Principle vs Gains

OK Veeky Forums, as tax season is around the corner, I keep thinking about this more and more.

>Put 5k USD into crypto
>Make 100% gains, have 10k USD worth of crypto now.
>Pull 5k USD out.

What did I just pull out? The principle or the gains? Do I get to pick? Is it a mix? Obviously I'd prefer to pull out the principle which has already been taxed, and leave the crypto to mature into long-term gains if it isn't there already. Do I get to do that?

Other urls found in this thread:

irs.gov/pub/irs-pdf/f8949.pdf
irs.gov/instructions/i8949
en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States
investopedia.com/terms/g/gain.asp
twitter.com/AnonBabble

you put in 5k and took out 5k so the difference for calculating gains tax is 0. When you cash out the other 5k you'll have to pay tax on that, but it's 0% if you hold it for a year and make less than 37.5k plus the 6k standard deductable

Thanks. Wouldn't that mean if I put in 5k and didn't take it out that year, that my difference would be -5k? Could I deduct it from my taxable income for the year?

what if you convert 100% into tether

No.

You pay what you gained regardless of 5k in 5k out.

Say you pay 100$ for 10 widget coin. Widget coin doubles you sell 5 widget coins.

You pay 50 bucks on tax.

You profited and sold for that. Since you held less than a year you pay what your tax bracket is.

Hold widget coin for over a year and sell than capital tax.

No that's wrong.
Just think of it like an equity. You bought X number of coins at $Y cost basis. Then you sold m coins (where m > X) at $Y+$n price. You then pay taxes on m*n.

What does cash out mean? Changing to USD? Or does it mean. Transfering BTC from one exchange to the other?

It goes by number of coins.

Imagine you put 5k into stock, make 100% gains, have 10k worth of stock now. Then you pull 5k stock out. How do you tell if it's principle or gains? How do you figure the taxes? You look at the number of shares. If you bought 2 shares for 5k and now you have 10k worth of stock, pulling out 5k means you pulled out 1 share. So you look at the purchase price of 1 share vs. the sale price. The purchase price of 1 share was 2.5k, the sell price was 5k. Capital gains are 2.5k, on which taxes are owed.

Now imagine you bought 5k worth of coins. For simplicity let's assume you only bought one type of coin. Let's say you bought 1.234 coins at 5k now 1.234 coins are worth 10k. To cash out 5k you need to sell 0.617 coins. You sell 0.617 coins to cash out 5k. What was the purchase price of those 0.617 coins? It was 2.5k, so again your gains are 2.5k on which taxes are owed.

tl;dr look at the number of coins you sold for fiat, figure out how much you bought that number of coins for and the difference is your gain.

Like I said but more NEET.

You sold your original 50$ investment for 100$. You don't tax your original investment. Only the gains /fit so the 50$ is taxed at your current income tax rate. Which if you live in a state that has income tax you have to report that as well.

What if I've made hundreds of trades over many exchanges transferring different coins from wallet to wallet exchange to exchange how the fuck do you even calculate that? Isn't it just fiat in vs fiat out and tax the profit?

i though the whole point of bitcoin was to not pay taxes. lol

Accountant here.
Generally you can pick an accounting treatment like weighted average, lifo, fifo. For simplicity sake use weighted average.

5k invested
now worth 10k
Pull out 5k
Tax gain of $2500

Coins don't matter.

It's treated like stock.

You don't get taxed for original investment. You get taxed on profit. Nigger has 100% profit. So he gets taxed on the profit minus investment. And taxed again if he lives in a state that income taxes.

i thought the IRS hadnt decided whether crypto is treated as a currency or as a stock

Every time you sell something and receive cash, you deduct the basis from the sale. If you put $5k in and took $5k out, there is no gain, therefore you owe $0 in taxes. If you put in $5k and took out $5.1k, your gain is $100, so you owe capital gains on $100. You can deduct capital losses, but again that means that you have to create both buy/sell transactions. If you put money in, and didn't take any out, all you have is the cash basis and not the gain/loss. You can't realize a gain/loss until you sell. So no, you can't deduct it. If you buy crypto at $10k and sell the same amount of crypto for $5k, you can deduct $5k as a loss.

Thanks user better verse than me.

>as if it was that simple
You have to reconcile the profit or loss on each individual trade and then add them all up.
If you did a lot of trades it's going to be hellish to do it by hand.
You will need to export your trades and import them into some tax software or into Excel (make formulas yourself) or do it by hand on paper.

irs.gov/pub/irs-pdf/f8949.pdf

irs.gov/instructions/i8949

No you nigger. Unless you sell at 1:1.

He clearly made a profit. Again use the widget. You pay on what you gained.

OK, so let's say I buy some ETH for $100, split it into a shit ton of altcoins, they all go 2x, then I sell them all for BTC and cash out half of that. What the fuck are my gains then? I've only held the BTC for a minute or two, its price hasn't changed at all before I sell it. How do I calculate what I owe in a situation like that?

should have said, you only have to pay taxes when you SELL (close out) a position for USD

Your welcome.
Good luck.
I actually like doing my taxes every year.

I replied to the wrong post, nigger. Chill the fuck out. Meant this one

listening to these asshats is going to get the IRS on your ass

depends if this was short term gain
depends on how much taxable income you had

No wrong again. Any time you make a transaction you pay profit or loss

It's ok. Just drunk waiting on the Koreans to start trading

Fuck's sake m8 it's not rocket science
How much worth you have-what you put in=gains to be taxed
Pretty sure a little kid can do his taxes, human kid that is not a NIGGER like you.

This man is correct, it doesn't have to be USD. If you make a gain on arbitrage against another coin, it is still a gain, and you have to figure out what that gain in USD is to properly report it. Although, the IRS has no way of figuring this out. It's really the USD trades that may hit your bank account that you'd get caught for.

One other thing to note about gains and how they are taxed. See this: en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

If you hold onto a particular coin for less than a year, it is taxed at your income rate. Longer, it is taxed at the capital gains rate.

Accountant tried generalizing it in that if you make a lot of transactions, it may be hard to associate original cost basis to gains/losses, because it's on a transaction by transaction basis. Weighted average is close enough, although this persons generalization is a little sloppy This is more specific

Yeah well, as soon as money starts hitting your bank account, especially if it is significant, the IRS will find out and ask where the money came from.

If you're buying bitcoin and actually spending it, and not trying to speculate and convert it to USD in the future, you have nothing to worry about.

Lmao 25% tax get cucked amricans

lmao idiot who doesn't know what he's talking about

Exactly.

That entails the problem. They can't really track crypto to crypto.

They will know what you fiat to Coinbase or whatever you use and again when you withdraw.

I thinks it's more like gold and silver. Do people or the IRS track that? Probably not but they do track when you convert silver or gold to fiat.

It's an ethics problem at this point. But, going back to OP, who wanted to convert back to USD. You pull out 5k, and put in 5k, regardless of the length of investment, it's a wash. They owe nothing. Just document it and you're good.

Thats the rub.

No one knows this.

Trading gold for silver is the closest I can think of.

If they track wallets then your ducked if you sent it all to one. Most smart people have multiple wallets and can with draw under the threshold to submit documents.

Again remember even if you love overseas or have dual citizenship you pay for the gibs.

No he owes tax on his profit.

I think you're misreading me. If you put in $5k, and the value of whatever they invested in came to $10k, they realized $0 in profit. The extra $5k is still invested, they just pulled out their cost basis. They made no profit until they pull out money that exceeds the cost basis. It's a wash. Once they start to pull out money that exceeds their original $5k investment, THEN it is realized profit, and taxable.

Sorry, poorly worded. If they put in $5k, the value of their investment is, today, $10k, and they pull $5k out of it(sell half of what they bought), then it's $0 profit.

God damn you're wrong on some many levels.

You must be LARP'ing for the IRS. He has to pay taxes on on his profit.

He puts ten in its worth twenty. He pulls ten out. He pulled out five of his investment and five of profit. He must pay tax on the five of profit.

The question is did he pull it out to fiat or another crypto.

For me I will only report what I with draw in fiat versus what I put in.

I put 10 USD in BTC, BTC is now worth 20 but I made several other trades invetween cyrpto but withdraw 10 USD and still holding because coinbase... I pay tax on the 5 of profit.

Holy shit Veeky Forums is retarded. There is no "interest," crypto doesn't give interest. Maybe staking could be seen as interested but appreciation is not "interest."

If you made $5k off a trade that is a realization of $5k of income. In the US you add that $5k to your income and pay income tax on it, or capital gains if you held it over a year. But there is no concept of principle vs interest.

That's not what OP said, read it again. He put in $5k, the value increase, then he pulled out the ORIGINAL $5k. He can still hold that extra $5k in BTC and only cash out the basis, therefore no profit until he realizes it.

No again your wrong.

Because he is withdrawing 2500 original investment and 2500 profit.

It doesn't work the way you think. You can't just keep withdraw your orginal investment and say Monopoly money.

The rule is you have to pay tax on any trade, regardless of whether you traded for crypto or fiat. Yes, EVERY trade is taxed. Although if you aren't pulling in hundreds of $$/year your chance of audit is low.

Don't forget that if you traded in between coins you owe cap gains on that because the IRS doesn't see crypto as like-kind trades, so its can't be 1031'd.

Are you ducking retarding.

There is no pulling out out your orginal investment.

I need proofs.

Show me where gold and silver trades are taxed.

This isn't how taxable gains are calculated

Thank god. Someone else understands.

For piece of of mind sure you didn't make money because you still have 5k invested but for the IRS you mad a profit because you still have USD out there.

God damn. Even turbotax knows this.

thousands of trades, and would have still come out on top if I just held BTC.

>
>The rule is you have to pay tax on any trade, regardless of whether you traded for crypto or fiat. Yes, EVERY trade is taxed. Although if you aren't pulling in hundreds of $$/year your chance of audit is low.
Shut up idiot nobody is going through the trouble to do that. I dare the IRS to come audit means spend the man hours figuring it out themselves. Plus if it's only 5k then fuckit just pay taxes on the total profit. You guys are pussies just pay the tax on your net profit and stop worrying.

Again.

How many people report gold to solve transactions versus precious metals to fiat.

It's hard to track. Although since blockchain and crypto you can actually trace every transaction

What if you accidentally sell and then buy right back in?

You don't realise the government has. Irving better to do than crush neets.

Remember the tea party unfairly targeted in the news. This will be next.

Again I said I think IRS only cares about fiat to crypto and crypto to fiat difference.

The same as precious metals. No ones tracking or hunting people down for silver to gold transactions.

What does "pull out" mean. For example I started with .03 BTC last month, traded shitcoins on Binance and held them as they appreciated, and traded it back into Bitcoin which I now have .1 Bitcoin. I never changed anything back to fiat. Do I have to pay tax yet, or if I still hold the bitcoin for a year is it capital gains? Do I have to hold JUST bitcoin for a year, eg does trading back and forth between coins become a taxable event at every single individual trade? If so how in the FUCK can you possibly track that if you have done literally thousands of scalping trades?

What if you sell a stock and buy right back in?

Report it dickhead.

But again. I'm only reporting fiat to crypto and vice Versa.

Thats my point.

I'm only reporting what I converted to fiat.

I see the rest as a straw man sales for weapons or precious metals being converted to fiat.

I'll pay the piper later on if they track or get subpoenas for every exchange.

What if I've made literally 10s of thousands of trades on exchanges which don't even exist anymore and through smart contracts on addresses I don't even have anymore?

And I've cashed out into multiple foreign currencies, then bought back in and made more gains, arbitraged, cashed out the same money several hundred times now into USD and then back.....and then finally end the year 100% in crypto/foreign currencies.

This is all 100% true. What the fuck do I do? It would take weeks and weeks just even begin to estimate what my "gains" are since I literally trade on 12 different exchanges making a few dollars every few minutes and have no idea how many hundreds of times I've cashed out or how much I've even put into crypto. It's literally an impossibly long mess.

What do I do?

Give me a source for how it should be calculated, then. If I put in $2k into a security in January, and pull $2k out today, although the security is worth $5k, tell me how I've recognized gains and owe taxes.

I've made tens of thousands of trades, managed other people's money, made trades in foreign currencies using smart contracts and cashed out small amounts of it, etc.

There is no possible way to tell how much I've gained because I've locked some of it away in foreign bank accounts of trusted friends I can't even access.

No larp. What do I do?

If you have a lot of money discuss it with a CPA, you can afford to

Generally speaking I think whatever you withdraw into cash is going to be regarded like "income" and will be taxed at that rate for the year

(so if you withdraw $60,000 in a year that would be taxed at 25%)

Thats up to you.

You're supposed to report any transaction that your profit from.

Buy a used car fix it up and sell for double for cash. You're supposed to report it.

Does it happen no?

Welcome to the real world. You're supposed to account any transaction you make. Again I'm only reporting fiat to crypto and vice Versa.

If you trade regular stocks it's easy because they have it exportable for day traders. Or shot term traders.

You should probably learn before you just do what you like. Actions have consequences

A CPA would charge me thousands and thousands for this much work. I know because it would take weeks upon weeks to figure this out.

>You can afford to.
Fuck you I don't want to pay for an extra cent just because I can afford to. I'm not paying for some jew CPA.

What about money I've withdrawn in foreign currency into foreign bank accounts, then converted half to USD when the rate was good, then back to the foreign currency again via private ledger (Monero)?

Thats you're fault.

If you've used coinbase and spent more than 20k then you're fucked.

If you're a us citizen it doesn't matter. Look up FEIE

I'll be honest. I turned $2,000 into about $56,000 this year and a ton of that is through arbitrage bots, airdropped genesis addresses that add more to your account gradually over time, and foreign arbitrage (I made $7,000) arbitraging with Korean won today).

I'll look this up, thanks.

I talked to my accountant and he says to not worry about it since IRS hasn't finalized any guidelines yet.

Stop being pussy bitches. The IRS isn't the fucking boogeyman. As long as you don't do shady shit, you're fine.

You're best bet is to set up an LLC and lay your self with your gains.

Upto 100k is untaxed as overseas income. So unless you're profits are in lambo land than eat it and report fiat to crypto and crypto to fiat.

But from the bank's perspective my bank account got a $20,000 deposit from a foreign bank, then a wire to a different bank, then a $25,000 deposit to the bank, then a wire to a different bank, etc., and a few wires from my bank into Gemini/Coinbase throughout the year.

There's no real way to prove it's the same money since I used Monero so I'm worried or curious if the IRS will believe me if I say it's the same money, or if I'm supposed to pay taxes on the same money all 100 times or so that this happened (every few days).

The IRS is the most powerful and efficient government agency in existence desu. They're the money collector for the rest of the operation, it's just what they are.

There is a lot you don't know or are considering and only someone with a deep understanding of taxes can help you with your situation, or else you risk an audit and potentially crazy back taxes (they will take 50% or more) or even jail time.

A CPA won't charge thousands for consulting, there are basic ways to calculate taxes on gains if you don't have all the documentation it's just going to cost more than if you had meticulously kept track of it all

Or you can try a crazy tax evasion scheme and not sleep well at night.

You're retarded.

Ok buddy

You do you. I'm sure money launderers who deposit 9,999 a time don't get questioned.

Any transaction over 10,000 gets reported. So good luck with that though process.

Can a money launderer prove where their money came from?

Thats the point of an audit. Fucking autists

I'll look into that.
I mean most people, including accountants, have no idea if crypto is even a capital asset or property. If it's a capital asset, losses can be manufactured untraceably extremely easily with private ledgers and smart contracts (is losing your private address technically a loss?). If it's property, then I'm fucked because there's no way to extrapolate how much money I have. If I converted it all to cash today, I might have X amount, but that's only because the genesis addresses I own are generating a random number of other cryptocurrencies every day.

If I make my own cryptocurrency to launder money and set a "price," then I could store it all in there and say it's all a "loss," and have no gains, right?

Damnit I replied to the wrong post again, gotta stop looking at IDs.
I was referring to:
If I'm ignorant to this, that's fine, show me what you're talking about.

Right. But there's no way to audit this stuff. It's mathematically impossible. And I realize the burden of responsibility falls on me. But my point is that it's far easier to manufacture a more believable story that I lost all my money in a coin (which I anonymously created and this also could never be proven, ever, even with an audit) that I sold on Etherdelta (to myself, also completely impossible to prove).

Hate to be the one to tell you, but any time it becomes fiat currency it is supposed to be taxed...
prepare to get taxed 25% on the same 20,000 5 times when you only actually made like 30k lol.

It's proportional to the gain. $50 * 10 transactions = $500 of taxable income. $500 * 1 transaction = $500 of taxable income. Quantity has no bearing here.

Fucking autist kill yourself

I don't know what you think you're doing, but I'm not retarded to see how much of a faggot you are. How was the taste of daddy's cock this morning

Any time it becomes fiat, the gains are taxed, not the same money. So I'd have to prove it's the same money, right? That's literally impossible to do.

The burden of responsibility falls on me, sure. But could I theoretically increase my tax burden to something ridiculous like billions of dollars by doing this, over and over? Where the fuck is the line where the tax guy's story becomes impossible and my story is more likely?

Look buddy. You don't have to prove yourself to me.

Any bank transaction over 10k gets reported.

You do you. If you think you can out smart the IRS than please do a AMA on Reddit.

Like I said I'm reporting. Fiat to crypto and crypto to fiat.

But to just not report or think moving money to an overseas account will save you, well you're wrong.

No you retard. You bought 10 Bitcoin at $1000. You sold 5 Bitcoin at $2000. With that sale you realized $5,000 in capital gains.

but he cant prove its the same money because he kept moving it through Monero lol.
he is fucked

Ok well are you reporting as a capital asset or as property? First one lets you report losses, second one only gains.

Which one is for you?

uhhhh, according to the government it would never end. you would just be in the hole for pretty much ever. probably some prison time too.

See Not just monero but foreign bank accounts, addresses for smart contracts that no longer exist, airdrops, etc.

At what point is my story more credible than a tax collectors?

(Surely I can't increase my tax burden to the billions of dollars just by repeating the same transaction over and over again).

Wonder if I could do this and then right a book about it.

*write

Than you're ducked. You're being shady and if you moved enough money for them to question it then doubly fucked.

I've waited 15 minutes and you vocal folks are suddenly silent. Please, teach me how taxes work.

investopedia.com/terms/g/gain.asp

"A gain arises if the selling or disposition price of the asset is higher than the original purchase or acquisition price"

If you are only selling half of the asset you purchased then you only take into account half of the cost base, i.e., the cost base of the investment you are selling.

Your argument is akin to saying if I buy 2 houses and sell 1 of them but the amount I receive for the one I sold doesn't exceed the amount I spent on the second house I have not made a gain, which is not true.

>fucked
This is my real life though. What do I do lol?

I can just say (and prove, although falsely) that all those gains and all my money was lost. It was all a capital loss.

Also, legally losing your private address is still a capital loss. It's shady but it's a fact and there's no way for anybody to ever tell if you mean it.

I'll post this pic again in the morning and show you my day trades from E*TRADE from last years taxes.

This probably the reason the IRS is being vague. So they can cash in on normies being stupid.

Just say you lost your private addresses.
Now you've got a loss.

So much the ENTIRE tax system relies on you being honest and sounding "credible" it's frustrating. Even if I'm honest, if I don't sound credible it will be punished, and if I'm dishonest but have a credible enough story I can evade the taxes all I want.

But losing your private address is a legal capital loss and a completely valid one for thousands of people.

Tell me, on that information alone, how is an IRS person supposed to know if I'm telling the truth?

You might say they just won't care and demand the money anyway, but in many cases they have to care legally because they really can't just force any story they like on you and saying you lost your private address is a perfectly valid and legal reason.

Report as accurately as possible, file, maybe you'll get lucky and they'll be fine with the fact you paid taxes in the first place

if not you may need a lawyer to duke it out or just pay their penalty

>Put 5k USD into crypto
>Make 100% gains, have 10k USD worth of crypto now.
>Pull 5k USD out.
>What did I just pull out?

OK. Let's assume that you bought FuckCoin at $100/coin to begin with, then it rose to $200/coin.

Here's what happened:

You bought 50 fuck coins for $100 each.

The price of fuck coins rose to $200. You still own 50 of them, but your cost basis per coin is $100. Or your overall cost basis is $5000 but the value is $10000.

Now you 'cash out $5000', or, you sold 25 fuck coins.

These fuck coins had a cost basis of $100 each, but are worth $200. So you have $2500 principle, $2500 gains.

For the tax man, this means that
- If you held for less than a year, you would add $2500 to your taxable income for the year, and end up paying your marginal tax rate on that (maybe 25%-28% if you're a wagecuck like me).
- If you held for more than a year, you would pay capital gains rate on that $2500 (maybe 15% if you're a wagecuck, or perhaps 0% if you're a student).

Alright I will. Also I received a bunch of gifts over $10,000 this year, honestly, from family members who don't know I trade, think I'm poor and unemployed, and meant to help me. I didn't turn them down but if I make enough money soon I'll give it back to them. But anyway I could just say it was all that, because for the most part that's true. It WAS gifts from people.

Suck it up.

Get a CPA that you can afford. Learn about tax breaks and what not. See if a standard deduction of better than by line.

Either way your situation will raise eye brows. You're transactions over 10k have already been reported to the IRS.

Depending on income you might be singled out. For example a guy making 200k a year getting or sending over 10k is low risk.

A student still a dependant on their taxes will raise eye brows when they send or receive 10k plus.

Literally just take the proceeds, and subtract cost you paid

Use the first in first out principle

Easy af

And how do you explain 1000's of dollars being deposited in your account

Okay, what happens if your scenario happens, I put in 5k, double it, pull out 5k, and the other 5k left in coins gets rotten by a 90% crash? Did I just pay 2500 dollars of taxes for nothing on the 5k I pulled out on?