2013-17-12 Forbes - Bitcoin Is Not Anonymous And Is Always Taxable

bryant.coleman

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Quote from: TraderTimm on December 18, 2013, 02:19:34 PM

Here's my government-required registered wallet balance: 0.00000001

What's the tax on less than a penny? Oh, no problem Mr. Tax Guy, keep the change!

Ridiculous, they have zero clue how easily this is circumvented.

As long as you don't convert your Bitcoins to cash, they won't be able to catch you. But right now, there are not many options to barter it for cash without getting unwanted attention from the tax authority.

TraderTimm

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Here's my government-required registered wallet balance: 0.00000001

What's the tax on less than a penny? Oh, no problem Mr. Tax Guy, keep the change!

Ridiculous, they have zero clue how easily this is circumvented.

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Edit: I want to add something here as well - that people would willingly contribute to their communities they live in and see direct benefit from. What I'm railing against here is intrusive fingers of government grabbing cash because it is simply there for the taking. I'd argue that the Return-On-Investment is inversely proportional to the locale where it is spent, which implies that the entire tax system needs an overhaul, and I hope Bitcoin is the very thing that makes it so.

bryant.coleman

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At least now the government agencies should shed their hatred towards Bitcoins. If the transactions are not anonymous, and tax evasion using them is not possible, then why the agencies should worry about it? Huh

Rygon

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Quote from: Peter R on December 18, 2013, 09:30:47 AM

Hi Rygon, I can see rationale to ignore the capital gains on the lost coins, but I don't see how you can get away from the fact that the miner earned coins in leu of dollars in what was essentially "his job."

Consider the individual in your Microsoft example above: if he was awarded this 1% stake in leu of an income, then he would owe taxes on the value of those shares at the time they were awarded. I now agree that if he later lost them, he would not owe *additional* capital gains tax, but he still owes the tax on the value of the shares that were exchanged for his work.

I apologize to you because you gave thoughtful comments when I was sort of trolling. After I read about the tax implications of "exchanging hugs for bitcoins," I assumed the Forbes article was a well-concealed parody. I thought the author was purposely being absurd, illustrating the complexity of our tax system and how certain aspects of our modern life make some of the rules difficult to adhere to and enforce.

No problem.

And perhaps the author was sort of being absurd when talking about taxing bitcoins for hugs. But he is totally right to say that any kind of barter transaction is a taxable event, whether it's a material exchange or a service. Bitcoin and other new technologies just bring to light the absurdity of the tax system. I'm sure almost everyone violates tax laws inadvertently to one degree or another, especially in the area of bartering. It's close to impossible for anyone to really understand and comprehend it all.

Peter R

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Quote from: Rygon on December 18, 2013, 09:05:45 AM

Quote from: Peter R on December 18, 2013, 08:12:53 AM

Quote from: Rygon on December 18, 2013, 07:49:16 AM

Incorrect, the article states that the hard drive loss is a taxable loss event. If his basis was greater than zero (unlikely), he could get back when doing his taxes.

Exactly. The hard-drive loss is a taxable loss event for which he can only deduct $3,000. But mining the coins gave him an income (the value of the coins when mined) and a capital gain (the value of the coins when lost minus the value when mined). He would deduct the $3,000 from the earnings and capital gain (minus mining expense) and pay taxes on the difference. This is why the author says it's a "double whammy": i.e., not only did he not get is $7,000,000. He also lost his ability to pay the taxes he owes on that $7,000,000.

Imagine this: I hire you to write some code for me and I pay you $50,000 in cash. While walking through the dump you "lose" that $50,000 wad of cash. You still owe taxes on this income even though you lost it, right? Sure, maybe you could deduct a bit if you can prove the loss, but you can't claim a loss AND not pay tax on the income you are claiming the loss for.

That's why I said the article was completely true and completely false at the same time: just like "hugs" are taxable, your lost bitcoins are too.

I disagree. He doesn't owe taxes on that $7,000,000 because he never cashed out to the fiat system or bartered those coins. The $7,000,000 gain was never realized. It's the same as if someone got a 1% stake in Microsoft back when the company wasn't worth anything, but then lost all the paperwork that proves it. The income (obtaining microsoft stock) would be claimed in the year it was obtained. If that paperwork was found, then selling/trading/giving away that stock would be a taxable event (long term capital gains). So, lost bitcoins are not taxable, at least within the US tax system.

Hi Rygon, I can see rationale to ignore the capital gains on the lost coins, but I don't see how you can get away from the fact that the miner earned coins in leu of dollars in what was essentially "his job."

Consider the individual in your Microsoft example above: if he was awarded this 1% stake in leu of an income, then he would owe taxes on the value of those shares at the time they were awarded. I now agree that if he later lost them, he would not owe *additional* capital gains tax, but he still owes the tax on the value of the shares that were exchanged for his work.

I apologize to you because you gave thoughtful comments when I was sort of trolling. After I read about the tax implications of "exchanging hugs for bitcoins," I assumed the Forbes article was a well-concealed parody. I thought the author was purposely being absurd, illustrating the complexity of our tax system and how certain aspects of our modern life make some of the rules difficult to adhere to and enforce.

TTBit

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* I get a lottery ticket as a birthday gift, but the dog eats it before the drawing. The numbers hit for $100 million, but I can never cash out. Taxable?

Foxpup

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Vile Vixen and Miss Bitcointalk 2021-2023

Quote from: Peter R on December 18, 2013, 08:12:53 AM

Exactly. The hard-drive loss is a taxable loss event for which he can only deduct $3,000. But mining the coins gave him an income (the value of the coins when mined) and a capital gain (the value of the coins when lost minus the value when mined).

Except for the obvious fact that the value of lost coins (or any other lost or destroyed property) is zero unless they are insured (in which case the capital gain is the insurance payout minus the value when they were mined), meaning losing the uninsured coins is a capital loss event, which is exactly what the article says.

Quote from: Peter R on December 18, 2013, 08:12:53 AM

He would deduct the $3,000 from the earnings and capital gain (minus mining expense) and pay taxes on the difference. This is why the author says it's a "double whammy": i.e., not only did he not get is $7,000,000. He also lost his ability to pay the taxes he owes on that $7,000,000.

He does not "owe millions of dollars in taxes", nor does he owe taxes on the $7,000,000, and the article never says either of these things.

Rygon

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Quote from: Peter R on December 18, 2013, 08:12:53 AM

Quote from: Rygon on December 18, 2013, 07:49:16 AM

Incorrect, the article states that the hard drive loss is a taxable loss event. If his basis was greater than zero (unlikely), he could get back when doing his taxes.

Exactly. The hard-drive loss is a taxable loss event for which he can only deduct $3,000. But mining the coins gave him an income (the value of the coins when mined) and a capital gain (the value of the coins when lost minus the value when mined). He would deduct the $3,000 from the earnings and capital gain (minus mining expense) and pay taxes on the difference. This is why the author says it's a "double whammy": i.e., not only did he not get is $7,000,000. He also lost his ability to pay the taxes he owes on that $7,000,000.

Imagine this: I hire you to write some code for me and I pay you $50,000 in cash. While walking through the dump you "lose" that $50,000 wad of cash. You still owe taxes on this income even though you lost it, right? Sure, maybe you could deduct a bit if you can prove the loss, but you can't claim a loss AND not pay tax on the income you are claiming the loss for.

That's why I said the article was completely true and completely false at the same time: just like "hugs" are taxable, your lost bitcoins are too.

I disagree. He doesn't owe taxes on that $7,000,000 because he never cashed out to the fiat system or bartered those coins. The $7,000,000 gain was never realized. It's the same as if someone got a 1% stake in Microsoft back when the company wasn't worth anything, but then lost all the paperwork that proves it. The income (obtaining microsoft stock) would be claimed in the year it was obtained. If that paperwork was found, then selling/trading/giving away that stock would be a taxable event (long term capital gains). So, lost bitcoins are not taxable, at least within the US tax system.

Peter R

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Quote from: Rygon on December 18, 2013, 07:49:16 AM

Quote from: Peter R on December 17, 2013, 11:48:44 PM

Quote from: Foxpup on December 17, 2013, 11:28:05 PM

Quote from: Peter R on December 17, 2013, 08:49:22 PM

the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes

No such notion appears in the article.

You may have missed the fact that the article contains 3 pages. This was on page 3 complete with a picture of the landfill:

http://www.forbes.com/sites/cameronkeng/2013/12/16/bitcoin-is-not-anonymous-is-always-taxable/3/

Incorrect, the article states that the hard drive loss is a taxable loss event. If his basis was greater than zero (unlikely), he could get back when doing his taxes.

Exactly. The hard-drive loss is a taxable loss event for which he can only deduct $3,000. But mining the coins gave him an income (the value of the coins when mined) and a capital gain (the value of the coins when lost minus the value when mined). He would deduct the $3,000 from the earnings and capital gain (minus mining expense) and pay taxes on the difference. This is why the author says it's a "double whammy": i.e., not only did he not get is $7,000,000. He also lost his ability to pay the taxes he owes on that $7,000,000.

Imagine this: I hire you to write some code for me and I pay you $50,000 in cash. While walking through the dump you "lose" that $50,000 wad of cash. You still owe taxes on this income even though you lost it, right? Sure, maybe you could deduct a bit if you can prove the loss, but you can't claim a loss AND not pay tax on the income you are claiming the loss for.

That's why I said the article was completely true and completely false at the same time: just like "hugs" are taxable, your lost bitcoins are too.

Rygon

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Quote from: Peter R on December 17, 2013, 11:48:44 PM

Quote from: Foxpup on December 17, 2013, 11:28:05 PM

Quote from: Peter R on December 17, 2013, 08:49:22 PM

the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes

No such notion appears in the article.

You may have missed the fact that the article contains 3 pages. This was on page 3 complete with a picture of the landfill:

http://www.forbes.com/sites/cameronkeng/2013/12/16/bitcoin-is-not-anonymous-is-always-taxable/3/

Incorrect, the article states that the hard drive loss is a taxable loss event. If his basis was greater than zero (unlikely), he could get back when doing his taxes.

Why the hatred to this article? Hate the tax law, not the accountant. Everything in there is factually accurate for US tax law. There are hundreds of threads on this site that have the same information. This isn't new, but clearly a lot of folks prefer to put their heads in the sand and pretend like that existing laws don't apply to bitcoin

nastybit

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The whole idea (tax!) behind the article is a bit lame

- if you don't use a traceable entry point and you don't exit on FIAT (e.g. rent VPS for a month?) how can a tax be calculated? on which FIAT/value?
- if you mine cryptos, what's your entry point? what's the value in FIAT? noboby is mining serious coins solo anymore; are they going to get the data from pools? are they going to run pools? hurray!

- are they going to track all addresses used on the blockchain?
- how are they going to demonstrated that I bought at a certain value if the transactions appears day after in the blockchain?
- do we have to register each address we use?

The authour will writing a follow to cover more stuff, I guess he needs many more LOL

LiteCoinGuy

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In Satoshi I Trust

Quote from: bitbouillion on December 17, 2013, 08:48:06 PM

If it's not anonymous and always taxable what's the problem for governments?

maybe it will be even less anonymous in the future. maybe that is what it needs to flourish. maybe.

Foxpup

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Quote from: Peter R on December 17, 2013, 11:48:44 PM

Quote from: Foxpup on December 17, 2013, 11:28:05 PM

Quote from: Peter R on December 17, 2013, 08:49:22 PM

the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes

No such notion appears in the article.

You may have missed the fact that the article contains 3 pages. This was on page 3 complete with a picture of the landfill:

http://www.forbes.com/sites/cameronkeng/2013/12/16/bitcoin-is-not-anonymous-is-always-taxable/3/

No, I read the whole thing, and nowhere does it say that James Howell owes millions in taxes. Where does it say that?

Peter R

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Quote from: Foxpup on December 17, 2013, 11:28:05 PM

Quote from: Peter R on December 17, 2013, 08:49:22 PM

the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes

No such notion appears in the article.

You may have missed the fact that the article contains 3 pages. This was on page 3 complete with a picture of the landfill:

http://www.forbes.com/sites/cameronkeng/2013/12/16/bitcoin-is-not-anonymous-is-always-taxable/3/

Quote from: Foxpup on December 17, 2013, 11:28:05 PM

Quote from: Peter R on December 17, 2013, 08:49:22 PM

the concept that receiving "hugs" would be taxable

What? It is taxable. If you're planning to evade taxes by trading "hugs", then don't worry, the "hugs" you'll receive in prison are tax-exempt.

Funny! Like I said, it's completely true and completely false at the same time.

Next time my GF asks for 20 bucks and I say come here and hug me first, I better make an entry in my ledger!

Foxpup

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Quote from: Peter R on December 17, 2013, 08:49:22 PM

the concept that receiving "hugs" would be taxable

What? It is taxable. If you're planning to evade taxes by trading "hugs", then don't worry, the "hugs" you'll receive in prison are tax-exempt.

Quote from: Peter R on December 17, 2013, 08:49:22 PM

the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes

No such notion appears in the article.

Carlton Banks

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Quote from: Peter R on December 17, 2013, 08:49:22 PM

I quite enjoyed that read. It was another example of Bitcoin as "Schrödinger's coin." The article was completely true and completely false at the same time.

P.S: Carlton: I read the article more as well-concealed parody (the concept that receiving "hugs" would be taxable, the author's cheeky tone when he wrote "government's fair share of your gains", and the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes). But after reading your comment, I'm completely mystified whether parody was was the author's intention or not.

Ha! I started skimming as I got to that 3rd page, the idea that the landfill hard drive loss would also incur taxes is beyond absurd. I just thought "the proof for that story was so thin, I can't believe this guy is devoting a single keystroke to it". How on earth does the UK tax inspectorate prove that he wasn't inventing the whole story, to seek attention or sympathy BTC? And the "fair share" comment, don't get me started.

I don't think Forbes do parody, it's just not a part of their repertoire. Market manipulation in the face of an inevitable change? When the change is driven by complicated information technology? I think that's up their street.

Peter R

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I quite enjoyed that read. It was another example of Bitcoin as "Schrödinger's coin." The article was completely true and completely false at the same time.

P.S: Carlton: I read the article more as well-concealed parody (the concept that receiving "hugs" would be taxable, the author's cheeky tone when he wrote "government's fair share of your gains", and the absurd notion that the guy in England who lost his hard-drive now owes millions of dollars in taxes). But after reading your comment, I'm completely mystified whether parody was was the author's intention or not.

bitbouillion

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If it's not anonymous and always taxable what's the problem for governments?

Carlton Banks

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"Forbes writer attempts to shoe horn bitcoin into existing tax rules, demonstrates how ridiculous that is"

And forgets that proving the ownership of pseudonymous addresses isn't as simple as he thinks... certainly not if the owner wants to keep the ownership a secret. How does this guy think tax havens worked? And he thinks that purchasing goods with bitcoin is a capital gain.

Why pay this guy? Seriously?

Athom

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Bitcoin Is Not Anonymous And Is Always Taxable

http://www.forbes.com/sites/cameronkeng/2013/12/16/bitcoin-is-not-anonymous-is-always-taxable/

Topic: 2013-17-12 Forbes - Bitcoin Is Not Anonymous And Is Always Taxable (Read 1073 times)