US tax implications for immediate altcoin buys?

codewench

member

Activity: 93

Merit: 39

Quote from: sephir0th on February 17, 2018, 01:02:07 AM

Here's the scenario:
1. Buy BTC and ETH on CB with USD, hold them.
2. Months later, buy BTC/ETH, transfer to another exchange (Bittrex/Binance) and immediately buy an altcoin and hold.

So (1) isn't a taxable event because I never sold them (unless I'm forced to use FIFO reporting, then it gets murky - but my lots are very clear/specific).

FIFO reporting only applies when you've commingled tranches. As long as they stay separate, then FIFO can't apply.

Scenario: Buy crypto on CB, transfer to a hardware wallet. Later, buy more crypto on CB and transfer to buy alts. The two buys didn't mix, so no FIFO.

Another scenario: Buy crypto on CB and leave it on CB. Later, buy more crypto on CB and transfer that quantity to buy alts. The two purchases mixed, so now you have to use FIFO, LIFO, or whatever else is required.

Yet another scenario: Buy crypto on CB and transfer to a hardware wallet. Later, buy more crypto on CB and again transfer to the same hardware wallet. Unless you intentionally joined the transactions, the two tranches remain identifiable*, even if you used the same address. Thus no FIFO. (* Someone using a blockchain explorer can see the funds move independently.)

chaoscoinz

sr. member

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☆Gaget-Pack☆

"Disclaimer" I am not an attorney, nor do I represent one. All advice given is only opinion based.

In the U.S, any time you buy, sell or trade crypto coins, you incur/trigger a taxable event. Moving coins from wallet to wallet doesn't necessarily constitute a taxable event.
If you moved your crypto assets to another exchange wheras it is on foreign land, and your account balance exceeds $10,000 at any given time durring the calendar tax year, even if you have multiple foreign accounts with balances under $10,000, if those accounts together exceed a balance of $10,000, you might have to file an FBAR for income exceeding $10,000 held in foreign countries.
If your balance exceeds $200,000 and you live abroad, or if it exceeds $50,000 while you live in the U.S, you might have to file FATCA report.

Be sure to check your countries laws and regulations, also seek help from a local professional!

P.S

However tedious it may be, remeber to keep detailed logs of every single transaction made regarding crypto assets. It will save you a headache in the long run, especially if by chance you're audited!

squatter

legendary

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STOP SNITCHIN'

Quote from: sephir0th on February 17, 2018, 01:02:07 AM

Here's the scenario:
1. Buy BTC and ETH on CB with USD, hold them.
2. Months later, buy BTC/ETH, transfer to another exchange (Bittrex/Binance) and immediately buy an altcoin and hold.

So (1) isn't a taxable event because I never sold them (unless I'm forced to use FIFO reporting, then it gets murky - but my lots are very clear/specific).

(2) apparently is taxable, but since I did the entire transaction within an hour, do I still need to report it? The gain/loss would be tiny since the entire lot transaction was done within an hour (usually less).

Prior to the tax overhaul that was just passed, there was an open question about like-kind exchanges -- where you roll your investment into a similar investment without incurring a taxable event. The overhaul ruled out like-kind exchanges for cryptocurrencies (and most assets), so we're supposed to treat (2) as a taxable event.

The gains/losses are negligible in the example above, so it shouldn't really matter.

The point of like-kind exchanges is to avoid resetting the clock on reaching long-term capital gains. So in the above example, people use the lots bought in (1) to buy altcoins, but they keep using the original BTC buy date for determining long-term vs. short-term tax rates.

Olegnar

newbie

Activity: 32

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Very interesting topic and much needed.
I just know that if my income exceeds above 22000$ in my country I must report it.
I pay 10% of tax. For above 44000$ I pay more for taxes, I'm not sure how many.

Samarkand

sr. member

Activity: 658

Merit: 282

Quote from: sephir0th on February 17, 2018, 01:02:07 AM

Here's the scenario:
1. Buy BTC and ETH on CB with USD, hold them.
2. Months later, buy BTC/ETH, transfer to another exchange (Bittrex/Binance) and immediately buy an altcoin and hold.

So (1) isn't a taxable event because I never sold them (unless I'm forced to use FIFO reporting, then it gets murky - but my lots are very clear/specific).

(2) apparently is taxable, but since I did the entire transaction within an hour, do I still need to report it? The gain/loss would be tiny since the entire lot transaction was done within an hour (usually less).

You are completely right that (1) isn´t a taxable event.

(2) is a taxable event even if the gain/loss is tiny. However, this isn´t really a problem,
because due to the small size of the gain/loss there is not really an incentive for you to not report it.
E.g. if you make a gain of 40 $ during the transaction time you can simply report it, because a small
amount isn´t going to increase your tax bill in most cases.

I´m not a US resident therefore take my advice with a grain of salt. However, I have been
reading a lot about the subject of taxes in various countries and am pretty sure that
the advice above is correct.

sephir0th

newbie

Activity: 3

Merit: 0

Here's the scenario:
1. Buy BTC and ETH on CB with USD, hold them.
2. Months later, buy BTC/ETH, transfer to another exchange (Bittrex/Binance) and immediately buy an altcoin and hold.

So (1) isn't a taxable event because I never sold them (unless I'm forced to use FIFO reporting, then it gets murky - but my lots are very clear/specific).

(2) apparently is taxable, but since I did the entire transaction within an hour, do I still need to report it? The gain/loss would be tiny since the entire lot transaction was done within an hour (usually less).

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