The Taxman Cometh

[CoinHoarder]

puh .. I have no clue .. and worse .. it depends on the country you live in .. not sure how my country will handle this ..

I'm looking at this from a U.S. perspective but I'm interested in all.

Where is BTC <-> GoxUSD <-> USD taxed, and where is bitBTC <-> bitUSD <-> USD taxed?

Maybe the second example is more accurate as: bitBTC <-> bitUSD <-> (BTSX) <-> USD
The (BTSX) represents what I assume must be a "virtual" transaction/conversion in the bitUSD onramps.

If that assumption is correct, GoxUSD would be playing the same role as BTSX.
So perhaps only GoxUSD <-> USD and BTSX <-> USD are taxed. Once you're in the BTSX ecosystem, you're free. I hope.

This is how I hope it works too, as capital gains are not realized until converting it into FIAT or BTC. Sure, you may make a profitable trade by getting into bitFIAT on the top of a bubble, but then you may also lose it back getting stuck in bitFIAT on a rally. You can just as easily make gains as you can losses as long as you are still trading.

It makes sense to me that capital gains are not realized until you purchase something or a service with bitassets, or you convert them to FIAT. It is like crypto to crypto trading, which is not taxable until you convert it into FIAT and realize your gains or purchase something with the crypto.

[xeroc]

Stan's view on this issue:
https://bitsharestalk.org/index.php?topic=9118.msg121204#msg121204

[roadscape]

puh .. I have no clue .. and worse .. it depends on the country you live in .. not sure how my country will handle this ..

I'm looking at this from a U.S. perspective but I'm interested in all.

Where is BTC <-> GoxUSD <-> USD taxed, and where is bitBTC <-> bitUSD <-> USD taxed?

Maybe the second example is more accurate as: bitBTC <-> bitUSD <-> (BTSX) <-> USD
The (BTSX) represents what I assume must be a "virtual" transaction/conversion in the bitUSD onramps.

If that assumption is correct, GoxUSD would be playing the same role as BTSX.
So perhaps only GoxUSD <-> USD and BTSX <-> USD are taxed. Once you're in the BTSX ecosystem, you're free. I hope.

[xeroc]

puh .. I have no clue .. and worse .. it depends on the country you live in .. not sure how my country will handle this ..

[roadscape]

But if we have these USD-bitUSD "onramps", then it raises the question: how different is bitUSD from GoxUSD?

bitUSD is not an IOU!

I still struggle to fully grasp these concepts, but I mean as far as the taxman is concerned. Could you dumb it down for me?

Where is BTC <-> GoxUSD <-> USD taxed, and where is bitBTC <-> bitUSD <-> USD taxed?

[xeroc]

But if we have these USD-bitUSD "onramps", then it raises the question: how different is bitUSD from GoxUSD?

bitUSD is not an IOU!

[roadscape]

But what if you're just day trading it to build your investment? That could get messy trying to figure out each gain and loss every time you buy and resell even a small portion. And to my knowledge, none of the exchanges send out 1099 forms to tell you your gains/losses, do they?

...but yea, you're probably right. Knowing the IRS, they probably would consider fiat transactions on an exchange taxable; but they'd have no real way of knowing unless you tell them. But be that as it may, I'd still think BitUSD is not the same as cashing into USD, and thus you'd just be making a trade of one investment for another with no gain or loss to recognize (like-kind exchange, basis in the new asset = basis in the old asset). If BitUSD were to start being accepted as real USD, however......that would be sweet. And probably taxable.

One BTC daytrader on Reddit said it was unwise to make trades without considering the tax implications. I took that to mean that even "GoxUSD" is taxed.

I assume if BTC-BTSX is untaxed, that means BTSX-bitBTC and bitBTX-bitUSD would not be taxed.

But if we have these USD-bitUSD "onramps", then it raises the question: how different is bitUSD from GoxUSD?

[CoinHoarder]

I am pretty sure selling into "digital fiat" on an exchange is a taxable event.

...but yea, you're probably right. Knowing the IRS, they probably would consider fiat transactions on an exchange taxable; but they'd have no real way of knowing unless you tell them.

Not that I disagree with you, but doesn't the tax system technically work on trusting the tax payers to report honestly?

I also kind of agree with the statement, knowing the IRS they will find some way to tax it.  :D

[nomoreheroes7]

I am pretty sure selling into "digital fiat" on an exchange is a taxable event.

But what if you're just day trading it to build your investment? That could get messy trying to figure out each gain and loss every time you buy and resell even a small portion. And to my knowledge, none of the exchanges send out 1099 forms to tell you your gains/losses, do they?

...but yea, you're probably right. Knowing the IRS, they probably would consider fiat transactions on an exchange taxable; but they'd have no real way of knowing unless you tell them. But be that as it may, I'd still think BitUSD is not the same as cashing into USD, and thus you'd just be making a trade of one investment for another with no gain or loss to recognize (like-kind exchange, basis in the new asset = basis in the old asset). If BitUSD were to start being accepted as real USD, however......that would be sweet. And probably taxable.

[CoinHoarder]

It is complicated I admit. We may not know an answer until the IRS or some alphabet agency makes a statement on it. I could see it going either way, but I hope capital gains are not due until spending it as money for a good or service, or cashing out into real FIAT.

[matt608]

No tax obligation (US tax system) until you convert to actual fiat.

Can anyone confirm this?

I was under the impression that each BTC-USD trade is taxable (even if you don't withdraw the fiat). So is coin-to-coin and coin-to-asset trading exempt? Because that would be great.

BitUSD is NOT $USD, it is a token and a piece of digital property

I agree with this. I wouldn't think even cashing out into "digital fiat" on an exchange is a taxable event until you actually withdraw that to your bank account. The IRS wouldn't know anyway, would they? lol

Disclaimer: I am a CPA by profession. But I may not be a very good one heh...

I am pretty sure selling into "digital fiat" on an exchange is a taxable event.

[nomoreheroes7]

No tax obligation (US tax system) until you convert to actual fiat.

Can anyone confirm this?

I was under the impression that each BTC-USD trade is taxable (even if you don't withdraw the fiat). So is coin-to-coin and coin-to-asset trading exempt? Because that would be great.

BitUSD is NOT $USD, it is a token and a piece of digital property

I agree with this. I wouldn't think even cashing out into "digital fiat" on an exchange is a taxable event until you actually withdraw that to your bank account. The IRS wouldn't know anyway, would they? lol

Disclaimer: I am a CPA by profession. But I may not be a very good one heh...

[sschechter]

No tax obligation (US tax system) until you convert to actual fiat.

Can anyone confirm this?

I was under the impression that each BTC-USD trade is taxable (even if you don't withdraw the fiat). So is coin-to-coin and coin-to-asset trading exempt? Because that would be great.

BitUSD is NOT $USD, it is a token and a piece of digital property

[roadscape]

No tax obligation (US tax system) until you convert to actual fiat.

Can anyone confirm this?

I was under the impression that each BTC-USD trade is taxable (even if you don't withdraw the fiat). So is coin-to-coin and coin-to-asset trading exempt? Because that would be great.

[tonyk]

I was asked a question I don't know the answer to. Can I get some feedback?

In the event that a bubble does occur, people can diversify into bitFIAT to reduce the amplitude of the bubble and reduce your exposure, and that is unlike any other cryptocurrency where you would need to actually sell them to reduce exposure which creates downward pressure on the market.

Can you describe the difference you see between "diversify into" and "actually sell".

Let's say you think a cryptocoin is at the top of a mini bubble and will likely go down in value in the short term.

With most cryptocurrencies you would need to sell them on the market to reduce your exposure which creates downward pressure on the market. Money exits the cryptocurrency's ecosystem for another cryptocurrency or FIAT. You could do so off of services or exchanges, but it is not convenient nor quick, and has counterparty risk involved.

With BitsharesX you can instead buy bitFIAT which are backed by BTSX, and thus there is no downward pressure put on the market and no money actually leaves the BTSX ecosystem. Yet, the end result is similar as you still reduce exposure to a downward price swing. There is no reason for the price to go down unless someone wants to exit the BitsharesX ecosystem all together.

In your "diversify into" example.  With what am I buying bitFIAT?  Is this new investment?  Do I still own the BitsharesX that I am expecting to decline in value?  If I do not still own the BTSX, who does?  Why does my selling them not cause downward pressure?

I am not yet finding any difference between "diversify into" and "actually sell" other than "diversify into" includes also purchasing bitFIAT which from the sounds of this "backing" system may create wash sale tax loss implications for me, increasing my risk and limiting my gains due to the way that taxes work.
http://www.sec.gov/answers/wash.htm

You sell your BTSX to buy the bitAsset (bitUSD), in other words exchange BTSX for bitUSD.
There is some downward pressure (arguably), though, as you sell BTSX while buying the bitUSD.

No tax obligation (US tax system) until you convert to actual fiat.

disclosure:My and you are not tax expert and this is not tax advice!