New IRS 'guidance' | Bitcointalksearch.org

squatter

legendary

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STOP SNITCHIN'

Quote from: gentlemand on November 14, 2019, 06:46:26 AM

It ain't my problem but I doubt the IRS will leave interpretations like that open. Like I said their wording is crap. I presume it's going to be tuned.

If they wanted to make it ambiguous they would have said "on the day of receipt." Instead, they were pretty clear:

Quote

You have received the cryptocurrency when you can transfer, sell, exchange, or otherwise dispose of it, which is generally the date and time the airdrop is recorded on the distributed ledger.

A fork must be recorded on the distributed ledger before markets can determine fair value. That's just a fact. Arguing taxpayers are supposed to use some price from the future as taxable basis basically means the IRS didn't mean what they wrote. That's unlikely since the IRS strives to never violate its own sub-regulatory guidance.

The fact that they specified "date and time" is very good for supporters of the $0 fair market value argument. According to the National Law Review:

Quote

In this regard, the IRS stated that cryptocurrency received in a transaction facilitated by a cryptocurrency exchange, is valued as the amount that is recorded by the cryptocurrency exchange for that transaction in U.S. dollars.[10] However, if the cryptocurrency was received in a peer-to-peer transaction or some other type of transaction that did not involve a cryptocurrency exchange, the fair market value of the cryptocurrency is determined as of the date and time the transaction is recorded on the applicable distributed ledger, or would have been recorded on the ledger if it had been an on-chain transaction. As evidence of fair market value the IRS will accept the value as determined by a cryptocurrency or blockchain explorer that analyzes worldwide indices of a cryptocurrency and calculates the value of the cryptocurrency at an exact date and time.

The people who really are in trouble are those who received exchange-issued "airdrops" after the fact and didn't report any income. They are doubly screwed because the exchanges have their KYC.

gentlemand

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Quote from: figmentofmyass on November 14, 2019, 06:20:22 AM

but that's the most obvious approach if you follow their guidance to the letter.

I dunno. It conjures up visions of these Freemen on the Land assholes who nasally intone in court 'I am John of the family Smith ergo you cannot prosecute me' just before a rain of batons turn their skull into mush.

It ain't my problem but I doubt the IRS will leave interpretations like that open. Like I said their wording is crap. I presume it's going to be tuned.

figmentofmyass

legendary

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Quote from: gentlemand on November 13, 2019, 08:08:38 AM

I think folks who think because a fork is effectively worthless the nanosecond it forks may find the tax man is unreceptive to noodling of that nature.

but that's the most obvious approach if you follow their guidance to the letter. placing value on assets where markets don't exist yet is impossible anyway.

exchanges crediting forked coins---especially cases like bitstamp crediting bitcoin cash months after the fork---are gonna yield taxable income though.

gentlemand

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Quote from: chaoscoinz on November 13, 2019, 08:02:34 AM

This is a problem, I've been listening to Bitcoin.tax podcast.

Are you willing to supply a TLDR? I'm sure no one will hold you legally liable if they follow the advice you precis.

I think folks who think because a fork is effectively worthless the nanosecond it forks may find the tax man is unreceptive to noodling of that nature.

chaoscoinz

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Quote from: gentlemand on October 09, 2019, 02:35:27 PM

https://www.irs.gov/newsroom/frequently-asked-questions-on-virtual-currency-transactions

One for all you lucky Americans.

The standout here is this - "

Q22. One of my cryptocurrencies went through a hard fork followed by an airdrop and I received new cryptocurrency. Do I have income?

A22. If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency.

Q23. How do I calculate my income from cryptocurrency I received following a hard fork?

A23. When you receive cryptocurrency from an airdrop following a hard fork, you will have ordinary income equal to the fair market value of the new cryptocurrency when it is received, which is when the transaction is recorded on the distributed ledger, provided you have dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency."

As far as I know no other tax authority has come out with this and it's ludicrous. In the UK it's taxable when you get rid. Then again I'm not sure what they mean by hard fork followed by an airdrop. They are in effect the same thing.

This conjures up images of people hard forking each other just to land them with giant tax bills.

Disclaimer: ( I am not a financial advisory or lawyer. I am not a paid spokesman for Bitcoin.tax. I am here just to share my personal opinion, not to give any financial or legal advice. If seeking legal and or financial advice, please consult with your local professional.)

This is a problem, I've been listening to Bitcoin.tax podcast. They frequently update their casts. Each episode is around an 1 hour or so, but it is definitely worth the listen, especially if you happen to reside within the states. The latest guest was "TYSON CROSS" a tax attorney who specializes in Crypto-currencies.He discusses the latest IRS Crypto tax guidance released in October 2019. He clarifies a lot of material.

The links provided below are for a podcast about crypto-currency tax discussion. What is your opinion on these discussions?
To be safe, I wouldn't take any of the discussions on the podcast as actual valid financial or legal advice. But maybe they might be a good listen for research & investigative purposes.

Bitcoin.tax: Official Tax Podcast
https://talk.bitcoin.tax/

Quick Link for Episodes
https://talk.bitcoin.tax/episodes/

Remember to always practice your Due Diligence Cool

"this post was edited, I didn't practice my Due Dilligence!"

figmentofmyass

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Quote from: malevolent on November 07, 2019, 10:42:41 AM

Quote from: figmentofmyass on November 07, 2019, 01:51:47 AM

that was my initial reaction, but it's not really that bad.

when a hard fork occurs, no markets exist for the forked asset yet, so the fair market value is zero. that means there is no taxable income at the time of receipt. down the road if you sell, the entire realized sale would be considered a capital gain.

I wonder how would it be treated if futures of a soon-to-be hardforked coin were to be actively traded somewhere. Would that change things?

i've thought about that. tbh i don't think it changes the analysis.

okcoin and viabtc had bitcoin cash futures before the fork. bitfinex had chain split tokens too. the thing is, these instruments were contracts---not the forked tokens themselves. price discovery for actual bitcoin cash didn't occur until after it existed, by definition.

futures contracts are pricing in all contingencies---including the fork never even occurring (like segwit2x chain split tokens)---which is fundamentally different than if the forked asset existed.

anyway, i sure hope that's the correct take, because there's no way in hell i'm amending my past returns and paying back taxes based on bitfinex chain split token prices!

malevolent

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Quote from: figmentofmyass on November 07, 2019, 01:51:47 AM

that was my initial reaction, but it's not really that bad.

when a hard fork occurs, no markets exist for the forked asset yet, so the fair market value is zero. that means there is no taxable income at the time of receipt. down the road if you sell, the entire realized sale would be considered a capital gain.

I wonder how would it be treated if futures of a soon-to-be hardforked coin were to be actively traded somewhere. Would that change things?

figmentofmyass

legendary

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Quote from: ?? on ??

The most frustrating thing is the liquidity aspect. If you follow their guidelines to the letter, then a single overpriced trade at 0.00000001 BTC volume could result in billions of dollars in tax liability across the market. It's completely absurd.

that was my initial reaction, but it's not really that bad.

when a hard fork occurs, no markets exist for the forked asset yet, so the fair market value is zero. that means there is no taxable income at the time of receipt. down the road if you sell, the entire realized sale would be considered a capital gain.

squatter

legendary

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STOP SNITCHIN'

They seem to be referring to "airdrops" only as tokens credited by exchanges after a hard fork. What about "airdrops" of already existing cryptocurrency into public keys? I'm thinking of things like the weekly Bitsend airdrop that went on for years. I'm guessing that they'd get the same treatment as hard forks, but I was hoping they might qualify for bona fide gift treatment since technically they appear to fit the IRS definition of "gift."

figmentofmyass

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Quote from: jseverson on October 10, 2019, 03:35:16 AM

Here's an attorney's take on this on Twitter:

Quote from: https://twitter.com/prestonjbyrne/status/1181997196914384902

The IRS has told us that if you accept an airdrop, the proceeds will be treated as income.

But the airdrop itself is a transfer of property, and as such it can be disclaimed.

"Tax hits by stealth" won't happen.

Problem is, the disclaimer must be sent to the donor, which is...the blockchain in this case?

I hope the IRS clears this up.

preston as usual is sowing confusion and then telling people to hire a tax attorney---like him. Tongue

his "qualified disclaimer" position is pretty unhelpful. these are some of the conditions:

Quote

The disclaimer is made in writing and signed by the disclaiming party. In addition, s/he must identify the property or interest in property that is being disclaimed. The disclaimed interest must then be delivered, in writing, to the person or entity charged with the obligation of transferring assets from the giver to the receiver(s).

The writing is received by the transferor of the interest, his legal representatives, or the holder of legal title to the property to which the interest relates in less than nine months after the date the property was transferred.

considering that most airdrops occurred in 2017 and 2018, this 9 month deadline has long passed. it's also a lot easier for an airdropper to drop coins in a public key than it is for a recipient to find their legal mailing address for service. they could be completely anonymous on the other side of the world.

Harlot

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Quote from: gentlemand on October 09, 2019, 02:35:27 PM

As far as I know no other tax authority has come out with this and it's ludicrous. In the UK it's taxable when you get rid. Then again I'm not sure what they mean by hard fork followed by an airdrop. They are in effect the same thing.

This conjures up images of people hard forking each other just to land them with giant tax bills.

I sort of get the point on why they are doing this, its similar how dividends work from a stock company and they treated forked coins as dividends of that cryptpcurrency. I remembered that when BTC was about to fork a lot of traders took advantage and bought Bitcoin to receive the forked coin, its similar how traders want to earn money from dividend plays in stocks. They are just trying to cover all our earnings coming from the market and I think its reasonable.

theymos

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The statement is complete nonsense, clearly written by someone who doesn't understand this stuff whatsoever. It sounds like the IRS asked around the office, "Hey, anyone know what this hardfork/airdrop stuff is?", and one guy said, "Oh yeah, Coinbase gave me an airdrop in my account that one time! Something about a hardfork. Dunno what it was about, but I guess it's income?"

Coin Center says:

Quote from: https://coincenter.org/entry/irs-cryptocurrency-guidance-answers-some-questions-while-raising-messy-new-ones

because the value of a coin is typically zero at the moment of a hard fork (given there are no markets yet), then the reportable income would be zero

So it seems that the accounting that everyone was already using (ie. when you sell it, it's capital gains with zero basis) holds up even under the nonsense guidance except perhaps when it's an exchange giving you the "airdrop".

If they try to go after someone for this sort of thing, they're going to have a hell of a time pinning down a market value. If you're Mark Zuckerburg and you want to gift all of your Facebook shares to a charity, you don't get to deduct the current market price of FB shares times the number of shares you donated: firstly because if you actually sold those shares, it'd crash the market; and secondly because many of those shares are of an untraded class. In this scenario, Zuckerburg would have to get an appraisal done by a specialist appraiser to estimate the actual cash value of the shares.

jseverson

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Here's an attorney's take on this on Twitter:

Quote from: https://twitter.com/prestonjbyrne/status/1181997196914384902

The IRS has told us that if you accept an airdrop, the proceeds will be treated as income.

But the airdrop itself is a transfer of property, and as such it can be disclaimed.

"Tax hits by stealth" won't happen.

Problem is, the disclaimer must be sent to the donor, which is...the blockchain in this case?

I hope the IRS clears this up.

figmentofmyass

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Quote from: gentlemand on October 09, 2019, 03:15:04 PM

Quote from: figmentofmyass on October 09, 2019, 03:08:17 PM

a hard fork (like bitcoin cash) requires that a bitcoin user download a new software/ledger in order to gain control over that cryptocurrency. if that never occurs---if you just left your BCH in their original outputs---i'm wondering if there is no taxable event.

https://twitter.com/lopp/status/1181980062318551040

point #1 is the most glaring. i don't see how it could be construed as income if it's not immediately accessible or spendable. let's say someone sticks a key in my mailbox and it opens a trunk full of cash, but i need to travel half way across the world to access it. is that income---at the time i received the key no less?

point #3 as well. exchanges generally don't list the fork or activate trading until after the fork has occurred. doesn't that technically mean the fair market value is $0? then you would just incur 100% of the capital gains as income when you sell it. i'm fine with that......

squatter

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STOP SNITCHIN'

Quote from: gentlemand on October 09, 2019, 03:15:04 PM

Every single comment I've seen about this so far from everyone vaguely in the know is along the lines of - WTF? One of the most persistent points is that if these rules are the rules countless random strangers can drop tax bills on you like cluster bombs and you have no say in it.

The most frustrating thing is the liquidity aspect. If you follow their guidelines to the letter, then a single overpriced trade at 0.00000001 BTC volume could result in billions of dollars in tax liability across the market. It's completely absurd.

More than that, this could stick taxpayers with huge bills based on the value at fork time, but if the value plummets, those taxpayers will only be able to deduct $3,000 in capital losses. This could ruin people's lives if they honestly report these transactions.

It would be one thing if they were treated like bona fide gifts, but if there are no standards and every token in existence is reportable based on the time of receipt, then this is incredibly screwed up.

gentlemand

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Quote from: figmentofmyass on October 09, 2019, 03:08:17 PM

a hard fork (like bitcoin cash) requires that a bitcoin user download a new software/ledger in order to gain control over that cryptocurrency. if that never occurs---if you just left your BCH in their original outputs---i'm wondering if there is no taxable event.

if they are taking the position that any shitcoin deposited to our pubkeys is taxable at the time received, that's infuriating. my cold storage ETH addresses have dozens of random airdropped tokens in there. these shitcoin markets are extremely illiquid too---if everyone dumped to cover their tax liabilities, the fair market value would undoubtedly be $0!

Every single comment I've seen about this so far from everyone vaguely in the know is along the lines of - WTF? One of the most persistent points is that if these rules are the rules countless random strangers can drop tax bills on you like cluster bombs and you have no say in it.

I can't imagine they're going to leave this section as is.

https://twitter.com/lopp/status/1181980062318551040

https://coincenter.org/entry/irs-cryptocurrency-guidance-answers-some-questions-while-raising-messy-new-ones

I see no reason why gaining control should be any more taxable than the fork in the first place. All you're doing is initiating some bits of code with some software. Spending or selling or swapping, so be it. Anything before that should not be so be it.

figmentofmyass

legendary

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Quote from: gentlemand on October 09, 2019, 02:35:27 PM

Q22. One of my cryptocurrencies went through a hard fork followed by an airdrop and I received new cryptocurrency. Do I have income?

A22. If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency.

Q23. How do I calculate my income from cryptocurrency I received following a hard fork?

A23. When you receive cryptocurrency from an airdrop following a hard fork, you will have ordinary income equal to the fair market value of the new cryptocurrency when it is received, which is when the transaction is recorded on the distributed ledger, provided you have dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency."

okay, not panicking yet........

let's decipher what this means: "provided you have dominion and control over the cryptocurrency"

a hard fork (like bitcoin cash) requires that a bitcoin user download a new software/ledger in order to gain control over that cryptocurrency. if that never occurs---if you just left your BCH in their original outputs---i'm wondering if there is no taxable event.

if they are taking the position that any shitcoin deposited to our pubkeys is taxable at the time received, that's infuriating. my cold storage ETH addresses have dozens of random airdropped tokens in there. these shitcoin markets are extremely illiquid too---if everyone dumped to cover their tax liabilities, the fair market value would undoubtedly be $0!

gentlemand

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Quote from: jackg on October 09, 2019, 02:54:32 PM

Aren't dividends handled differently in the US also? (a hf has to come under dividends doesnt it)?

Well, they're calling it income in that blurb. I think this is one area they really need to consult more people on and clarify what they're trying to say at present. It doesn't make a great deal of sense.

A bit more here - https://www.irs.gov/pub/irs-drop/rr-19-24.pdf

https://www.irs.gov/newsroom/virtual-currency-irs-issues-additional-guidance-on-tax-treatment-and-reminds-taxpayers-of-reporting-obligations

This is stating they're awaiting public input so hopefully it's going to be sorted.

jackg

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https://bit.ly/387FXHi lightning theory

Aren't dividends handled differently in the US also? (a hf has to come under dividends doesnt it)?

And yeah the UK one makes a lot more sense, report it once you've sold it and won't buyback again...

The term "fair" does seem a bit obscure though. Probably to protect against forks like bcg that started off being worth 0.

gentlemand

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https://www.irs.gov/newsroom/frequently-asked-questions-on-virtual-currency-transactions

One for all you lucky Americans.

The standout here is this - "

Q22. One of my cryptocurrencies went through a hard fork followed by an airdrop and I received new cryptocurrency. Do I have income?

A22. If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency.

Q23. How do I calculate my income from cryptocurrency I received following a hard fork?

A23. When you receive cryptocurrency from an airdrop following a hard fork, you will have ordinary income equal to the fair market value of the new cryptocurrency when it is received, which is when the transaction is recorded on the distributed ledger, provided you have dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency."

As far as I know no other tax authority has come out with this and it's ludicrous. In the UK it's taxable when you get rid. Then again I'm not sure what they mean by hard fork followed by an airdrop. They are in effect the same thing.

This conjures up images of people hard forking each other just to land them with giant tax bills.

Topic: New IRS 'guidance' (Read 372 times)