Author

Topic: Questions Regarding Bitcoin & Lending (Read 945 times)

theonewhowaskazu

sr. member

Activity: 448

Merit: 250

Quote from: MSantori on September 30, 2013, 10:00:53 PM

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

1) Is Bitcoin-Denominated Debt Enforceable?
In other words, say I lend someone X BTC (unsecured), and get them to sign a promissory note for the X BTC loan, etc... etc... Now, assume they didn't pay me back. Could I theoretically pursue them for this debt, and potentially take them to court? If so, would I receive only the USD value of BTC lent, or is there a way of writing a contract such that they would be obligated to provide me with the actual X BTC, no matter how much it is worth in USD terms, now?

Yes, there is. I've dealt with these agreements before. It's not as simple as just substituting BTC for USD in the text of the agreement, but it isn't impossible either.

You know that's really nice, I'm frankly surprised that there isn't any more widespread use of such an instrument. How would one go about doing it? Some websites would greatly benefit from it.

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

2) Do normal usury laws apply to BTC?
Self explanatory.

It would depend heavily upon the state. Usury is a question of state law in the US.

How about the nationwide 36% cap for military? Probably most state caps function in a similar way.

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

3) Do I have to report income tax on interest earned from BTC loans?
Or do I only have to pay such tax when/if I exchange that newly earned BTC into USD?

I honestly don't know the answer to this one. The tax professionals I work with typically reason by analogy when dealing with Bitcoin income. If there is some other in-kind investment out there that pays dividends in-kind, then they would probably use its tax treatment as precedent.

To be honest, I really don't care about paying the taxes, they'd likely be minute (unless it was something insane, like I was realizing a profit for the entire lent sum, not just the interest). I just don't want to get in trouble. How exactly would I go about doing the 'safe' thing?

NewLiberty

legendary

Activity: 1204

Merit: 1002

Gresham's Lawyer

Quote from: MSantori on September 30, 2013, 10:00:53 PM

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

Yes, there is. I've dealt with these agreements before. It's not as simple as just substituting BTC for USD in the text of the agreement, but it isn't impossible either.

So if this sort of agreement is not in place, depending again on local law, legal tender laws may apply to debt repayment and you get the local fiat?
I may also seek a drafting, when it becomes a concern that warrants this.

Quote from: cp1 on September 30, 2013, 10:05:05 PM

Also check your state's maximum personal loan interest rate.

Yes and this is a changing target in many of them.

cp1

hero member

Activity: 616

Merit: 500

Stop using branwallets

Also check your state's maximum personal loan interest rate.

MSantori

full member

Activity: 168

Merit: 100

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

Yes, there is. I've dealt with these agreements before. It's not as simple as just substituting BTC for USD in the text of the agreement, but it isn't impossible either.

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

2) Do normal usury laws apply to BTC?
Self explanatory.

It would depend heavily upon the state. Usury is a question of state law in the US.

Quote from: theonewhowaskazu on September 30, 2013, 09:48:55 PM

3) Do I have to report income tax on interest earned from BTC loans?
Or do I only have to pay such tax when/if I exchange that newly earned BTC into USD?

theonewhowaskazu

sr. member

Activity: 448

Merit: 250

I know these are in a legal grey area, so answering what you believe would be the "most likely scenario" would be greatly appreciated.

1) Is Bitcoin-Denominated Debt Enforceable?
In other words, say I lend someone X BTC (unsecured), and get them to sign a promissory note for the X BTC loan, etc... etc... Now, assume they didn't pay me back. Could I theoretically pursue them for this debt, and potentially take them to court? If so, would I receive only the USD value of BTC lent, or is there a way of writing a contract such that they would be obligated to provide me with the actual X BTC, no matter how much it is worth in USD terms, now?

2) Do normal usury laws apply to BTC?
Self explanatory.

3) Do I have to report income tax on interest earned from BTC loans?
Or do I only have to pay such tax when/if I exchange that newly earned BTC into USD?