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  1. #1
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    Calculating Crypto Tax

    Who's using what to track trades and gains or losses? I started using cointracking and it took a while but I almost have it all right. My BTC is still off and I can't find the problem but I will go thru it again. My portfolio sucks by the way lol.

  2. Stocks/Investments Moderator boneil's Avatar
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    #2
    I think alot of people are going to be surprised at how much of a pain in the azz it is to due taxes on trading, unless the brokerage does it for you and downloads all your trades into Turbo tax or something similar. When I first started trading, my wife spent hours entering my trades into the tax program, because the brokerage wasn't sent up to do it automatically. Now it's just a click of a button.
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  3. Member Bsktball55's Avatar
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    #3
    I was reading a little bit about it yesterday and it does seem like a pain in the ass. I don't agree with how it's being taxed either. In believe it should be taxed when you cash out, not every time you make a trade.

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    #4
    Quote Originally Posted by Bsktball55 View Post
    I was reading a little bit about it yesterday and it does seem like a pain in the ass. I don't agree with how it's being taxed either. In believe it should be taxed when you cash out, not every time you make a trade.
    It's called short term gain and it's not a new concept to the tax code.

  5. Stocks/Investments Moderator boneil's Avatar
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    #5
    Quote Originally Posted by Bsktball55 View Post
    I was reading a little bit about it yesterday and it does seem like a pain in the ass. I don't agree with how it's being taxed either. In believe it should be taxed when you cash out, not every time you make a trade.

    when you make a complete trade buy and sell, you have realized gains and losses. Doesn't matter if you made $100 or $1000. Uncle Sam wants his. Now if you just buy and hold then you haven't realized any gains of losses.

    Now I know this doesn't happen for the crypto traders, but if at the end of the year you realized losses, you still report them, but the losses can be carried over to cover next years gains. Just an FYI from someone who knows a thing or two about carrying losses.
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    #6
    Well, I finally got the cointracking deal good. It would have been easier if I would have done it from the beginning and not had to go thru all my stuff. It also gives you tax reports for multiple tax prep programs like turbo tax and more. They aren't the only one that will do what they do. They're just the one I used. With having to track every trade it's going to slow a lot of people down on day trading just to avoid all the headache. I know it's not new and it was really just a loophole but it sure was nice.

  7. Member Bsktball55's Avatar
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    #7
    Quote Originally Posted by Ben Danbleume View Post
    It's called short term gain and it's not a new concept to the tax code.
    My point was the idea that in order to buy most cryptos you have to first buy bitcoin or one of the others. So with the current tax code, I have to report the fact that I bought bitcoin and held it for all of 30 seconds as I traded it for something else. Then I have to trade it back to bitcoin and report that I held it for 30 seconds until I cashed it out. Just seems like a bunch of needless paperwork. When I cash out and take my realized gains take what I made, subtract my initial investment and tax me on that. Feel the same way about stocks, if I sell a stock and reinvest that money into something else, I really don't feel that money should be taxed either until I cash out and have actual realized gains.

  8. Stocks/Investments Moderator boneil's Avatar
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    #8
    Quote Originally Posted by Bsktball55 View Post
    My point was the idea that in order to buy most cryptos you have to first buy bitcoin or one of the others. So with the current tax code, I have to report the fact that I bought bitcoin and held it for all of 30 seconds as I traded it for something else. Then I have to trade it back to bitcoin and report that I held it for 30 seconds until I cashed it out. Just seems like a bunch of needless paperwork. When I cash out and take my realized gains take what I made, subtract my initial investment and tax me on that. Feel the same way about stocks, if I sell a stock and reinvest that money into something else, I really don't feel that money should be taxed either until I cash out and have actual realized gains.
    No one would argue about the senseless paperwork.

    But the more I think about this, the more I see a cluster F. With cryptos what is realized profit? If you take a dollar, and buy bitcoin, then sell it for two dollars, you have a realized profit of a dollar. So at the end of the year, you would report a dollar profit. But, if you take a dollar, buy a bitcoin, then use a bitcoin to buy XRP then sell the XRP for two bitcoins, do you have a realized profit? And I don't think you do. If you continue to hold the bitcoins, you are still in an investment. Now if you sell the 2 bitcoins for more than the original dollar you realized a profit, or loss depending on the value of bitcoin vs. a dollar.

    SO in my mind, and I could be wrong, If you never convert the bitcoin back to a dollar, then you are still in a investment and haven't realized anything.
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  9. Stocks/Investments Moderator boneil's Avatar
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    #9
    But here's the million dollar question. What is realized profit with these coins? What is taxable?

    Scenario, you take dollars and buy 1 bitcoin. Through trading the currencies, you now have 10 bitcoins. Now lets say you start buying goods with bitcoin. Have you realized a taxable profit? What if you never sell the bitcoins for dollars. As bitcoin and other coins become more accepted, couldn't you completely avoid taxes.

    Scenario, Maybe I accept to do a job and be paid in bitcoin. Maybe my employer pays me minimum wage plus .002 bitcoins per hour? Talk about a way to avoid payroll taxes. I could then buy other goods and services in bitcoin. Why report any of it? Talk about a bullish case for a crypto currency

    No way does the govt not step in.
    Last edited by boneil; 01-14-2018 at 02:34 PM.
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  10. Member
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    #10
    Quote Originally Posted by boneil View Post
    No one would argue about the senseless paperwork.

    But the more I think about this, the more I see a cluster F. With cryptos what is realized profit? If you take a dollar, and buy bitcoin, then sell it for two dollars, you have a realized profit of a dollar. So at the end of the year, you would report a dollar profit. But, if you take a dollar, buy a bitcoin, then use a bitcoin to buy XRP then sell the XRP for two bitcoins, do you have a realized profit? And I don't think you do. If you continue to hold the bitcoins, you are still in an investment. Now if you sell the 2 bitcoins for more than the original dollar you realized a profit, or loss depending on the value of bitcoin vs. a dollar.

    SO in my mind, and I could be wrong, If you never convert the bitcoin back to a dollar, then you are still in a investment and haven't realized anything.
    This is my thought also BUT that's not going to make any more tax for the grubby hands of the government sothats not how they see it. Let's say you bought .5 of a bitcoin to buy xrp. Then you sell that xrp for .75 btc. Technically that is a gain although I personally don't see how it's a taxable gain. If I hold a coin from Dec 2016-Jan 2018 I won't pay a tax on that same .5 btc that I could have used to buy the xrp. I don't get how that is any different than trading that same btc thru the year without it ever going back to USD. Just a ploy to try and stop the crypto world I guess.

  11. Member Bsktball55's Avatar
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    #11
    This is what I've read.
    • Trading cryptocurrency to fiat currency like the dollar is a taxable event,
    • Trading cryptocurrency to cryptocurrency is a taxable event (you have to calculate the fair market value in USD at the time of the trade),
    • Using cryptocurrency for goods and services is a taxable event (again, you have to calculate the fair market value in USD at the time of the trade; you may also end up owing sales tax),
    • Buying cryptocurrency with USD is not a taxable event. You don’t realize gains until you trade, use, or sell your crypto. If you hold longer than a year you can realize long term capital gains (which are about half the rate of short term).

    So anytime you trade cryptos from one to another, you have to report any gains on it. So even though you never switched it to USD and it is still invested, you are taxed on any gains between trades.

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    #12
    Yes, that's how it is now. The grubby little hands of the government.

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    #13
    The IRS has been questioned about the use of Like Kind Exchanges used in the crypto world when switching from one crypto to another. Their answer? Silence. They did change the law for next year though:

    "The tax act in Sec. 13303 amends IRC Section 1031 (a)(1) to delete “property” and replace it with “real property"

    Which makes me think that a like kind exchange in crypto would get a pass this year. Disclaimer: I am not a tax professional.

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    #14
    Super easy way to do it. Use the website Bitcoin.tax. You can usually download your transactions through what ever platform you are using. It is free to use if you have less than 50 transactions I believe. It does most of the math for you.

  15. Stocks/Investments Moderator boneil's Avatar
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    #15
    What about the miners?

    lets say your mining bitcoin, and every month you sell your bitcoin on one of the exchanges. Something to think about.
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