
Only 802 People Paid Taxes on Bitcoin Profits, IRS Says - wslh
https://cointelegraph.com/news/only-802-people-paid-taxes-on-bitcoin-profits-irs-says
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panarky
I bet the IRS data is wrong.

After all, it's not as if Schedule D [0] or Form 8949 [1] has a standardized
way to report it.

There's no official ticker symbol, so you just write in a description.

I paid capital gains taxes on trading in 2015, and I wrote in something like
"gain on sale of digital currency".

I can't believe I'm one of just 802 people to have paid taxes on these
transactions.

[0] [https://www.irs.gov/pub/irs-pdf/f1040sd.pdf](https://www.irs.gov/pub/irs-
pdf/f1040sd.pdf) (pdf)

[1] [https://www.irs.gov/pub/irs-pdf/f8949.pdf](https://www.irs.gov/pub/irs-
pdf/f8949.pdf) (pdf)

~~~
nwatson
I paid capital gains on my sale of 325 BTC and used the profits to buy a
Butterfly Labs Monarch mining machine.

I was unlucky ... BFL never got their engineering straight and the machine
never appeared.

I was lucky ... I demanded a refund early and got back a full cash refund.

I was unlucky ... 325 BTC today would be worth US$1.35 million had I just held
on instead of buying a BFL machine.

I was lucky ... my 325 BTC was held at Mt Gox and we know those BTC all
vanished.

So ... I'm glad I made some decent gains back in the day, but I sure wish I
still had the 325 BTC in a legitimate and safe form.

~~~
otp124
So, did you pay taxes on the BTC sale? I appreciate your story, but it's not
really relevant. Did you comment on the wrong post?

~~~
lathiat
> I paid capital gains on my sale of 325 BTC and used the profits to buy a
> Butterfly Labs Monarch mining machine.

Did I miss something?

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wmf
How it could have played out:

IRS: Exchanges need to generate 1099s.

Coinbase: We're sending out those 1099s now.

What happened instead:

IRS: Everybody calculate your own Bitcoin capital gains on the honor system;
we trust you.

Coinbase: Yeah suckers, calculate that stuff yourself.

IRS: Hey wait, nobody is reporting Bitcoin gains. Let's sue Coinbase to hoover
up every scrap of data they have and spend a lot of money on social
media/blockchain analysis.

Coinbase: We're fighting this overbroad lawsuit to the death!

It sure seems like there's an obvious solution to this issue and both sides
know what it is, but they're choosing lawsuits instead.

~~~
nsnick
So you don't like privacy?

~~~
KGIII
I love privacy. I love a well funded government even more.

Please pay your taxes. Thanks.

~~~
DennisP
I do pay my taxes. But I can't help but think there's a less intrusive way to
fund the government.

~~~
KGIII
Such as? I can't think of a more realistic way. Not everyone is honest.

~~~
unabridged
Property tax, its the only thing you can't hide and its not a friction on the
economy.

~~~
KGIII
We already tax that and not everyone owns property. There are also a lot of
poor people who still manage to hold property.

~~~
KekDemaga
Everyone lives on property. A tax on landlords is a tax on renters.

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nextstep
You only have to pay capital gains tax when you sell, so if everyone else is
“hodling”... (unlikely).

~~~
nugget
You also owe taxes if you exchange one digital currency for another, e.g. BTC
for ETH, equivalent to if you had sold the BTC for USD.

~~~
Zarath
How does that make sense? If I have $1000 of BTC and exchange it for $1000 of
ETH, why would I ever need to pay taxes on that?

~~~
nugget
You typically aren't allowed to tax-free swap one asset for a different asset,
even if the assets are of the same type. You can't tax-free swap Facebook
stock for Amazon stock, for example, or a gold coin for silver coins of
equivalent market value. There are a very few exceptions, such as in real
estate where you can do what's called a "like kind" 1031 exchange, or with
corporate mergers and acquisitions where you can do a tax-free re-
organization, but all of these exceptions require specific contemporaneous
paperwork to be filed.

This isn't much of a problem because BTC and ETH are close to all-time highs,
but in theory you can see how somebody could exchange BTC for ETH, ETH
plummets, and they end up owing more in taxes than they are worth. A similar
scenario occurred after the dot-com crash in 2001.

~~~
ahallock
> You can't tax-free swap Facebook stock for Amazon stock,

You must convert to USD first to swap stocks. With crypto you don't have to.

> they end up owing more in taxes than they are worth

That's bizarre and punitive, and does not seem to be consistent with a fair
system.

~~~
sdkmvx
Of course that's not true. All you must do is find a counterparty willing to
take Facebook stock as payment for Amazon stock. (I am not aware of any
exchange listing such a contract, but it's certainly possible over the
counter.) And if you do, you will have to pay taxes on the gain and will have
a new cost basis in your Amazon stock.

With a few exceptions (like-kind exchanges come to mind), you owe the capital
gains tax when you dispose of the property. That you continue to take on
market risk afterwards does not enter into it.

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GFischer
Title should say that the information was for 2015 (and was already covered in
Fortune).

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trentnix
That's probably more than paid use taxes on out-of-state purchases.

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dpiers
I am one of the 893 who reported a transaction in 2014. I mined ~6MM dogecoins
and sold them when they were near their peak. I wonder if reporting the
transaction makes it more or less likely for my records to be audited...

~~~
AznHisoka
how much did you make?

~~~
dpiers
~13K USD

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nodesocket
Shouldn't exchanges have to send out 1099's just like online brokerages do?
That seems absurd.

People (this applies to US citizens only) will not report gains, and I hope
they get audited. Pay your fair share silicon valley.

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Procrastes
I'm another of the 802, I suppose. 802 Seems fishy.

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hd4
Why?

