Topic: Do I pay taxes when I sell an alt coin for bitcoin? - page 4. (Read 19340 times)

I think a lot of people are yet to realise that the exchange they trade on, most especially centralized exchange, pays tax. So for such exchange to be able to meet up with their charges by the government, they would have to put some of the charges on their customers, which is taken from both trading and withdrawal fees. I am not surprised to see some exchanges charge exorbitant fees.

Till date I haven't come across such a kind of taxation on the trade of any altcoin pairing with bitcoin. There were few countries around the world that has taxed the bitcoin based on the transaction done with cash. Even this can't be followed that effective, to which a trading fee is levied when an altcoin is changed to bitcoin through an exchange 

For sure you must pay taxes, but I think nobody is doing that. Maybe some centralised exchanges are adding an extra fee for tax obligations but I am pretty sure that you do not pay taxes by making trades on DEXes.

Keep in mind that the IRS document posted above is the tax guidance in its entirety. There is a ubiquitous assumption that in the US, altcoin for altcoin trading is taxable, but per the relevant IRS guidance:

Q-6:  Does a taxpayer have gain or loss upon an exchange of virtual currency for other property? A-6:  Yes.  If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain.  The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency.  See Publication 544, Sales and Other Dispositions of Assets, for information about the tax treatment of sales and exchanges, such as whether a loss is deductible.

Notice it clearly only mentions virtual currency being exchanged for "other" property, and "property" in exchange for "virtual currency", never "virtual currency for virtual currency". It is not clear that the IRS intended this to be taxed, and it would lead to situations that have no precedent. Eg, if one buys $1000 worth of altcoin, and then does more altcoin trading for thousands of dollars out of this initial investment, but the altcoins all go to zero (which is quite common), then is there supposed to be a taxable gain? It would not make sense. Out of common sense, it should be a $1000 loss. This only happens in crypto because the volatility is many times higher than all other assets (and the volatility is high because it is purely digital and so easy to exchange). If one believes that these transactions are all taxable, then one must sell holdings before the end of the calendar year to fiat to have the funds to pay taxes, increasing administrative burden, possibly forcing one to sell crypto for a depreciating currency (fiat) and so having a loss, not to mention transaction fees.

I doubt that the IRS has considered any of this or would want for these things to happen. The situation is not the same for stocks, which are tangible companies with employees, assets, real estate, bonds, hopefully profits, and so forth, not digital representations which can be invented en masse in a day. It is clear from the above document that the IRS is not proficient in this space because of the distinguishing of "convertible" digital currency, their definition being one that "that has an equivalent value in real currency", from non-convertible digital currency, but all digital currency has an equivalent value in real currency, just as airline miles and other digital things have a value in real currency. Also, as has been pointed out, the tax on mining bitcoin at the time of mining does not make sense. In manufacturing, when one produces 1000 copies of software, there is no tax until it is sold, it is inventory until that point. So one could again be taxed on mining something that becomes worthless later. When gold is mined, it is generally taxed when it is sold, not at the time of mining.

Like-kind is a total tangent; anyone who has looked at the forms required can tell that it obviously only applies to real estate. So the recent ruling that confirms this obvious fact has no bearing on anything. For example there are tax rules on currencies. If the government comes out and clarifies that a rule only applies to currencies, it would have no bearing on crypto.

The problem is that because the IRS has decreed that virtual currency is to be taxed as property, and property is taxed on form 8949, it would not make sense to not mention altcoin-altcoin trades, because if only reporting fiat trades, the numbers will not add up because the form (which was not designed for crypto) requests the number of items, the date bought, sold, and the cost basis, unless the number of shares of the asset is not reported. The IRS likely did not consider any of this, nor how to deal with hard forks, and so on, so it is normal that the forms would not make sense.

The most obvious solution would be for the IRS to come out with a new form specifically to report crypto trading, which would deal with all of the above issues.

If you are in the US right now you should report all your sales to the IRS, even between altcoins. It is insane what they want. They need to know your cost basis and if your cost basis was originally xyz token then you need to prove that. Otherwise you could be on the hook for the whole amount, as if your bitcoin appeared out of thin air and had no cost. If you get audited you could end up paying 100% of the sale value.

This whole taxing of crypto trading thing is the gov's way of scaring off investors.  They are afraid of the beast.  Well the genie is out of the bottle.  The moral to this story.  Don't sell your crypto cuz USD isn't gonna be worth squat in a few years if not a few weeks.

I think maybe in some other countries they require taxes for the bitcoin users but mostly not. Just like me, my only charge was in transaction fee  only but not in any form of tax deduction mate. Maybe it could have tax once Bitcoin become regulated in each country.

Laws of each country state that every person must pay taxes on the profits received. But many traders do not pay this tax and hide their profits from the state. This is due to the fact that the government can not identify the transactions of the crypto currency.

It depends on your country. Some countries are trying to make money by buying taxes from bitcoins and similar crypto money.
Although there is no support for the investors, the states are earning more than us with this unjust gain

If i am getting your question correctly, you are referring to FEE from trading site "exchange"
If i am correct, every transaction happpen within the trading site havee a fee, most of them are 0.1percent of the actual transactions.
But if you are not onto it i cant help you then.

FACT: every time you Deposit a token to the exchange you need to pay for gas.
once you do trade you need to pay the transaction fee on a trade of 0.1 percent.
once you withdraw you token or bitcoin to another wallet you need to pay for transfer fee again.

i think the way on how we are able to pay tax are depends on a country that we have to belong for there is a lot of possibility that this is one of the chances that may happen for so better to be more aware for everything tax are can applied everywhere.

In most countries you will only be taxed on any USD you take out, quite simply, USD out - USD in = taxable amount, it is a little more complex than that and an accountant can work things out in detail for you but that's the simplified version.

I think it really depands on the way you are using tol exchange your bitcoin, for me i mostly use peer to peer exchange sites like localbitcoin so if i am using  cash exchage hand to hand i don't pay any taxes the only thing i pay is the transaction fee from my wallet, but i don't find anyone selling bitcoin near me i usally use money transfer method like moneygram or westernunion which uslay takes some fees that are paied as taxes, as for exchanging altcoin for bitcoin i think the best way you can do that is through poloniex which has the lesset fees of all exchange sites.

What country is that? 

You will only get taxed when you converted you cryptocurrency to your local currency,trading doesnt require any taxes but you need to pay trading fees in exchanges.

if a country has consented to a crypto and btc transaction then the possibility of an alt-coin exchange to btc shall be taxed as income tax

I think if the tax affair applies when a country has made its policy and to exchange alt-coins to bitcoin may be charged a fee by exchange as their services

There is no yet tax regulation here in our country regarding buying and selling the bitcoin but whenever We change the coins into fiat there is transaction fee with tax included.

you will have to pay only when you cash out, but there will be commisson charges while buying other alt coins.

I think yes you should pay your taxes as you transfer it in other currency you made a tax to it and if I pay for something like that I will pay for my taxes that a government requires to a country that you are using and even when you cash it out of has a taxes that you need to like here in my country.