There is not really such a thing as rule of law in the west anymore including U.S.A. Just because someone is not legally required to pay tax that won't stop the corrupt government from throwing them in jail to make an example of them. What governments are legally entitled to do and what they actually do are two completely different things.
The Living Off of Cryptocurrency Thread (Parallel/Circular Economies outside the system)
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I know in Australia for example there are exceptions but in general if you trade one asset for another asset its classified as a sale of the original asset even though no fiat exchanged hands. For example previously I owned some Ethereum and I later swapped directly for Bitcoin on an exchange. When I filed my tax return my accountant told me that was classified as a sale of Ethereum and was a taxable event. Otherwise if there were no taxation restrictions on barter people would just barter all of their assets to avoid paying capital gains taxes (I'll swap my Apple shares for your Microsoft shares etc). I feel most countries would have some types of rules that clamp down on using barter as a lopphole to avoid capital gains taxes or income taxes.
We are commanded by God in the scriptures and pay our taxes, I personally was not interested in bitcoin to avoid tax but to be in direct control of my money and also I liked the transactions and how it can be used in foreign lands.
Now regarding taxes progressive income taxes are a new thing and it seems to be against the principals of God, how can you get punished for the more you produce and then rewarded for beinf being lazy and not working? Anyway let me explain how South Africa works, people are paying rates and taxes and business taxea etc and then our roads which used to be the best in the world are just not repaired, Iv even seen some people quite a few times repairing their own roads at their own cost yet they pay tax. Then we pay tax to have security the police, but nobody uses them so people then hire private security, we have way more private securiry guards on the ground than cops. Someone I know of recentlt was murdered and till today no policeman has even showed up at the house where the murder took place to write a report. Then we pay tax for schools and medical etc etc but nobody uses those services because they falling apart, I know people who went to these hospitals and were sent home because there was no medicine and others who were robbed in the hospitals by theives who come and steal patients belongings at night.
So in other words we pay double for everything in South Africa, we are not getting the services we are paying for and on top of it thr rand has devalued so much, a decade ago it was sbout R8 to the dollar, today its almost R20 to thr dollar and the price of EVERYTHING has gone up so much and interest rates etc, so can you understand why I took an interest in bitcoin?
Besides all this I dont trust my government and at 1 stage I thought the country was going to fall into cival war (maybe some day it still might) so bitcoin is a good way of keeping your money in a situation like that. We have had threats and laws that were almost passed That would have allowed for property confiscation by the government.
We also have a lot of fraud in my country it happens every now to people we know that their bank cards get cloned and they steal thousands from your bank account, It just happened to a friend last week, usually its the staff that works inside the bank, I can carry on but I think this is enough
On an exchange where you trade like in a stock market for those crypto currencies then to my understanding yes it taxable because you dont actually own the bitcoin you have paid fiat currency (government money) to "invest" in these crypto currencies so when you cash it out it comes out in kangaroo dollars with a profit, its different if you actually holding the bitcoin yourself and then trading in that bitoin with another person or business ONLY in bitcoin so its never changed into fiat money, its like using cattle as long as it stays in cattle then its not money, but if you invest fiat government money in cattle on an exchange and the value of cattle goes up then you will have to pay tax on that, to my understanding.
Its not "us" who are trying to avoid paying taxes its "them" twisting and bending their tax laws into something that it doesnt actually mean or say.
On an exchange where you trade like in a stock market for those crypto currencies then to my understanding yes it taxable because you dont actually own the bitcoin you have paid fiat currency (government money) to "invest" in these crypto currencies so when you cash it out it comes out in kangaroo dollars with a profit, its different if you actually holding the bitcoin yourself and then trading in that bitoin with another person or business ONLY in bitcoin so its never changed into fiat money, its like using cattle as long as it stays in cattle then its not money, but if you invest fiat government money in cattle on an exchange and the value of cattle goes up then you will have to pay tax on that, to my understanding.
Its not "us" who are trying to avoid paying taxes its "them" twisting and bending their tax laws into something that it doesnt actually mean or say.
So technically if a person doesnt sell their Bitcoin the same principal is supposed to apply according to the current laws of the land?
Even with the house example I have Robert Kiyosaki always taught that if you reinvest those capital gains into property again then according to the laws you DONT pay taxes on it.
I don't think your interpretation is right. I believe if I send you Ethereum and you send me Bitcoin then it will be a taxable event because as far as the tax office in my country is concerned I have "sold" my Ethereum. If I own a Ferrari dealership and I accept payment for Ferrari's in stuff e.g. blocks of land, high end watches, high end art, etc does that mean I can declare zero income and pay no income tax? If I won Apple shares and you own Microsoft shares can I swap my Apple shares for your Microsoft shares and avoid paying tax? I do not think its as simple as you think to avoid paying taxes simply by bypassing fiat.
In Australia for example when a company listed on the local stock exchange (the ASX) is taken over by another company in a scrip for scrip deal where you only recieve shares and no cash in the takeover the Australian Tax Office (ATO) as a matter of course provides an individual tax ruling on the transaction and the announcement is released on the ASX. I believe there are special tax rules pertaining to capital gains tax relief for corporate takeovers and thus usually the ATO determines that no capital gains tax is payable, but the fact that they need to do an indivudal ruling tells you that its not a clear cut way of avoiding tax by bartering one asset for another asset. I believe most countries have restrictions and rules on "barter" so as to limit "tax avoidance".
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Not true. Most crypto exchanges if you buy Bitcoin you own the Bitcoin and are able to transfer it off the exchange onto your own hard wallet.
The ferrari example I dont think it would work because fiat currency was used to buy and build parts of the car and to pay wages in a registered tax paying company etc neither would they accept your trade and barter payment options.
I dont know about etherium to bitcoin exchange might be wrong but it depends how its done and to my understanding the etherium woukd first be converted into fiat currency on an exchange then become bitcoin so then yes taxea are due if there were profits made of certain amounts Im guessing, but a bitcoin to bitcoin transaction without it being on a stock market kind of exchange technically and if Im thinking about it in a logical way it cant be taxed with our current tax laws because it would be the same as trading cows, only when the cow is sold for fiat currency and then that money used to buy a new cow then there it can probably be taxed.
I think if the government wants to legally tax bitcoin or crypto currencies from being traded in the way I just explained then most probably they will eventually adopt them as real money so some laws would have to be passed and maybe they will do away with their fiat currency and only use crypto or maybe both Im sure they can just pass any laws they want, China on the other hand seems to have banned bitcoin so its a sign they dont accept it and they dont want it around but Im sure there are still bitcoin users over there.
Ok, because I also heard that there are exchanges where you dont own the bitcoin you just "investing" in bitcoin so thats not the point of bitcoin and that makes no sense to use it like that.
If you sell crypto it is a taxable event. If you “convert” (sell one thing, buy another thing) to another coin, stable or not, it is taxable. If you use crypto to pay for goods or services, and the crypto you used increased in value from when you got it, there are tax implications.
People in the crypto sphere seem to be particularly confused by an asset being free of an underlying fiat currency, and being free of any tax consequences whatsoever.
Some of these topics are new (for reference the irs asking specific questions about crypto starter in 2023) but the tax system with its penalties and interest- not to mention NO statute of limitations- is not.
One last point,
Failing to report sales as income because it was transacted in cash is illegal friends. Not legal or financial advise, but just be wise. Same goes for “opting out of income taxes”. That really needs its own thread.
On barter… note that fair market value is used when determining the value of goods/services.
Taken from irs.gov:
This type of transaction — bartering or trading — can prove to be useful when cash-flow problems would otherwise prevent you from securing needed goods or services. And, while there is no exchange of cash or credit, the fair market value of the goods or services that were exchanged is taxable to both parties and must be claimed as other income on an individual or business income tax return.
Remember, just like payments made with money, if a business makes payments of bartered services to another business (except a corporation) of $600 or more in the course of the year, these payments are to be reported on Form 1099-MISC.
When considering record-keeping requirements, barter and trade transactions should be treated just like any other financial transaction or exchange. Original cost of goods being bartered or traded, transaction dates, fair market value at the time of the transaction, and other pertinent details should be recorded to assist in the preparation of your income tax return and, in general, held for a period of 3 years in accordance with other documents and receipts used to substantiate income and expenses.
For more details on barter and trade transactions, please visit the IRS’s Bartering Tax Cent
People in the crypto sphere seem to be particularly confused by an asset being free of an underlying fiat currency, and being free of any tax consequences whatsoever.
Some of these topics are new (for reference the irs asking specific questions about crypto starter in 2023) but the tax system with its penalties and interest- not to mention NO statute of limitations- is not.
One last point,
Failing to report sales as income because it was transacted in cash is illegal friends. Not legal or financial advise, but just be wise. Same goes for “opting out of income taxes”. That really needs its own thread.
On barter… note that fair market value is used when determining the value of goods/services.
Taken from irs.gov:
This type of transaction — bartering or trading — can prove to be useful when cash-flow problems would otherwise prevent you from securing needed goods or services. And, while there is no exchange of cash or credit, the fair market value of the goods or services that were exchanged is taxable to both parties and must be claimed as other income on an individual or business income tax return.
Remember, just like payments made with money, if a business makes payments of bartered services to another business (except a corporation) of $600 or more in the course of the year, these payments are to be reported on Form 1099-MISC.
When considering record-keeping requirements, barter and trade transactions should be treated just like any other financial transaction or exchange. Original cost of goods being bartered or traded, transaction dates, fair market value at the time of the transaction, and other pertinent details should be recorded to assist in the preparation of your income tax return and, in general, held for a period of 3 years in accordance with other documents and receipts used to substantiate income and expenses.
For more details on barter and trade transactions, please visit the IRS’s Bartering Tax Cent
I dont know how it works in US but in my country cash payments nobody records it and many people actually ask for cash so that they dont have to record it or pay tax on it, even in America the illegals dont pay tax because they get paid on cash, Im sure its one of the reasons why they going to do away with cash some day.
I think the tax laws will be updated because is Bitcoin goods? Its not physical its invisible so they will probably do a change in the tax laws because as you said this is all quite new and the tax laws were not written with crypto currencies in mind
Anothet point I would like to bring up, Bitcoin isnt American, its not a company and doesnt have an address, its international and de-centralised, for example, if you own a house or company outside the USA you follow the laws according to the country where the business or property is situated in so US law doesnt apply to your assets in foreign land, another example I can think of is what recentlt happened with the Trump Elon Musk interview, the European union told Elon to censor the twitter live interview in the UK, yet twitter isnt a UK company so they have no right to tell an American business what to do, yet the people in UK use Twitter and nobody could actually stop them from viewing the speech, bitcoin to me kind of works the same but even better because its not based on a country, its almost like being in international waters where the laws of the countries dont apply, its a very interesting discussion and its a bit of a problem for the governments of the world to control at the moment I dont think they can stop it.
A friend a church recently suggested that it might become a back door for Christians to use during the days of the mark of the beast. I personally dont think so because the prophesies say it will be impossible to trade. One way the governments could eventually control it is if ALL technological devices made going forward require ID and finger print to operate, this cant happen overnight but and there will still be old devices around. So for now we are not in that situation, yet.
A lot of questions here, I don’t want to create a huge text wall.
TLDR: don’t sell or spend Bitcoin, use it as loan collateral
Taxes: easiest advice, don’t sell your Bitcoin. Small purchases are OK, and peer to peer, NOBODY reports these, up to a few thousand I feel perfectly safe doing that and not reporting any capital gains (which are gains only in a collapsing currency, not real gains.)
Major purchases (using Bitcoin): buying a vehicle or a house - hard to get away with unless you don’t file taxes - so for most of us, do what Robert Kiyosaki does: don’t sell, just take out a loan. Use the BTC as collateral for a loan to buy house, car, whatever, or even buy more BTC (Michael Saylor). He is issuing corporate bonds at 5% interest, and using the money to buy BTC that has a CAGR of 65%.
Using BTC to take out loans is similar to the Yen Carry Trade. People borrow ¥ in the Trillions at 0% interest, buy US debt at 5% interest, and collect 5% yield on money that cost them literally nothing. This is also known as a speculative attack. It continually devalues the Yen and supports the dollar. To stop it the BoJ could raise interest rates, but this would destroy their stock market and bond market and banking system. They are trapped and eventually the Yen will collapse. In this decade we will see 200 or 300 yen/dollar.
The USD can be attacked in the same way. Borrow dollars at 5% interest, buy BTC. Bank lending creates more dollars (they aren’t “loaned” from deposits, they are simply created), further devaluing the dollar and making the loan even cheaper to pay off in BTC terms. If enough large companies and rich people do this, it collapses the fiat currency while BTC goes parabolic. In 4 years, Saylor has taken his unknown software company from obscurity to being in the S&P 500 using this very strategy. Others will do the same.
TLDR: don’t sell or spend Bitcoin, use it as loan collateral
Taxes: easiest advice, don’t sell your Bitcoin. Small purchases are OK, and peer to peer, NOBODY reports these, up to a few thousand I feel perfectly safe doing that and not reporting any capital gains (which are gains only in a collapsing currency, not real gains.)
Major purchases (using Bitcoin): buying a vehicle or a house - hard to get away with unless you don’t file taxes - so for most of us, do what Robert Kiyosaki does: don’t sell, just take out a loan. Use the BTC as collateral for a loan to buy house, car, whatever, or even buy more BTC (Michael Saylor). He is issuing corporate bonds at 5% interest, and using the money to buy BTC that has a CAGR of 65%.
Using BTC to take out loans is similar to the Yen Carry Trade. People borrow ¥ in the Trillions at 0% interest, buy US debt at 5% interest, and collect 5% yield on money that cost them literally nothing. This is also known as a speculative attack. It continually devalues the Yen and supports the dollar. To stop it the BoJ could raise interest rates, but this would destroy their stock market and bond market and banking system. They are trapped and eventually the Yen will collapse. In this decade we will see 200 or 300 yen/dollar.
The USD can be attacked in the same way. Borrow dollars at 5% interest, buy BTC. Bank lending creates more dollars (they aren’t “loaned” from deposits, they are simply created), further devaluing the dollar and making the loan even cheaper to pay off in BTC terms. If enough large companies and rich people do this, it collapses the fiat currency while BTC goes parabolic. In 4 years, Saylor has taken his unknown software company from obscurity to being in the S&P 500 using this very strategy. Others will do the same.
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So in other words if we just hold our bitcoin we shall be ok regarding taxes
Thats what I thought.Small purchases ok, some groceries, some clothes etc. If I do a job or service for someone and they pay me in Bitcoin and I just hold it and dont spend it will I be ok with the tax laws? Or does that only apply to bitcoin miners?
Im also interested to know what your opinion is of China banning bitcoin? Somehow I have a feeling its not going to turn out well for their currency, ontop of all the other things you just mentioned.
I read in the bitcoin standard that Chine was the last country to take their currency off silver and because of their very slow response their currency devalued the most over 70% are they making the same mistake again by banning bitcoin? That mean they will most probably once again be the last ones on the band wagon.
Yes, though technically you are receiving income, it's supposed to be reported. Most people don't and I think that's fine.So in other words if we just hold our bitcoin we shall be ok regarding taxes
Small purchases ok, some groceries, some clothes etc. If I do a job or service for someone and they pay me in Bitcoin and I just hold it and dont spend it will I be ok with the tax laws? Or does that only apply to bitcoin miners?
Im also interested to know what your opinion is of China banning bitcoin? Somehow I have a feeling its not going to turn out well for their currency, ontop of all the other things you just mentioned.
I read in the bitcoin standard that Chine was the last country to take their currency off silver and because of their very slow response their currency devalued the most over 70% are they making the same mistake again by banning bitcoin? That mean they will most probably once again be the last ones on the band wagon.
The lesson with China and India being laggards to gold, and opting for silver, is that hard money will impoverish those who use easier money. In our generation, people who don't switch to Bitcoin will be impoverished...slowly at first, then rapidly.
It could be the USA is last to Bitcoin, because the government gains the most by being able to export inflation globally. The US govt could be last. China routinely bans things for their own people, while the ruling class loads up on it. I wouldn't be surprised if they are buying BTC now or soon.
It doesn't matter what nation states do, in the end. Individuals will gain so much sovereignty, whatever form of government is left will actually provide services and serve the people, rather than being the owners of a tax plantation - discussed at length in The Sovereign Individual
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Who is issuing USD loans and accepting BTC as collateral? Is this even a real thing, or just something Bitcoin maxis dream about?
Saylor is laughing all the way to the bank running his ingenious but highly unethical scam: loading up MSTR with debt to buy Bitcoin, offering up shares of MSTR as a Bitcoin proxy and then selling his own shares for cash. He'll personally walk away from this whole thing wealthy, but he'll end up blowing up his company and all of its investors and bondholders. The reason he's so vocal and public about Bitcoin is because he's preemptively covering his own ass to protect himself when the whole thing inevitably collapses. At that point, he can look back and credibly tell a court, "Hey, look at the evidence. I wasn't scamming anyone, I was a true believer in this thing. It's unfortunate it didn't work out, but that's not my fault."
So lets say Im living in the west and the "income" that Im receiving through my bitcoin is actually from China not the country Im currently living in then surely that income is outside the borders of the country Im living in? Like Michael Saylor he has businesses all over the world he follows the laws differently depending on the country he is doing business in according to what their laws are, how would that work with bitcoin?
I heard rumors that Trump liked bitcoin?
Bitcoin financial services - Unchained
Unchained is a bitcoin native financial services company offering collaborative custody multisignature vaults and loans for bitcoin holders.
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unchained.com
The US taxes all income, no matter where derived, if you reside in the US. It's up to you to report it (LOL).
Trump doesn't understand or care about Bitcoin, but he does understand the Bitcoin vote. I do think Trump is above average in intelligence, so he might come to understand it, but it's just as likely he never will, due to his age.