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like kind exchange cryptocurrency reddit

In January , Nevada-based attorney Tyson Cross wrote a Reddit post that attempted to make sense of cryptocurrency taxes. Bitcoin had experienced a small boom that year, and the IRS had yet to weigh in on how it should be taxed. Many people were lost when it came to paying the government for their gains. Why the disparity in expectations vs reality? His clients were not happy to learn this, he said. After all, was defined by quick and dirty cash grabs, where investors bought into a new ICO token or altcoin, watched the value climb, and then quickly sold it for the next one.

Savvy investors did this over and over, gaining big along the way. Making these trades usually means going through a number of exchanges. Coinbase, arguably the most mainstream platform, currently only allows for Bitcoin, Bitcoin Cash, Ethereum, and Litecoin trading. Cross said his average client has used about five different exchange platforms, though some have gone through as many as Get six of our favorite Motherboard stories every day by signing up for our newsletter.

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like kind exchange cryptocurrency reddit


So you want to start trading cryptocurrencies? Check out this guide to the best cryptocurrency exchanges. Take our beginner course on cryptoeconomics. Cryptocurrency exchanges are websites where you can buy, sell or exchange cryptocurrencies for other digital currency or traditional currency like US dollars or Euro. For those that want to trade professionally and have access to fancy trading tools, you will likely need to use an exchange that requires you to verify your ID and open an account. If you just want to make the occasional, straightforward trade, there are also platforms that you can use that do not require an account. Here are a few things you should check before making your first trade.

10 Step Guide for Day Trading Bitcoin, Ethereum and Litecoin

Everybody is making money in crypto these days, and I guaranteed that they are using the list below of the best cryptocurrency exchanges to do it. This guide will introduce you to top cryptocurrency exchanges and their advantages and disadvantages. A cryptocurrency exchange is basically a marketplace where someone can exchange or trade one cryptocurrency for another cryptocurrency. These exchanges help crypto investors sell their coins quickly and easily when they are ready to cash out. They also help people invest into other coins on the market through the act of trading, much like a stock exchange. In some exchanges, you can even exchange fiat for crypto or vice versa, but that depends on the type of cryptocurrency exchange you use. There are four different types of crypto exchanges that you can use to trade and buy coins from. Understanding the differences between the exchanges is the first step to choosing the best cryptocurrency exchange for you. The four types of crypto exchanges are trading exchanges, decentralized exchanges, broker exchanges and P2P exchanges. It allows you to trade cryptos for other cryptos.

like kind exchange cryptocurrency reddit

A Tiny Island in the Indian Ocean

Trades between different cryptocurrencies might qualify as like-kind exchanges under Section likee The tax season is officially underway, and one of the hottest topics among cryptocurrency investors is the possible application of Section to defer capital gains on crypto-to-crypto trades. As a tax attorney specializing in cryptocurrency, this is undoubtedly one of the most common questions I'm asked. Unfortunately, there's more misinformation than truth going around on the topic of like-kind exchanges.

Cryptocurrendy cryptocurrency investors have some grave misunderstandings about the like kind exchange cryptocurrency reddit and downsides of treating their crypto-to-crypto trades as like-kind exchanges under Section Truth 1: It's possible for cryptocurrency to qualify as "like-kind property".

In order for crypto-to-crypto trades to qualify as like-kind exchanges under Sectionthe cryptocurrency involved in the trade must be "like-kind property. The comparison should be directed to ascertaining whether the taxpayer, in making the exchange, has used his property to acquire a new kind of asset or has merely exchanged it for an asset of like nature or character.

Commissioner, 71 T. The "nature or character" standard is a highly factual and nuanced test. There are hundreds of regulations, revenue rulings, and US Tax Court cases applying the test to other kinds of property, but unfortunately none are directly relevant to cryptocurrency. Examples include the exchange of gold bullion coins, FCC broadcast licenses, and even parking spaces.

Although not directly relevant, some of these authorities nonetheless tend to support the classification of cryptocurrency as like kind property.

Most convincing in my opinion are the authorities that focus on the nature of the taxpayer's investment and whether the taxpayer's economic position has changed as a result of the exchange. A strong argument can be made that exchanging different cryptocurrencies is merely a change in grade or quality of the taxpayer's investment, and excyange the nature and character of the investment remains the.

Ultimately, there's no right or wrong answer until we get further guidance from the IRS or the issue is litigated in court. One of the most common misconceptions I encounter when consulting with new or potential clients is the belief that treating crypto-to-crypto trades as like-kind like kind exchange cryptocurrency reddit eliminates the need to track and report such trades on their tax returns.

Unfortunately, this is not true. Even though like-kind exchanges are "tax free," every single trade must still cryptocurency reported to the IRS.

Like-kind exchanges are reported using Form Software like bitcoin. First, as discussed above, the absence of direct authority on the issue means the IRS is free to reach its own conclusions about the qualification of crypto-to-crypto trades as like-kind exchanges.

That's just 0. With that said, we have no way to know if the IRS will ultimately take a stance on the use of Section The IRS has limited resources and so far has not shown much kinc to spending those resources on cryptocurrency related issues. However, there are no guarantees and no way to confidently predict what like kind exchange cryptocurrency reddit the IRS will ultimately take, if any.

If the IRS decides to reject the use of Section for crypto-to-crypto trades, affected taxpayers would be on the hook for additional taxes and. There's also the possibility that the IRS will choose to assess an accuracy related penalty against such taxpayers for negligence or "substantial understatement of tax. Taxpayers may avoid the accuracy related penalty if they have sufficient legal authority for treating crypto-to-crypto trades as like-kind exchanges.

What is sufficient legal authority? It depends on whether the taxpayer discloses to the IRS that they treated all of their crypto-to-crypto trades as like-kind exchanges. This disclosure would be made by filing Form - Disclosure Statement with their tax return.

By including the disclosure statement and thereby notifying the IRS of the use of Sectionthe taxpayer will be excused from any accuracy related penalties as long as the taxpayer had a "reasonable basis" likr the position.

Taxpayers who don't file the disclosure statement will have to have "substantial authority" in order to avoid any penalties. According to IRS regulations, "substantial authority "exists if the weight of authorities in support of a position is substantial in relation to the weight of the authorities against the position. When evaluating the risk of using Section for deferring gains on crypto-to-crypto trades, taxpayers should keep in mind the amount of time the IRS has to reject the use of Section and assess cryptodurrency tax.

Generally, the IRS only has three years to assess additional tax after a tax return is filed. Unfortunately, treating crypto-to-crypto trades as like-kind exchanges might cause such an omission of income. In such a case, the IRS would have six years from reddi the tax return was filed to reject the use of Section and assess additional taxes, interest, and penalties.

As part of the Exchabge Cuts and Jobs Act passed at the end ofSection was amended to make like-kind exchanges only applicable to real estate transactions. Thus, crypto-to-crypto trades are permanently foreclosed from like-treatment beginning January 1, All future crypto-to-crypto trades will have to be treated as taxable events and reported accordingly. This does not affect or other previous years, although it might influence the IRS's decision to contest the use of Section in those years.

At the end of the day, crypto-to-crypto trades may qualify as like-kind exchanges, but such qualification is far from certain. Although I believe there's sufficient legal authority to treat such trades as like-kind exchanges, such authority does not guarantee the IRS will accept the use of Section for crypto-to-crypto trades. In such a case, the taxpayer would have to either accept the IRS's conflicting interpretation or litigate the matter in court.

According to IRS data, justtax returns included Form inthe most recent year for which such data is available. I'm a tax attorney and founder of Cross Law Group.

One of my specialties is the read article of Bitcoin and other cryptocurrencies, which Reddut been writing about extensively I write about the tax treatment of Bitcoin and other cryptocurrencies. Share to facebook Share to twitter Share to linkedin. Tyson Cross. Read More.

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Of course, despite the sensationalism of the Panama Papers and big leaks that exposed the complex web of financial instruments that the rich and famous use to shelter their money, not every company or person who puts their money there is some kind of criminal. All Rights Reserved. Chapter 3 Payment Methods. Scammers target new Bitcoiners and like kind exchange cryptocurrency reddit tech-savvy users. Nothing is all good or all bad. Whether you were paid in ethereum or you sold some of your bitcoin inone key question will determine your responsibility to the IRS: Many Redditors theorize it was this lack of awareness that resulted in its removal. A physical bitcoin for sale. If you want to learn the best way to buy bitcoins, keep reading! This is how you receive our latest news. All the elite traders I knew loved it. Maintain records of your transactions translate them to U. In order to calculate the taxes you owe, you need your cost basis — that is, the original value of the asset for tax purposes — and this information can be hard to. Daniel Jeffries January

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