an issue yet to be addressed and may not be for a while.

But we can be sure the taxman will want his share at some point, and it would be terrible if folks had created a lot of wealth via Bitshares only to end up in serious trouble with the local tax thugs.

I'm not sure if the client/trading platform has any transaction tracking/exporting functionality, but if not, this should be added prior to mass release/marketing push.

Not a big deal - just need the ability to export trade history in .csv and perhaps a few the more common accounting software formats (ie. Quickbooks).

Taxation is something that is not well represented in the crypto space and this is yet another opportunity for the Bitshares platform to shine and widen the moat.

If users have an easy/automatic/slick way to track P&L for taxation and performance purposes it is one more feature to drive adoption.

Offline luckybit

Re: The Taxman Cometh
« Reply #1 on: September 25, 2014, 02:19:11 AM »
Pay the tax then. Income taxes if you spend it.
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Offline bytemaster

Re: The Taxman Cometh
« Reply #2 on: September 25, 2014, 02:22:07 AM »
FYI cost basis for genesis blocks is 0.  Donations do not count as your basis. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline yellowecho

Re: The Taxman Cometh
« Reply #3 on: September 25, 2014, 02:36:08 AM »
FYI cost basis for genesis blocks is 0.  Donations do not count as your basis.

Good to know
696c6f766562726f776e696573

Offline tonyk

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Re: The Taxman Cometh
« Reply #4 on: September 25, 2014, 03:36:35 AM »
FYI cost basis for genesis blocks is 0.  Donations do not count as your basis.

'Insignificant differences', 'rounding errors' and others of the same kind ...

Just trying to say that when you sell  an asset for 1mil,  the base being $1000 or $0 is just not that important... :)

That being said, I understand the reason behind your post.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline eagleeye

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Re: The Taxman Cometh
« Reply #5 on: September 25, 2014, 03:52:59 AM »
Taxation is an issue yet to be addressed and may not be for a while.

But we can be sure the taxman will want his share at some point, and it would be terrible if folks had created a lot of wealth via Bitshares only to end up in serious trouble with the local tax thugs.

I'm not sure if the client/trading platform has any transaction tracking/exporting functionality, but if not, this should be added prior to mass release/marketing push.

Not a big deal - just need the ability to export trade history in .csv and perhaps a few the more common accounting software formats (ie. Quickbooks).

Taxation is something that is not well represented in the crypto space and this is yet another opportunity for the Bitshares platform to shine and widen the moat.

If users have an easy/automatic/slick way to track P&L for taxation and performance purposes it is one more feature to drive adoption.

Ya for traders there will need to be an accounting part of it.  Its quite simple in the GUI

Trade Name                    Date  Entered                          Date Exited                     Profit/Loss            Bought/Sold     Exited At
bitUSD029837336            Sept 19 2014                        Sept 20 2014                   Loss - ($20.00)       [email protected]       [email protected]

Should be searchable and categorized by year.  This is not grouped properly
« Last Edit: September 25, 2014, 03:56:58 AM by eagleeye »

Offline luckybit

Re: The Taxman Cometh
« Reply #6 on: September 25, 2014, 11:27:03 PM »
Taxation is an issue yet to be addressed and may not be for a while.

But we can be sure the taxman will want his share at some point, and it would be terrible if folks had created a lot of wealth via Bitshares only to end up in serious trouble with the local tax thugs.

I'm not sure if the client/trading platform has any transaction tracking/exporting functionality, but if not, this should be added prior to mass release/marketing push.

Not a big deal - just need the ability to export trade history in .csv and perhaps a few the more common accounting software formats (ie. Quickbooks).

Taxation is something that is not well represented in the crypto space and this is yet another opportunity for the Bitshares platform to shine and widen the moat.

If users have an easy/automatic/slick way to track P&L for taxation and performance purposes it is one more feature to drive adoption.

Ya for traders there will need to be an accounting part of it.  Its quite simple in the GUI

Trade Name                    Date  Entered                          Date Exited                     Profit/Loss            Bought/Sold     Exited At
bitUSD029837336            Sept 19 2014                        Sept 20 2014                   Loss - ($20.00)       [email protected]       [email protected]

Should be searchable and categorized by year.  This is not grouped properly

If you stay in Bitshares X there is no capital gains unless you bought in with USD but there is income tax to pay if you cash out. So when you cash out on a centralized exchange just pay taxes from the information on that. Everything you cash out would be income so $1000 is $1000 in income.  The process is no different than what it would be for other cryptocurrencies.

This may actually be a selling point for using Bitshares X. You don't have to pay capital gains taxes using Bitshares X while you do have to pay capital gains with centralized exchanges. The people lucky enough to have bought in via donations should not have to worry about capital gains if they stay in but if you're day trading in and out of Bitshares X then you do.

But you do have to pay income taxes and depending on how you cash out your income taxes could be higher or lower.
« Last Edit: September 25, 2014, 11:32:28 PM by luckybit »
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Offline tonyk

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Re: The Taxman Cometh
« Reply #7 on: September 25, 2014, 11:45:31 PM »
Taxation is an issue yet to be addressed and may not be for a while.

But we can be sure the taxman will want his share at some point, and it would be terrible if folks had created a lot of wealth via Bitshares only to end up in serious trouble with the local tax thugs.

I'm not sure if the client/trading platform has any transaction tracking/exporting functionality, but if not, this should be added prior to mass release/marketing push.

Not a big deal - just need the ability to export trade history in .csv and perhaps a few the more common accounting software formats (ie. Quickbooks).

Taxation is something that is not well represented in the crypto space and this is yet another opportunity for the Bitshares platform to shine and widen the moat.

If users have an easy/automatic/slick way to track P&L for taxation and performance purposes it is one more feature to drive adoption.

Ya for traders there will need to be an accounting part of it.  Its quite simple in the GUI

Trade Name                    Date  Entered                          Date Exited                     Profit/Loss            Bought/Sold     Exited At
bitUSD029837336            Sept 19 2014                        Sept 20 2014                   Loss - ($20.00)       [email protected]       [email protected]

Should be searchable and categorized by year.  This is not grouped properly

If you stay in Bitshares X there is no capital gains unless you bought in with USD but there is income tax to pay if you cash out. So when you cash out on a centralized exchange just pay taxes from the information on that. Everything you cash out would be income so $1000 is $1000 in income.  The process is no different than what it would be for other cryptocurrencies.

This may actually be a selling point for using Bitshares X. You don't have to pay capital gains taxes using Bitshares X while you do have to pay capital gains with centralized exchanges. The people lucky enough to have bought in via donations should not have to worry about capital gains if they stay in but if you're day trading in and out of Bitshares X then you do.

But you do have to pay income taxes and depending on how you cash out your income taxes could be higher or lower.
link?
[Assuming a wide adoption of bitUSD] IRS will spend thousand of man-hours (aka taxpayers $) figuring out who and how and under what rules they gonna tax.
« Last Edit: September 25, 2014, 11:51:32 PM by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline arhag

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Re: The Taxman Cometh
« Reply #8 on: September 26, 2014, 12:44:25 AM »
If you stay in Bitshares X there is no capital gains unless you bought in with USD but there is income tax to pay if you cash out. So when you cash out on a centralized exchange just pay taxes from the information on that. Everything you cash out would be income so $1000 is $1000 in income.  The process is no different than what it would be for other cryptocurrencies.

This may actually be a selling point for using Bitshares X. You don't have to pay capital gains taxes using Bitshares X while you do have to pay capital gains with centralized exchanges. The people lucky enough to have bought in via donations should not have to worry about capital gains if they stay in but if you're day trading in and out of Bitshares X then you do.

I highly doubt the IRS is going to see things this way. I think they will consider the decentralized exchange of BitShares X as no different than centralized exchanges (somewhat related: I hope the IRS doesn't change their mind regarding whether to treat cryptocurrency technologies as "foreign banks" from the perspective of FBAR reporting requirements; BitShares X is different enough from Bitcoin, since it is an exchange, that they might just treat it differently...). I am conservatively assuming (I am NOT a tax attorney) that they will treat each exchange between BitAssets/BTSX to be a taxable event with capital gains/losses. Having tools built in the client to help us track this for tax reporting would be incredibly useful. I am hopeful that they at least treat BitUSD and the like as currencies, so at least we do not need to worry about keeping track of capital gains/losses every time we spend BitUSD (like it has to be done with BTC currently). If the peg works well, the gains/losses would be negligible anyway.

By the way, here is another interesting thing to think about regarding taxes. If we create a fork of BitShares X to run concurrently with BitShares X, is that like getting a dividend? Or is it more like being gifted (without tax liability) an asset with a cost basis of zero that you later pay capital gains taxes (short-term if sold in less than a year, long-term if held more than a year) when you sell? It would be silly to think of it as a dividend, because then you could be liable to pay taxes on an income you don't even know you have (it is ridiculous to expect someone to keep track of every new DAC that gave you shares through a snapshot). Now what if the fork was actually a mandatory upgrade (like we have had numerous times already)? It would be ridiculous to have the cost basis of our BTSX go to zero every time we have a mandatory upgrade (does the link-kind exchange rule come into play there?). What about a weird middle ground where a clone is released and people do not switch over instantaneously but within a few months: market cap of original goes down as market cap of clone goes up. In this case do we treat the clone's shares as having a cost basis of zero still but have the capital loss of the original DAC cancel out the capital gains that we intentionally realize that year in the clone DAC? Does the wash-sale rule come into play there?

It is all so confusing and complicated.


Offline oldman

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Re: The Taxman Cometh
« Reply #9 on: September 26, 2014, 02:07:38 AM »
Bitshares is globally accessible, so there are a myriad of tax jurisdictions to contend with.

If crypto-derivatives gain any traction tax authorities are likely to treat them as any other assets.

Meaning trading BTSX for bitUSD is a taxable event.

As there is no guidance on this, and is not likely to be for some time, the best insurance the devs can give users is some kick ass automated book keeping.

That way, a few years down the road we won't have to read about desperately insolvent governments lynching wealthy early adopters over tax fraud.

Just toss 'em the csv printout from the railing of your yatch....

Offline luckybit

Re: The Taxman Cometh
« Reply #10 on: September 26, 2014, 05:26:19 AM »
I highly doubt the IRS is going to see things this way. I think they will consider the decentralized exchange of BitShares X as no different than centralized exchanges (somewhat related: I hope the IRS doesn't change their mind regarding whether to treat cryptocurrency technologies as "foreign banks" from the perspective of FBAR reporting requirements; BitShares X is different enough from Bitcoin, since it is an exchange, that they might just treat it differently...). I am conservatively assuming (I am NOT a tax attorney) that they will treat each exchange between BitAssets/BTSX to be a taxable event with capital gains/losses.
If they were going to do that then why wait?

They currently don't tax if I trade you 10 Bitcoins for 1 beyond barter taxes. So at best Bitcion/BTSX is barter. Since many of us got ours for free through a donation then only income tax is possible.

If the government wants to arrest us all then why wait? If they intend to tax every Bitcoin transaction with a sales tax then they have to say Bitcoin is a currency. It's not a currency.

Anyway here is a relevant IRS rule for like-kind exchanges: https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031#Section_1031_Like-Kind_Exchanges

BTSX to BTSX should be seen as a like-kind barter exchange. You're not exchange BTSX for anything else but for itself. So if you're going to tax the operating of Bitshares X itself then you're trying to tax the program itself which doesn't make any sense.

A centralized exchange can be taxed because fiat is involved with it and when you trade between Litecoin and Bitcoin it's not the same software which means at some point the centralized exchange has to convert or exchange the money between the two chains. BTSX and BitUSD are the same thing. BitUSD is just a specific amount of BTSX so why would there be a tax between BTSX trades?

« Last Edit: September 26, 2014, 05:57:15 AM by luckybit »
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Offline luckybit

Re: The Taxman Cometh
« Reply #11 on: September 26, 2014, 05:38:41 AM »
Bitshares is globally accessible, so there are a myriad of tax jurisdictions to contend with.

If crypto-derivatives gain any traction tax authorities are likely to treat them as any other assets.

Meaning trading BTSX for bitUSD is a taxable event.


Trading Bitcoin for Bitcoin is a taxable event too then if that is what you believe. Trading baseball cards are a taxable event too. If I trade a deck of baseball cards for a card you have then that is a taxable event right?

Yeah, it's barter. Technically it can be taxed but does the IRS go after people trading baseball cards? Can you find a single instance when they taxed people for bartering?

As there is no guidance on this, and is not likely to be for some time, the best insurance the devs can give users is some kick ass automated book keeping.

I don't think developers should waste time on it when the likelihood is so low. The risk is also extremely low so it's just not worth the time to bother. If the IRS cares then they can develop the app or you can develop it.

But since no dollars are being traded, and really nothing is being traded except betting, it's not like you can say it's a legal contract, it's not even like you can say it's baseball cards. If you treat it like it's an asset when it's not then you waste development time and you encourage people to think of source code as legal contracts which means every app (perhaps free speech itself) can be threatened.
That way, a few years down the road we won't have to read about desperately insolvent governments lynching wealthy early adopters over tax fraud.
Desperately insolvent governments within a few years? If you believe Bitshares will be that successful then you'll be a billionaire. Pay the tax in a few years if that is the case and then you can renounce your citizenship if you want to. If the IRS cracks down on this technology 3 years from now then let it happen but at least wait until you have a reason to write code rather than write code out of fear of the government.

Just toss 'em the csv printout from the railing of your yatch....
That CSV wont do any good. If they want to get you they can get you no matter what taxes you thought you were supposed to pay.

Also BitUSD isn't a derivative. BitUSD is like if I took some bottle caps and made a bet with you which says if a certain team wins the world series that I owe you a specific amount of bottle caps. It's betting perhaps but no it is not a derivative according to the legal definition. If you didn't buy Bitshares X then it also was not an investment.

It is gambling and since you're saying the IRS can go after us I suppose the gambling laws could apply too. So they can arrest any of us for any reason they want, change the laws to anything they want for any reason, tax us under any rules they want or invent new rules.

No need for paranoia, determine the actual level of risk we face or this thread is FUD.

But what is the likelihood of these events occurring? If you haven't done a risk assessment of Bitshares X then you might think these scenarios are likely. Do a risk assessment of Bitcoin and the exact same likelihood of Bitcoin being taxed to death is the likelihood of Bitshares being taxed to death. And based on the actual events that likelihood is very low.

The IRS did not declare Bitcoin a currency so it's not treated as one. Capital gains rules do apply to Bitcoin but there is no sales tax on Bitcoin transactions because the IRS ignores that. The IRS in theory could treat it as barter but people always barter in life and unless it's a significant amount of money the IRS isn't going to care.

If you're cashing out millions of dollars then the IRS will care. The easy thing to do is just follow the same procedures you do with Bitcoin. If the IRS decides to target you for some unknown reason then the Bitcoin community will be forced to take your side, help you with your legal fees, etc. To make it clear I'm not giving any legal advice because I'm not a lawyer but I don't think we should give into FUD and let FUD shape the design of Bitshares X.

The design of Bitshares X should be shaped by facts. The only facts required to decide whether or not to be concerned about taxes are what policies the IRS currently has. Has the IRS targeted Bitcoin users for barter taxes in the past? Has the IRS tried to get Bitcoin users to pay a sales tax in the past? Did the IRS determine that Bitcoin is like a commodity?

All the other stuff mentioned are what if possibilities. If we are going to play the what if possibility game then the IRS and US government can do anything it wants anyway so why not just use the USD out of fear that we might get arrested in the future via retroactive laws?
« Last Edit: September 26, 2014, 06:06:03 AM by luckybit »
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Offline arhag

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Re: The Taxman Cometh
« Reply #12 on: September 26, 2014, 06:46:20 AM »
BTSX to BTSX should be seen as a like-kind barter exchange.

Why would you ever exchange BTSX for BTSX? BTSX is fungible, that makes no sense. Now what would be interesting in terms of the like-kind rule is trading BitGold on one chain for BitGold on another chain. Then I wonder if you can carry over the cost basis from the BitGold of the previous chain.

A centralized exchange can be taxed because fiat is involved with it and when you trade between Litecoin and Bitcoin it's not the same software which means at some point the centralized exchange has to convert or exchange the money between the two chains. BTSX and BitUSD are the same thing. BitUSD is just a specific amount of BTSX so why would there be a tax between BTSX trades?

I disagree that governments will view BitUSD and BTSX as "the same thing" from a tax perspective. BitUSD is a crypto-derivative. I don't want to call it a derivative because technically there is no legal contract between two parties. Still, it is similar enough to a derivative that the IRS may just treat it like one (just like how they claimed BTC should be treated as property even though ownership rights of BTC are not enforced by law but by cryptography). So if they treat it like a derivative, I bet they will expect people to pay capital gains taxes on any gains from trading these BitAssets (just like they expect capital gains taxes on trading Gold ETFs for example). And if they already expect capital gains taxes from trading Litecoin and Bitcoin, I don't think they will care whether it is on the same blockchain or not, or whether the exchange was implemented on a centralized server or on a decentralized network. To think otherwise is naive and/or wishful thinking in my opinion.

But what is the likelihood of these events occurring? If you haven't done a risk assessment of Bitshares X then you might think these scenarios are likely. Do a risk assessment of Bitcoin and the exact same likelihood of Bitcoin being taxed to death is the likelihood of Bitshares being taxed to death. And based on the actual events that likelihood is very low.

Based on the fact that the IRS ruled that Bitcoin should be treated as property, to the point that every time you spend BTC on goods/services it is a taxable event and you could be liable for capital gains taxes, I would say the likelihood of the IRS expecting capital gains taxes on BitAsset trades is actually VERY HIGH.

Capital gains rules do apply to Bitcoin but there is no sales tax on Bitcoin transactions because the IRS ignores that.

What do you mean there is no sales tax? Merchants still need to charge sales tax on their goods/services whether the customer pays in credit cards, checks, cash, or cryptocurrency.

I don't think developers should waste time on it when the likelihood is so low. The risk is also extremely low so it's just not worth the time to bother. If the IRS cares then they can develop the app or you can develop it.
I don't think we should give into FUD and let FUD shape the design of Bitshares X.

Calculating capital gains and losses actually shouldn't be that difficult and it certainly doesn't require changing the BitShares X protocol in any way. In fact, someone could just write a small script to read in the client's exported JSON file and calculate it all for us. No need to even change the client design. By the way, that was a very funny joke about the IRS developing an app to help us in the cryptocurrency community with our taxes. LOL!

Offline luckybit

Re: The Taxman Cometh
« Reply #13 on: September 26, 2014, 09:12:31 AM »
Why would you ever exchange BTSX for BTSX? BTSX is fungible, that makes no sense. Now what would be interesting in terms of the like-kind rule is trading BitGold on one chain for BitGold on another chain. Then I wonder if you can carry over the cost basis from the BitGold of the previous chain.
BitGold is BTSX. If you're talking about BitGold on another chain then perhaps you can make an argument that it is like trading Bitcoin for Litecoin. In that case there might some sort of capital gain tax involved in cross chain trading.

But when everything is taking place on the same chain you cannot make the case on any level that anything more than BTSX to BTSX is taking place. Therefore there cannot be any capital gains taxes within a chain between BTSX and BitGold.

I disagree that governments will view BitUSD and BTSX as "the same thing" from a tax perspective. BitUSD is a crypto-derivative.
No it's not. A derivative is a legal contract. BitUSD is not a legal contract. Bitcoin is not a currency either and you're probably one of the people who expected the government to think of it as a currency just because a lot of people in the Bitcoin community want it to be.

Bitcoin is being taxed as a commodity because that is what it functions like. Bitshares X (BitAssets) are just BTSX and if you think otherwise then Bitcoin could be argued to be a currency, a derivative to the dollar, etc. I think if Bitcoin doesn't fit the definition of a currency then there it is inconsistent to believe BitUSD is a derivative.

Suppose it were to function like a crypto-derivative? It doesn't mean it's a legal derivative any more than bottle caps functioning like currency are a legal currency. The IRS and US government at this time does not believe Bitcoin is a currency, Bitshares X is not a foreign bank either.

I don't want to call it a derivative because technically there is no legal contract between two parties. Still, it is similar enough to a derivative that the IRS may just treat it like one (just like how they claimed BTC should be treated as property even though ownership rights of BTC are not enforced by law but by cryptography).
Bitcoins are a property because you can own it. It's not an ownership right, it's like owning the password to a bank account. Your password is your property because it allows you to access your stored value but it doesn't mean that Bitcoin itself is a currency under the law.

This is for lawyers to sort out and not programmers. Let the IRS start suing people and then respond to the threat. As of right now there is almost no risk of any of this happening and just a bunch of people in panic mode thinking about what the IRS could do if it wants to. The IRS could do virtually anything it wants to take down the whole crypto economy and the government can use all kinds of laws in any kind of way to put a lid on blockchain technology.

Until they actually start doing it there is no reason to start taking actions. It is paranoia to act prior to there being any risk and that paranoia can waste development time. Development should not be driven by paranoia and fear of government possibilities because there are too many possibilities.

So if they treat it like a derivative, I bet they will expect people to pay capital gains taxes on any gains from trading these BitAssets (just like they expect capital gains taxes on trading Gold ETFs for example).
How long will that take? 5 years? 10? Either you'll have millions of dollars and the tax will be a drop in the bucket or it will never amount to anything and the IRS wont care. If Bitshares X were to replace NASDAQ and if what PWC said is true and banks cease to exist in 2025 then you'll have to worry about it then but there is no evidence at all that the IRS is going to do anything in the next 5 years.

This is like people fearing the government would tax the Internet so they don't built websites like Ebay and Amazon. Build Ebay and Amazon first and then wait for the government to decide whether to tax it or not. It's very possible that a few years from now there will be a lot more friendly politicians in office and it may actually mean a tax cut for using these technologies. Laws can be changed and just like with the Internet it could be possible to make crypto tax free for a while.

Yes it is possible the IRS could go into the mode of taxing everyone but how popular do you think that will make the IRS politically? Remember that scandal when the IRS got caught with involving taxing Republicans?

And if they already expect capital gains taxes from trading Litecoin and Bitcoin, I don't think they will care whether it is on the same blockchain or not, or whether the exchange was implemented on a centralized server or on a decentralized network. To think otherwise is naive and/or wishful thinking in my opinion.
Litecoin and Bitcoin are considered two different technologies. BitUSD and BTSX are the same technology.

You can argue in court that it is like kind exchange. You can't argue it is like kind exchange when it's Bitcoin and Litecoin. If you cannot argue in court that it is like kind exchange then tell me what a like kind exchange is and why that clause exists at all? I'm not a lawyer but I doubt you are either.
Based on the fact that the IRS ruled that Bitcoin should be treated as property, to the point that every time you spend BTC on goods/services it is a taxable event and you could be liable for capital gains taxes, I would say the likelihood of the IRS expecting capital gains taxes on BitAsset trades is actually VERY HIGH.
It's already known that it is a taxable event to spend BTC on goods and services. But mining is not a taxable event in itself is it? Mining is not considered money exchanging is it? Because it's all taking place on the same technology, on the same chain.

What do you mean there is no sales tax? Merchants still need to charge sales tax on their goods/services whether the customer pays in credit cards, checks, cash, or cryptocurrency.
There is a sales tax when you buy something from a merchant. There is no sales tax when you're interacting with Bitshares X technology. If you're bartering BitUSD for some product or service then of course there is a sales tax but if you're within the Bitshares X chain and not actually doing anything else then what exactly can be taxed?

It would be like taxing people who trade around bottle caps while playing dice. If the IRS really wanted to tax stuff like that I'm sure they could find a law to figure out a way but there is no evidence they are going to spend the resources to do it. And it's not feasible for developers to focus on what the IRS and all the other tax agencies in the world might decide to do in the future.

Calculating capital gains and losses actually shouldn't be that difficult and it certainly doesn't require changing the BitShares X protocol in any way.
Suppose you're not an American? How do you calculate your taxes then?
How do you know what counts as a gain and a loss when everything is in BTSX internally?
A gain of what? a loss of what?

Here is a quote on like kind exchange:
Quote
One critical issue in a like-kind exchange is defining “property of like kind.” The tax code contains no such definition. Treasury Regulation § 1.1031(a)-1(b) offers a little guidance, suggesting that the term “like kind” refers to “the nature of character of the property and not to its grade or quality.” But the regulation does not further define a property’s nature, character, grade or quality. Rather, it states that “one kind or class of property may not be exchanged for property of a different kind of class.”
Exchanges of personal property (vehicles, equipment, intellectual property rights) are subject to more restrictive rules than exchanges of real property, as set forth by Treasury Regulation § 1.1031(a)-2. Depreciable personal property is generally considered like-kind to other depreciable personal property that has the same “General Asset Class” in assigning class lives for purposes of depreciation. For intangible property (and personal property not subject to depreciation), the more general test of “nature or character” applies. While livestock can qualify for like-kind exchange treatment, livestock of different sexes will not qualify as like-kind.
Six types of property are not eligible for a like-kind exchange: (1) stock in trade or other property held primarily for sale; (2) stocks, bonds, or notes; (3) other securities or evidences of indebtedness or interest; (4) interests in a partnership; (5) certificates of trust or beneficial interests; and (6) choses in action.

https://en.wikipedia.org/wiki/Like-kind_exchange#What_is_Property_of_.E2.80.9CLike_Kind.E2.80.9D.3F

Quote

DEFINITION OF 'LIKE-KIND PROPERTY'
Any two assets or properties that are considered to be the same type, making an exchange between them tax free. To qualify as like kind, two assets must be of the same type (e.g. two pieces of residential real estate), but do not have to be of the same quality.

For example, you can exchange your car for another car tax free, but if you exchange your car for a piece of land, you could be subject to capital gains tax. Similarly, if you sell your car and then reinvest the proceeds back into another car, you should be able to avoid paying taxes on any gains incurred. In the U.S., this type of like-kind transfer can be accomplished by what is called a Section 1031 exchange.

http://www.investopedia.com/terms/l/like-kindproperty.asp

BTSX exchanges are like trading passwords. All the passwords are like car keys.

So this would be like we are trading cars, and all of our cars are BTSX. It's just trading passwords as far as I understand it which is ultimately just trading entries in a database. The cars don't have to be of the same quality though so if it's BitUSD, BitGold, Bitwhatever, it's still BTSX at the core so why wouldn't that qualify as a like kind exchange?


There is no capital gain or capital loss. There might be income so you could say the taxable events could be income but I don't really see why it's the developers responsibility to do that. If developers wanted to make the job of the tax agencies easier then they would not have rushed to implement TITAN. Tax agencies are just going to have to wait for years for the technology to mature and actually decide on the rules before developers should respond.

If tax agencies don't give any guidance, and if tax agencies aren't caring about it, it's likely the market cap isn't big enough to matter. When the market cap is in the tens of billions then maybe the IRS will start to care but at that point you can hire a tax lawyer to help you figure out how much you owe.

Let's face it. No one knows how much they owe in Bitcoin. There is uncertainty and it's not going to change. If you want certainty then you should just buy your Bitcoins and hold them in cold storage until you can determine what the IRS wants you to do. If you've spent any Bitcoin at all you have no way to know how much taxes you owe the IRS so just pay what you think you owe.

You also don't know what the FBI might do, or the NSA, or any of the other government agencies all around the world. If you want to help them to do their job then contact congress and tell congress to get off their ass and make a law to make the crypto industry tax free for a certain amount of time like they did with the Internet. This way there will be no uncertainty about the tax.

Also tell the SEC to stop wasting time and implement the JOBS Act.
In fact, someone could just write a small script to read in the client's exported JSON file and calculate it all for us. No need to even change the client design. By the way, that was a very funny joke about the IRS developing an app to help us in the cryptocurrency community with our taxes. LOL!

You should go ahead and do it then. I don't think it's worth the time to bother with it because I don't think Bitshares X is a real exchange. Nothing is being exchanged except for BTSX so it's more like a gambling app at this point. In the future maybe someday it might seem like more but $1 worth of BTSX is still just BTSX. It's not like BitUSD is actually anything more than BTSX so I don't see how BTSX suddenly becomes a real stock which can be subject to capital gains unless you purchased it and in our case we didn't purchase the genesis block.

Sure lawyers and the IRS can interpret the law in any kind of way. I'm not a lawyer but that is an extremely bizarre interpretation which would have very broad and destructive implications for Bitcoin and beyond. Are items in Second Life subject to capital gains taxes, property taxes, etc? I guess they are and we should pay the IRS for that too?
« Last Edit: September 26, 2014, 09:48:58 AM by luckybit »
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Offline sschechter

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Re: The Taxman Cometh
« Reply #14 on: September 26, 2014, 03:34:23 PM »
The way I see it, entering the BitShares X market is like sitting down at the poker table and placing placing a few $100 bills on the table.  The dealer than gives you back an assortment of white bitUSD $1 chips, green $25 bitSLV chips, and black $100 bitBTC chips, and BTER is like the casino down the road that will honor the BitShares X chips.

* Disclaimer:  I am not an IRS agent but I play one on internet forums.
BTSX: sschechter
PTS: PvBUyPrDRkJLVXZfvWjdudRtQgv1Fcy5Qe

 

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