Topic: IRS Now Gets to Tax Unrealized Cryptocurrency Gains (Read 93 times)

This shouldn't affect people who are completely independent of the system.
Much of the issues were solved by principled Bitcoin founders and "thinkers" who based their creations on ideals that can help keep Bitcoin participants untargeted/unaffected/safe from the fiat and centralized system of the world, but alots of altcoins developers ignored this and took their followers many steps backwards with cryptos that are centralized, too dependent on the centralized system and can be targeted. If you were completely "off grid" or independent of the system, who will ever ask you for tax without feeling ashamed? In PoW option, for example, if you buy some piece of easy-to-move miners and go offgrid to mine bitcoins while warming your home with heat from the miners, who will be bold enough to ask you to pay tax?  Big miners who become dependent on the system by concentrating large/heavy miners on single point and powering them with energy from centralized sources, also create problems for themselves, like the altcoiners and stakers who develop things that are centralized and too reliant on the system.


One of the most likely reasons for the double taxation was to prevent those who depend on the system from keeping their income/coins on the staking system (which is possibly centralized) to avoid paying taxes. That would be the least of the owners worries if the altcoins were decentralized and independent. Then when it's time to spend the income or coins they spend them in decentralized p2p manner and the tax people would not be able to censor or take the coins or know who the owners are

Ok (breathing a sigh of relief), but I do feel genuinely sorry that you have to live in such an awful tax jurisdiction. Some of those places make the IRS look downright benign.

Correct.

Yep. Hence the lost lawsuit about human rights violations. But that was about the high tax on savings accounts, they're still fighting over the investment part. And I'm not even mentioning the "hidden tax" disguised as BRRR.

To be fair: this isn't the (US) IRS.

You mean they get to tax you when Bitcoin rises (even though you haven't cashed out), yet they don't credit you when it loses value??

That is beyond self-serving and unethical. The IRS needs some serious reform, like, last week. If and when that happens, they better just STFU and not complain about it. Rather, they should be grateful they got away with what they did for so long. It's shameful and horrendous.

That's what I thought. Seems fair.

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You know what isn't fair? Here, we're taxed close to 2% in "annual wealth tax" (although they don't call it that way) on Bitcoin, even though Bitcoin dropped a lot last year. Other investments dropped too, and they're still fighting over it in court. I wish we'd only be taxed on capital gains.

This definitely adds to the frustration of being a crypto enthusiast in the US. Why would businesses even set up shop there if there are other countries that are more crypto-friendly and have less or zero taxes? On the brighter side, at least we're getting somewhat clear rules in the space. Hopefully, future guidelines will strike a FAIR balance between taxing and fostering innovation. But to be honest, Europe is looking so good right now.

Call it what you want, but you're getting taxed twice with their new "ruling": the first time when you simply receive the crypto, and then again when you sell it (income + any capital gains). We should not be getting taxed just for receiving cryptocurrency, as it hasn't been cashed out yet. That constitutes a tax on unrealized gains. That's what I'm talking about.

What are you talking about? You only pay capital gains tax on capital gains. If you receive something of value (crypto, stock, whatever) then later sell it, you pay income tax on what it was worth when you received it and capital gains tax on how much (if at all) it increased in value between when you received it and when you sold it. If you sell immediately before it appreciates in value, you have no capital gains and hence no capital gains tax.

Yes. Everything does. The IRS is merely clarifying that the same rules that apply to everything else also apply to crypto, because apparently some people seem to think that the normal rules of finance don't apply to their Magic Internet Money.

Does dividend get the same treatment from the IRS?

The IRS operates by assumed contract and agreement. If you ever signed paperwork for anything with the IRS, simply revoke your signature off it all. Then, file their forms (if you want to) with "n-a" on every line, and sign the forms "non-assumsit, Your Signature." Non-assumpsit means no-contract/no-agreement.

If they pester you after that, notice the head of the major branch that is pestering you, or the Internal Revenue Commissioner, to control their people to stop harassing you. If they don't stop, charge the bosses personally (not their office) with harassment.

"The IRS just published new guidance regarding the treatment of cryptocurrency staking rewards. In Revenue Ruling 2023-14, the IRS has ruled that staking rewards must be included in gross income for the taxable year in which the taxpayer acquires dominion and control of the awarded cryptocurrency."

In other words, the IRS will now get to tax unrealized cryptocurrency gains acquired from staking.... because they said so. Shocker that they "ruled" in their own best interest. I didn't see that one coming!  

How the hell is this arbitrary and capricious "ruling" even legal, and why isn't it being automatically challenged in court?

When we receive cryptocurrency from staking, we are not converting it into fiat currency (cashing out). Therefore, it is unrealized income. But, according to the creeps at the IRS, they have the right to tax it when we merely receive it, and then tax it again when we cash it out into fiat. Nice double taxation sleight of hand.

Am I missing something here? Please enlighten me if I am (and for the love of everything that's good, please make sense).

Oh, and this reminds me of another cynical and perverse IRS rule, that allows them to tax stock dividends and bond interest.

If a company is rewarding us with shares (property, NOT cash) of stocks or bonds, which we reinvest, without cashing them them out, why the hell does the IRS have a right to tax us on those shares (and then tax us again when we cash them out)??

These self-serving IRS rulings are so cynical and perverse. It's sicking that they consistently get away with it. This predatory agency is treated as if they're beyond reproach, like Louis XIV, the "sun" king, who was appointed by God himself.

If there ever is the political will for IRS reform, selfish rules, like these, should be the first to go.