selling low and not at the peak and the way that when you sell something in
crypto you have to pay taxes immediately on it at the price that you sold it for
so that was unknown to me at the time and that caused me a ton of money so I
don't want y'all to make the same mistake so knowing things about tax very
important and lucky us we have a actual CPA with us here Shihan who will
illuminate us about crypto taxes so how this will work is first he'll go over some
stuff about crypto taxes in a Broadway and then we can invite people up to ask
some specific questions this will go until about noon ish so might not get to
everyone's question but hopefully this is enlightening and helpful yeah so how's
it going Shihan? Hey good thanks Billy for hosting this space yeah so next Monday
is the official tax filing season start date so we thought it was a it's a good
idea to kind of do this 101 on crypto taxes should I rename this crypto taxes
101 then yeah yeah yeah I mean I'm looking forward to answer your questions if you
have any questions just have them ready but as Billy mentioned like a lot of
people are not aware of the basics of crypto taxes so let me kind of walk you
through some of the basics that you need to know heading into the tax season
so basically crypto tax guidance and rules they have been out since 2014 it's
nothing new IRS is pretty familiar with this phase and according to the IRS
cryptocurrencies are treated as property even though we call it a currency so if
you're familiar with taxes related to stock transactions pretty much the same
rules apply to crypto and NFT trades just to kind of keep things simple
these are the five situations where you could owe crypto taxes so let me kind of
go through one by one so number one is cashing out it's pretty self-explanatory
right so you let's say you bought a Bitcoin for $10,000 a few years ago and
you sold it for $40,000 for cash you got to pay capital gain taxes on $30,000 in
the year you you sell the asset so that's pretty clear yeah Billy it seemed
like you had a huge capital gain event so you probably know the max pain you
had to go to yeah so that one is pretty self-explanatory I think I don't think
anybody questions that but the second event the taxable event happens when you
convert one coin to another you could go from Dodge to Ethereum or Ethereum to
Bitcoin and whenever you go from one coin to another if that first coin has
appreciated in value you got to pay capital gain taxes even though you're
not realizing any cash in hand so let me kind of continue my example so I had one
Bitcoin which I purchased for $10,000 so instead of cashing it out what I'm
doing today is I am trading that one Bitcoin for a bunch of Ethereum today so
in that case I still had to pay capital gain taxes on that $30,000 worth of
difference because at the time on spending that Bitcoin to get a bunch of
Ethereum so a bunch of NFTs I have effectively sold my Bitcoin at that higher
price so I gotta pay taxes now the question is do I have actual cash to pay
that tax liability and most of the time people don't have it and they get into
trouble so something to keep in mind the third situation where you had to pay
taxes is when you spend crypto to buy stuff like it could be a cup of
coffee in the crypto space like very common transaction is like you have to
typically spend Ethereum to buy an NFT and that triggers a taxable event if that
Ethereum has appreciated in value at the time you're spending it to buy that NFT
so another like a hidden situation that people do and and you could have a tax
liability coming out of that the fourth situation is when you earn crypto there
are a lot of ways for you to earn crypto in this space right you can work for an
employer who pays you in crypto that's taxable staking rewards mining rewards
they are taxable at the time you receive them based on the market value of
those rewards and then the final situation where you have some tax
liability is if you get like a new coin as a result of like an airdrop or a
hard fork and and those things are those coins are taxable at the time you
receive them so remember those five situations in during 2023 if you went
through any of those situations you could have a tax liability and you could
have to fill out like additional forms with the IRS when you file your taxes
this year so that's just a basic ability like do you do you have any
specific questions before we kind of open it up for questions so I don't know
so I just wanted to point out the the two that got me personally in trouble one
was Eric was airdrop because airdrop like sometimes you don't even know it
actually hit your wallet you just got something in your wallet and if it's
some random coin that's worth like you know $8,000 and then four days later it
becomes worth $1,000 and you're like ah crap and you sell it you still have
to pay taxes on the $8,000 because the government sucks so that can get you in
trouble when someone's being nice and giving you some coins or whatever and
you're like cool like sell that immediately if you don't think it's
gonna appreciate because otherwise you have to pay taxes on the exact amount it
as soon as it hits your wallet you had to pay tax on that exact amount and
it's obscenely ridiculous in my opinion but that is how it works and unless you
have gains to offset that loss against you just get screwed and then the other
one that you mentioned was like if you gain taxes that's also if you sell NFTs
so if I created and sold NFTs which I did and someone bought it for three
Ethereum and Ethereum is worth $4,800 at the time you pay taxes on the $4,800 so
if you end up selling your Ethereum that you got for $4,800 for $1,000 then you
have effectively just lost money because you owe more in taxes than you have in
cash and the government only lets you if you don't have gains to offset your
losses the government only lets you carry over $3,000 of losses in the future
per year it like lets you carry over all of them all of your losses but you
can only do 3,000 per year so I now have like $400,000 in losses that I can
carry over 3,000 per year so I'm just gonna live till I'm 180 or whatever so I
can realize all those losses and write them up by taxes but this is all you can
love yeah you could afford to make like you mentioned that I mean this is good
example for the listeners as well and you said you have $400,000 worth of
losses in any given year if you make $500,000 worth of gains you can fully
offset that $500,000 with your $400,000 worth of losses okay I yeah exactly I
hope you will make that money yeah I don't know how likely that is with the way things are
currently going but knock on wood I can make a bunch of gains some day
somehow you know we were all excited about the whatever the ETFs and then we
know what happened with that but yeah I don't have any specific questions other
than you know you can probably talk about some tools that might be helpful I
personally use coin tracker which you were very familiar with but if there's
any other tools that help coin tracker basically like you just put your wallet
in and it'll enumerate all of the transactions that were made and
calculate the the basis for it and also one thing I don't know about coin
tracker specifically is you know we have a lot of international people I don't know
if it's just US only or if it's for you know UK and other countries like that
yeah so let me kind of talk a little bit broadly about crypto attack software
because again this is something new right so if you're generally filing tax
like if you're generally filing taxes you either use a CPA you use some
tool like TurboTax however if you have crypto you have to use one of these
crypto tax softwares because exchangers are not giving you a tax form called 1099
where they list your sales price cost basis and and your gains and losses
similar to stockbroker so you are responsible for figuring out all your
gains and losses by using a tool like coin tracker so yeah Billy like coin
tracker does support US, UK, Australia and Canadian taxes today and we are trying
to expand our tax logic to to other countries in the future as well but the
point being is I mean there are a handful of tools in the market if you're
dealing with crypto it's virtually impossible for you to kind of
manually figure out your gains and losses so I highly encourage you to use a
tool yeah the other tricky part to me with the tools is swaps and I think this
is you make this point a lot about having accountant that knows about crypto
because when I got an accountant they didn't really understand that the swap
wasn't like me just materializing money and I had to pay the whole cost basis of
the swap but like I just need to pay the like if I made any money previous to
the swap and after the swap type things so yeah it's definitely good to if you
can find one it's definitely good to get an account if you have a lot of the
transactions that know something about crypto yeah this is something that I
that to it all the time and and I say it in a funny way but however it is the
reality I say that you know finding a crypto savvy economy is harder than
finding the the next 100x coin which is true because they're very rare to find
there's this whole accountant shortage happening in the US as well so yeah I
mean if you are a complex user yes I encourage you to use an accountant in
addition to using a crypto tax software DME I'm happy to connect you with some
of some of my colleagues but yeah I mean if you're struggling just let me
know happy to help yeah and then the other thing I would bring up is shoot I
forgot I had a really good point but I guess hopefully an audience member will
bring it up or I'll remember it when someone else talks but yeah is there
anything you wanted to talk about before we start asking for or bringing up
people from the audience to ask their questions yeah so just to kind of tee up
the basics just remember those five situations and as Billy mentioned like if
you are like going from one coin to another just just keep like at least 20
percent of that entire gain in a stable coin or a US dollar so you can kind of
meet the tax obligation towards the end of the year so I would say those are
kind of like the two things that you can remember just to kind of stay out
of the Irish trouble oh yeah that did actually remind me of the thing I
wanted to bring up was that blockchain is extremely traceable so it's like way
more traceable than cash so if you want to cheat on your taxes that is not a good
idea because the iris at least in America is hiring 88 billion dollars of
people to investigate this stuff and once they become a little more
blockchain savvy they'll see that like how you didn't seem to like say
everything that you gained in your address that you use to to mark on your
taxes so that would not be good so don't don't cheat the IRS even though it's
annoying yeah so yeah anything else you want to bring up no I think I'm gonna I'm
gonna this is a common question that that I get all the time you know like a
lot of people are like hey crypto is either anonymous or pseudo anonymous so
how does the IRS know if I have anything to do with crypto I actually wrote a
thread about this so I'll I'll pause this to this thing like if you guys are
curious like the ways that the IRS know that you have something to do with
crypto but yeah other than that I think I think we covered the basics Billy so
yeah happy to answer the questions sure all right so I'll just start from the
top and go from there so we'll bring up star doge mouse hey doge mouse hey what
up big dog what up I love the space I love the education man that's what it's
all about so my question is even though I'm taking like a bunch of L's or if I
have been hacked by someone am I still viable when that happens as well that's
actually a really good question I don't know this okay I'm curious yeah so I mean
if you if your wallet is compromised that means you know you no longer can
control the wallet in that case I mean you're not liable for taxes because it
has been stolen right so actually the whoever the hacker is actually
responsible of like reporting those taxes obviously I don't think it's gonna
happen but if you if you read the IRS guidelines it literally said that if you
if you make money from any type of illegal means you're still required to report that
income so that's a hackers problem so you're saying when they took my hard
drive back in the day and then they just made a post about they're gonna sell
all of the Bitcoin off that hard drive from all the people so the government
right yeah I mean you're off the hook and make sure you kind of document like
you know what happened with that event and stuff but yeah and yeah you're right
government's not gonna pay taxes on that either so yeah so what you're saying is
the government can do whatever they want and all of us still have to suffer
well that's that's how we set up currently so actually I have a question
related to that so let's say let's say I sold an NFT and I made six thousand
dollars in a theorem or whatever and then I tried to send that to to coinbase to
sell it but I like screwed up the address and then went to a burn account
or whatever I still owe the taxes for what I gained question mark even though I
lost it well you saw something and you made six thousand right so daddy's
taxable to you it's like this right I mean you so like if you just kind of
put in like physical world you saw something somebody paid you six thousand
dollars worth of like paper cash and it's in your wallet and you lost your
wallet so in that case like yes you made six thousand worth of income which
you had to pay taxes on and the subsequent like loss of that wallet it's
like a personal loss which you cannot do anything with unfortunately cool don't
mess up anything because you're on the hook for that the government basically is
the biggest winner of cryptocurrency of any kind I have no idea why Elizabeth
Warren is so upset about crypto because the government is raking in with no risk
and doing nothing and it's a really psycho thing to be upset about making
money while doing nothing but uh yeah so thanks for that I know this happened to
people I know and it's very sad that you can you know and like if people
donate a lot of their crypto also to like non 501c places like they're
writing to good causes but as a matter like you still pay taxes on your
donation because if you've gained money from it and you don't get to write off
that donation because it's not a real tax write-off donation so it's is what it
is in these type of things yeah thanks for your question does a really good
question let's bring someone else up we'll bring x habib hello x habib how's
it going hey thanks for having me up here I mostly had a statement to make
but then a small question yeah but just around this topic because if you were
like me and you bought NFTs around the Pico top and lost like some of them
literally went to zero the thing I wanted to mention there is a lot of
those are liquid now so there's like no buyers but you can't claim a loss
unless you sell so I know there's some platforms that specifically buy your
NFTs for pennies so that you can claim the actual name so I guess that's my
question like does anyone know the actual name of that service because my
whole point is you can't claim a loss unless you sell so you do need to sell
those liquid jpegs to claim that loss yeah there are a couple of platforms I
think I don't remember them on the top of my head but if you just google them
you can find them basically you're sending your NFT to the address that
they specify and they kind of give you like a like very minuscule amount of
money back to you to create like a capital loss so yeah so can your friend
just do that or do you need to go through something more real you your
friend can do that no absolutely as long as their unrelated parties then you can
create a transaction like that yep and I can I can just go to my friend and be
like hey can you buy my NFT for like point zero zero one theory and because I
lost 40k on it so great well I mean at the same time that you're having to pay
the 20 grand of taxes on your 40k loss anyway or whatever if you depending on
how you made that money so it's like whatever you can do to get your recoup
some funds and this is perfectly legal to use these things um these are new
things right so I think these software came to the space because like a lot of
NFTs like kind of lost their market so people had to find a way to kind of
liquidate them so are they legal I don't see any reason why they're illegal
yeah okay thank you for that statement did you have any other question or no that
was there I just wanted people to know that they need to sell their their rug
assets worthless and not to me I just want them gone because they're just a
reminder of all my failures yeah I have a maybe I can buy your failures you can
buy mine or something Arno Arno how's it going Arno Arno are you there no okay
well if you're if you hear us later please speak up but otherwise I'll bring
up someone else bring up Jettlyn Jettlyn how's it going no the spaces where do we
have to sell the spaces to a server oh yeah go ahead if you can unmute your mic
hey sorry about that yeah I'm kind of something to try to but I won't take
advantage of the space and I have a question for all the people who had funds
it like exchanges that went bankrupt like FDX Voyager Celsius all that stuff so
let's say hypothetical scenario you had let's say 50k you put 50k in there
there's bankers superseding let's get you let's say you get 10 back question
is okay like the 40 is that a loss that you can claim and second are those
exchanges or like their best bankruptcy proceedings expected or required to send
you like some sort of a write-up on that whole thing or are we like on our own on
that regard yeah so the situation depends on like the each bankruptcy right
because all of those bankruptcies have different reasons some of them are like
bad this business issues of them have like you know scams or theft and those
type of things generally speaking so a new example that $40,000 like first of
all like you had to wait like until all the bankruptcy proceedings are finalized
until they're finalized you you cannot do anything because the event this whole
bankruptcy thing is is still pending right so in order for you to kind of
create like some type of taxable event things have to be like confirmed so I
don't think any of these bankruptcy proceedings are like finalized yet so
so therefore you can't even think about a deduction like today so let's say
everything is finalized so out of that 40,000 you're only getting like 10,000
back so then the question is what do you do with that remaining $30,000 worth
of losses can I get any tax benefit or not again it depends on the specific
bankruptcy in certain bankruptcies that $30,000 could be deducted as a loss
because you invested that money with the intention of making profit so but that
deduction is very very limited meaning you had to itemize on your tax return
and you had to kind of work with the CPA because those deductions are very
complicated and you just had to kind of do it the right way so I know it's
not a short answer I cannot give a short answer because it's such a
complicated thing okay just a follow-up on this then let's say stuff is finalized
the crypto exchange has liquidated whatever and disperse you know disperse
the whatever remaining funds are they required to send you like a 1099 or
whatever I don't I don't think so the if they sell something on be I don't think
they're gonna send you send you any 1099 bees because none of these crypto
exchanges like issue 1099 bees they will put like some like a like public notice
or something like that hey like you know every the bankruptcy proceedings are
final we have distributed everything based on those documents you just had to
kind of manually calculate your eligible amount of deduction with your CPA
potentially thank you for that appreciate it so just to follow up that
another like very concrete example so I I had like a little bit of money in
Voyager where I bought some storm X because my buddy runs storm X and then
that Voyager went to hell and then I got like one tenth of the storm X crypto
back when during their bankrupt these stuff so like I bought a certain amount
and then I got like one tenth of that back is the other nine tenth of that
storm X stuff can I like deduct that or is it just like very situational
dependent you have to look at all the fine print it's a situation dependent so
the number the first step is like you had to make sure that entire voyage of
bankruptcy proceeding is finalized I don't think that's the case they're
still yeah so that's number one and after that the one the nine tenth of
that that that amount could be deductible in your taxation billy if you
itemize and if you can prove that you know you lost that amount in a
transaction that you entered into to specifically make profit I know I'm kind
of going to this like little bit beads because like these are like not very
like general area of taxation is like you know in the weeds so it's that's
why it's really hard to give you like a binary answer yes and no yeah it is
possible for you to deduct but just because you can deduct sometimes it's not
necessarily a good idea to deduct because those type of kind of like
obscure deduction could could surface like like could flag could signal the
IRS that oh this this person has this very sophisticated deduction so you
probably like signaling the IRS to kind of I don't know maybe comment audit your
return for this huge deduction so you had to kind of balance like all those
things before you take a deduction right because what's the point of taking a
deduction and you're opening up a return for an audit like I don't see the
benefit there so yeah yeah I hope no one audits my return because 2021 return
was like 9,000 transactions it was like like 300 pages like you really want to
see dorks like giving you so much money but yeah I think I only lost like
couple hundred dollars it's yeah it's yeah it's so yeah all right let's bring
up oh looks like Jettlyn got knocked out or something Jettlyn are you there yes I
am hi excellent hello hello hi how are you everybody hey you know I have a good
question I do tax by myself and most of the platform I use and they in general
actually tax documents and I was just wondering that is the safest to use that
those in generated documents direct to my database or to complete my tax
return or I should have a special CPA to do that um if if your transactions are
very simple you know if you just do buy-and-sells in you know centralized
exchanges and maybe in like you know self custody wallets software kind of give
you a good answer however I mean we just spoke about like okay how to treat the
money lost in these bankruptcies if you kind of go to some of those sophisticated
ones I would encourage you to work with the CPA because they can kind of tell you
the best way to kind of go about those complicated transactions so like a if I
transfer my money to some people and do I have to show those also in it or
they automatically come into those in generated documentation so what so my
question to you like what why did you transfer money like like what was it why
did you do that like meaning like what was the really did you did that person
give you some service and you paid them or what was the the reason behind the
transfer exactly some people was giving me some services and then I
transferred to them and also sometimes I realize that this stock I don't like it
and I just want to sell them and getting new ones and I did actually some point
last year a lot frequently that so I was just wondering that do you think those
platform they do correct way all those thing I should just rely on them
blindly and submit my documentation or I should have a special people to do that
for me yeah so I can speak on behalf of coin tracker because I'm not sure how
other platforms handle days so in coin tracker like if you have an outgoing
transaction from your wallet to some other wallet it assumes that that's a
taxable sale because in your case it is taxable because you're paying
somebody yeah so that's the answer to the question one this question too is
okay should you blindly rely on these forms I don't think you should blindly
rely on any software like not crypt attacks of like this goes to like even
terror attacks and everything right so once you've got kind of see the report
just just do some spot checks and and kind of see if it makes sense yeah I
wouldn't go to line by line but you probably know that the top five biggest
transaction just makes you okay does it make sense and and I would go like I
would have that habit instead of just like downloading it and just forwarding
it to a CPA or the DIY software just just do a spot check sure okay and my
second question is that if I personally gave somebody like a all those cryptos
through different like a what is called kiosk or something like that it it
doesn't have anything to do with me it's like in my personal money I'm giving
them it doesn't have to be taxed or anything right whoever receiving they had
to pay the tax right well as I assume this is a gift is that it right okay if
this is a gift then there's nothing for you to do there's something for you to
do if that if the value of the gift is more than sixteen thousand dollars but I
don't think the gift is that big in your case no yeah so so yeah so
basically you you don't have to do anything from a tax point of view yeah
so you're fine with that oh thank you if you give a gift more than sixteen
thousand dollars you got is that like a just a general law or something with
crypto it is a general law so if you give somebody a gift worth over 16,000 I
don't remember the exact like number adjusted for the inflation it could be
sixteen thousand or seventeen thousand you don't have to pay taxes but you had
to file a separate form with the IRS and you got to let them know okay here's the
value of the gift and here's the identity of the person you you gifted
that that money crypto or property too so you just had to file like a like a
information tax form with the IRS right yeah I have a third question if you
don't mind sorry about that then my third question is that I'm using the
platform it's not about the crypto so I bought some stock and I gained from that
stock like a huge amount of money in a day right so I decided that I don't want
to deal with that because sometimes they have a pumping up dumb stocks they
goes up and down so I decided to sell that stock and then I wanted to invest
into something else and but I didn't take out the money from the platform or
the I invested into the stock still I will be reliable for the paying the tax
for the next terms well you said you your stock went up and you cashed out
and but you didn't withdraw the money I invested into different stock not same
stock but the different oh so you went from one stock to another stock correct
yes okay yeah in that case the same thing applies like I've mentioned like
you know when you go from one crypto to another or one stock to another if
that first stock has appreciated in value you still had to pay taxes on
the appreciation at the time you exited the first stock so it means if I sell
it it means I am physically exceeding the yeah okay all right that's good to
know because I've been taxed actually last year for one of the stock and I
was shocked I said I'm still in a platform so and I'm using in money into buying a
different stock and why I've been taxed for that particular stock so I was a
little bit confused but glad to know thank you so much though yeah it was
very helpful yes thanks for the questions and I'm sure they're also
helpful for other people sure thank you all right let's bring up Russell how's it
going Russell hello hello hmm test one two three all right if you can unmute
yourself and chat at some point go ahead Russell otherwise I will bring
someone else while they're getting muted I just wanted to thank you and the
co-host for putting this space I think it's really important to talk about this
stuff especially april's gonna arrive really soon so I appreciate that yeah we
can actually like start doing like I'm getting all the 1099s and stuff like
Twitter gave me the 1099 from or Twitter slash X gave me the 1099 I was
like oh man I wonder what mr. beasts 1099 is gonna look like I oh my god that
dude's taxes must be the most ridiculous looking thing because he spends so much
money too on his business and his business especially like buying Ferrari
and blowing it up right okay sex would be crazy I think I brought up nuke how's
it going new hey Billy how's it going and hey Shay I'm thanks guys for putting
together this space I think it's like really super helpful informative like in
a very sort of you know space that's growing we're all trying to learn and
just sort of cross-pollinate because a lot of this stuff is like super
confusing and even some of the tax people that I've dealt with over the
years like they're always like referring me to different people because
they're not always sure sure of themselves I have two questions one of
my other questions answered but I have two questions so the first one is about
the hard forks right so you know I know sometimes I'm either you know there's
certain coins or certain tokens that'll have you know a fork of their of their
token or of their coin and I'm just curious about the tax implications there
and like what what the differentiations are between like hard-forked assets and
soft-forked assets so I'll just ask that question first yeah so for hard forks
are like if you receive like the new second coin and at the time you receive
that new second coin and it has a value according to the IRS you had a report
income based on the value of 10 new coin so that's a hard fork like example
like Bitcoin and Bitcoin Cash hard fork that happened for the soft fork good
example is the Ethereum going from proof of work to proof of stake that is not a
taxable event and IRS actually clarified it without directly mentioning the
Ethereum situation but I did clarify that that that is a soft fork and that
sounds taxable okay yeah no that that's interesting just because like again like
the accountants I've dealt with over the past few years like some of this stuff
is cloudy and probably some of the more scarier things especially if you guys
anyone else who's like you know sat down with like an actual account and
you're not just going through you know one of these websites or whatever to
follow your stuff is like when they start doing things like that's the most
terrifying thing but yeah so the second question I had and this was goes in
respect to some of the tools that folks can use like so for myself I also use
coin tracker someone had asked before about exchanges shutting down like my
recommendation that can this help me a lot was to was to proactively use coin
tracker not reactively use it because then if that exchange shuts down like
you're just gonna be like caught up and especially by these tier two exchanges
or tier threes like and these um you know certain countries where there's not a
lot of regulations you're gonna be impossible so I just recommend using
those tools like proactive proactively but interestingly enough yeah the other
day you had asked if anyone was using grok for any sort of things and I'm just
curious like in terms of like AI tools which is much better than like googling
you know things for steps you know like have you in your experience or you
know maybe have you advised anyone else or do you know anyone that's like using
tools like chat GPT or grok to like just you know help guide them through their
journey of like you know just being an endurance to their local regulations um I
would say um chat GP 3 in my experience maybe maybe I'm too much in the beats
whenever I asked like a crypto question I think it gives me like surface level
answers it doesn't want to take the risk you know so I don't know how in
fact which had GPT can be when it comes to kind of getting your regular questions
answered however like I think would be helpful in other scenarios like let's say
like you have like a CSV and you want to convert that CSV into a compatible
format to to your tax crypto tax software it can do like those type of
like things pretty quick so yeah I've had a mixed bag like mixed experience with
chat GPT when it comes to crypto awesome awesome yeah just trying to
figure out ways to like just get ahead of stuff because this last year I got
audited and that was just a mess and just trying to do whatever I can to not
experience that again so but yeah thanks man appreciate it yeah you're
welcome yeah I had a follow-up question with the hard fork about cost basis
because I would think that the cost basis in a hard part could be zero for
the new crypto because it's like not worth anything yet until it starts
getting traded because when it works is like immediately just get some tokens
and nonsense value until people start trading it I don't think it's wrong it
could be the case for some people it may not be the case for other people so I'll
give an example the biggest hard fork that happened was the whole oldest in a
Bitcoin to Bitcoin cash thing so I think people who held like Bitcoin in
more like a self-custodial way yes they saw that Bitcoin cash appearing on their
wallet but at the time they appeared that the Bitcoin cash had probably zero
value because the market wasn't even established so in that case you have
zero income zero basis however if you held bitcoins in in a exchange like
Coinbase they unlock the Bitcoin cash much much later when Bitcoin cash had a
price in that case you have income and and the income that you report that
that establishes your cost basis so hopefully that that makes it clear for
you Billy I see that makes sense so if you if you're a self-custodial that
makes sense because there's no market so we can't actually have a value if
there's no market but it seems like a lot of these like well not necessarily in
a hard fork it seems like a lot of these like random tokens that people
gamble with like have a market because they have some liquidity so you have to
pay attention a lot of stuff Arnaud you have your hand up and then we'll go to
Russell who I skipped over earlier right on and yeah thank you for that it's
this is a question from someone in the audience his his big chief energy Martin
Seger's handle the question is and I'm gonna read it like word for word it's I
want to know if I create a series of NFTs that represent a one-time entrance to an
event event is that a taxable event so basically if you create ticket NFTs
when would you have to like yeah like yeah yeah yeah so I did the creation of
the NFT itself is not a taxable event however if you if you're creating an
NFT I assume you have spent some ETH on gas fees if that's the case that spending
like when you spend Ethereum to initiate the gas that transaction fee is gonna
create some capital gains or capital losses that that's it
what about perceived value like it sounds like that's ticket NFTs like an NFT
that represents a ticket can they if there's no tickets that are you know so
for fear it's just the entrance is there's like no taxable implications on
that so this is the when you create the the NFT slash tickers that is not a
taxable event however when you sell that NFT slash ticket at a certain price that
that triggers a taxable event like when you when you sell the ticket to somebody
and it's if it's given away gifted like if just like a thing then it doesn't
create a taxable event so is it a business or is this is it like a person
giving out stuff let's say hmm let's say a private event you know I can't speak to
if you want to bring big chief up he would probably be able to elaborate
further but let's say it's a private event a bunch of people from around the
country there's like I create these NFTs that basically are like the admission
yeah I don't necessarily sell them but I distribute them people might sell them
between them if there's limited amount because somebody has one but can't make
it someone else wants to make yada yada oh big chiefs up here big chief you
want to take that no actually I think he answered all of my questions you asked
them wonderfully thank you I wasn't I was afraid that I wasn't gonna come up
be able to come up because Billy has me muted but that's okay
great yeah tax wise yeah it was answered I just wanted to know so I was
under the impression that you'd have to pay taxes on those NFTs as soon as they
have value in your wallet so like say you make a thousand NFTs each one
represents a ticket to admission and the value is $200 I was under the
impression that at the time of creation of those you would have to pay the taxes
on $200 per per asset but he answered the question apparently you don't have
to pay taxes on the creation of the NFT you just have to pay taxes on the
sale and pay taxes on fees or whatever yeah yeah you got a hundred percent right
yeah wait a second though if you assign values to those NFTs like tickets isn't
that a different story than rather than just giving them away to people well I
mean they're gonna have value whether or not they're unless they're all given
away for free then you I imagine if they're all given away for free then
you wouldn't have to pay any there is no taxable event it's just a gift of a
digital yeah I just said yeah you're just giving it away yeah all right thank
you I'll go back to listening thanks I don't think I have you muted actually
oh well you just check you you might not you might have just been woofing
when you told me you were gonna mute me but yeah a lot of people that yeah thanks
God damn big chief I've muted you like five times already don't worry yeah right
right appreciate you all thanks I think Russell wants to ask this question
yeah Russell how's it going no no Russell okay um Russell if you if you're
back at some point or does your mic not work or do do this if your mic is not
working because we can't hear you oh no okay I guess the mic is no good sorry
Russell if I see your question in like you can reply to the post that is for
this space and if I see your question now I'll ask it for you all right let's
pick someone random Shawn Shawn how's it going Shawn Shawn Shawn yeah now you
know hi hi sorry thanks thanks so much guys for you know for your help today
very helpful so I'm new to the trading I said a few months ago my plan is to
basically move from Minnesota to Florida so I don't pay I guess a state tax like
we've had like 10% here is that is that a good I mean is that a case like if you
move to a state that you don't pay income tax so that means you get like a
save like 10% on each trade or something yeah I mean basically if you permanently
move and and changes your residency from Minnesota to to Florida then you
don't have to pay state level taxes in Florida because Florida does not have a
state level tax so yes you get to save that 10% or so that you would have paid
to Minnesota yes oh perfect okay great thank you and then let's say I didn't
have time to tax my files for last year because it's like a lot going on with
this right this for my first time and I'm gonna basically file both of them
both years like next year do you think it's gonna a bad idea no I think it's
a good idea because you're catching up with the past year so yeah I mean do it
do it sooner okay good and the final question is so let's say I have a friend
from you know other country he's gonna send me let's say five bitcoins and I'm
gonna put it in my you know cold wallet how can you know they track it if I
just keep it there so is it possible that I don't pay taxes on that so I would
know I mean I would not like try to do this because like you know whenever like
somebody sends you Bitcoin from their wallet to your wallet like things can't
kind of get recorded under your social security number slash your tax profile
there are ways to kind of tell the IRS hey you know these five bitcoins are not
yours it belongs to your friend but that's like a kind of a messy situation
so my recommendation to you is like set up like a separate wallet for your
friend and try to do something kind of like putting your friend stuff in your
wallet it kind of it kind of messes up your tax profile and it's really hard for
you to kind of separate like your stuff from your friend stuff and you
don't end up paying taxes on your friend stuff at the end of the day yeah
I guess it's like putting a bunch of money in your bank account being like
it's not mine yeah exactly exactly yeah okay so there's no way basically to
avoid taxes anyway right yeah yeah you cannot over tax it but I wouldn't go
far to like pay taxes on behalf of your friend out of your pocket so I like that
I like that very much thank you guys thank you for the question and Russell was
able to write his questions so I'll ask them he has two questions the first one
is is crypto considered capital gains or income if profits are your old is a tax
is a long-term capital gain yeah so crypto like if you trade those gains
are capital gains and yes you could have long-term capital gains when you sell
something after holding it for more than 12 months you can also have short-term
capital gains when you sell something for for a profit after holding that asset
for less than 12 months so that that's that's capital gains crypto is also
subject to regular income taxes when you earn crypto through like staking mining
and when you get crypto from airdrops and hard folks so yeah they're
subject to both capital gain taxes and income taxes for percent transactions so
it can be both but so like if somebody buys your NFT for to Ethereum and you
hang on into it for a year the Ethereum and then sell it any of your gains so
you pay the tax on the income and then you pay the gains if it went up the
value on the off chance that actually went up in value may I stay one question
about regarding that so if I if I have the crypto and then I gain $10,000 this
year right I paid tax next year so it's I already paid for the 10,000 the next
year I gain another 10,000 so I have to pay for the 20,000 following year or I
have to pay only the $10,000 I think only if you cash out but what do you what
do you mean by gay again Chadley he was she how do you pronounce your name she
hon yeah yeah she hon okay so Mike my question is that I had crypto right so
last year I gained $10,000 so this year I'm paying for the $10,000 what is
called as tax right did you sir sir yeah exactly what do you mean by you gay like
is it just in your Robin Hood or something I went up or did you so right that
for instance that my Robin Hood went $10,000 okay yeah you don't have to pay
that is if it's going up you don't have to pay you don't have to pay until you
sell when you if you bought a crypto and then you're like just watching it
you don't have to pay the tax on it until I don't have to pay as long as I
mean if as long is in the same account right I don't know anything the same if
you haven't done anything and you you bought aetherium and then they went from
1,000 to 2,000 you don't pay taxes until unless you sold at 2,000 then you have to
pay the capital gains tax or whatever okay so it's the same same crypto like
several instance I have a Dutch coin right so I sold the Dutch coin because
it was I wasn't feeling good about it and then I said hey I'm gonna go back
again so can I go back again and they're going to tax me for that though I bought
the same tax again I'm a same top if you gained money like if you bought it at
seven cents and you sold it eight cents you pay the difference okay and then when
you buy it again it's it starts over so whatever you bought it for versus
whatever you eventually sell it for that makes sense thank you so much yeah oh
good I feel good if she on is telling me that I'm not making crap no you're
great I'm glad I mean you should you should tweet more about taxes and stuff
going for it I do I just complain yeah so Russell had a second question this is
does the $600 reporting rule apply if you if you make less than $600 in
profit you need to report it the answer is yes you need to report even if you
make like you know $1 or $2 the $600 threshold is for your brokers meaning
like exchange could send you like a 10-9 and miscellaneous form if you make let's
say for example $750 worth of staking rewards because it's all over 600 if you
make like let's say $300 worth of staking rewards exchanges are not required to
send you that 1099 tax form however you are still required to report it on your
taxes I see so it's not about whether or not you have to pay taxes or not it's
just you always have to pay the taxes and you always it's just about if you
get a nice sheet correct that's not or that they send it to the IRS and you
yeah versus you have to self-report okay that makes sense and sucks all right
we're running out of time so I'm just gonna pick one more sorry to the
people who were not able to come up but Lumi you're there oh hi yeah I can hear
you sorry a little bit of a surprise thank you yeah my question is this say I
am I came across my old mining wallet which I thought was lost and it I
didn't even think it had value and this is hypothetical what's the best thing to
do I would say talk to your advisor because the answer kind of depends on
your crypto stuff how big they are and also your non crypto stuff right one
option is for you to kind of amend your past year returns to kind of reflect that
income you had another option is to kind of do something like I'm gonna catch up
type of reporting meaning yes you couldn't report like all the past year
stuff but this year return you're kind of catching up into that reporting again
depends on your facts and circumstances because we just had we had to do these
type of things in a way that doesn't raise any red flags to the IRS either
so I would encourage you to talk to a CPA and figure out the best option for
your specific situation thank you have you find a whole Bitcoin wallet where
you where you mine some early things for 50 Bitcoin per solved block that'll
be a good day but you still will have to play probably well actually no you
probably won't have to pay a ton of taxes is way back then correct yeah you
said the capital gains but my question is really like say for instance I then
found it in Puerto Rico would it be better to I mean yeah I mean potentially
I mean if you find that wallet in a state or a country where the tax rate is
like zero or effectively zero yeah that could be put you in a better place yeah
okay so I need tax-efficient luck you're saying all right okay thank you again
no nothing we discuss here is you know tax and financial advice just again my
whole question was hypothetical remember as well okay good question to end on
again apologies to people who I didn't get to maybe she on probably do more
spaces in the future about taxes if you have more questions thank you all for
coming thank you so much she hon for providing such great information and all
the questions we had were really really good so very appreciated thanks
Billy and thanks everybody for attending yep have fun with your taxes the next
yeah all right thank you both thank you bye