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Capital gains tax

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5 hours ago, ieiaiel said:

If you do not specify where you live.....  Here in Italy cryptocurrency is considered like  foreign currency, so if you  only  buy crypto,  hodl  and sell one time only ,  you don't pay any tax. But if you trade it , and sell and buy forth and back, that is trading and you pay the government tax.

Yes, but that not exactly, because if you exceed the 51645  euro threshold cash out  in 7 days , the amount is taxable, for what I have understand you can only cash out about 50000 euros / week  to avoid taxes.

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13 hours ago, dayvkaos said:

When the time comes for you to hit that  sell button, you will need to transfer that money to some bank account.

A couple of questions here:

When you transfer sold amount to your bank account, will this freeze your account due to the amount transferred ?

Why did it freeze? if so, is it contingent to IRS (or your government tax agency) review ?

When it comes time to sell, how do you prove to your government it is not capital gains (held over a year) that way you are charged the lesser amount for tax? (from my understanding capital gains differentiates. In some places it's investing longer than 12 months, and some places it's investing longer than 5 years).

From US perspective there shouldn't be any bank account freezing.  Make sure you notify both your bank and the exchange about such a large transfer that will be taking place before you actually initiate the transfer.  The biggest concern is on the exchange side to ensure they have the liquidity to handle your transfer when you want to process it.  I've heard stories of people trying to move hundreds of thousands of dollars without notifying both parties and that's when accounts get frozen/stuck because the numbers are big and something didn't quite sync up between transferring parties so the exchange usually puts a hold on the account action and it can take several days or weeks to unlock funds.

Once you've sold off such a large amount from US side you'll be required to report any foreign accounts holding more than $10,000 USD during your next EOY tax return.  If the exchange is within the US you'll skate right by this, but once that money hits your actual bank account you absolutely have to notify the IRS on your next EOY tax return.  You might get lucky for anything less than $10,000, but anything over you'll probably get caught and fined if you try to not report it, under-report it, or try to continue day trading on capital gains without reporting even though it never made it to an actual bank account.  The IRS will be looking for buy/sell dates and prices to confirm how your investment of $1,000 blossomed to $100,000 over time.  Anything sold >12 months holding gets you the long term capital gains tax brackets.  Anything below that should get taxed at your current income tax bracket I believe.  Not exactly sure how the second one will work in 2018 with the new income tax brackets.

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Here's a question that's probably been answered somewhere but haven't seen it yet.  Let's say you think the crypto market has topped out and you want to take some off the top for just a few months before re-investing. Assuming you don't need any fiat immediately, why not just exchange it for something that follows fiat closely instead? That way your tax liability might be lower depending on where you are living. I'm aware of Tether and all the warnings, and perhaps BitUSD, but if you're trying to move say $500k in crypto to some instrument like that, won't there be liquidity issues with that kind of transaction? Seems like this process hasn't been well designed yet, or has it?

Edited by madcap99

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2 minutes ago, FlyingFox said:

@Inequivalent for UK residents, check this:

Quote: "Gains and losses incurred on Bitcoin or other cryptocurrencies are chargeable or allowable for CGT if they accrue to an individual"

Revenue and Customs Brief 9 (2014): Bitcoin and other cryptocurrencies

You cut off the important bit "depends on the activities and the parties involved." If you have a service like a shop that sells in that then yes it would apply, for a regular trader this would not. Phone HMRC up yourself, they will quiz you. Stop being retarded and paying tax when you dont need to. 

Edited by Inequivalent

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3 hours ago, Inequivalent said:

You cut off the important bit "depends on the activities and the parties involved." If you have a service like a shop that sells in that then yes it would apply, for a regular trader this would not. Phone HMRC up yourself, they will quiz you. Stop being retarded and paying tax when you dont need to. 

The HMRC Capital Gains Manual suggests otherwise:

Quote

 

As cryptocurrencies are not recognised national currencies, transactions in which they function as consideration given or received are ‘barter transactions’. There is guidance on barter transactions at CG78310: this guidance is written in terms of non-sterling currency but is applicable to cryptocurrencies.


 

 

 

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9 minutes ago, tev said:

The HMRC Capital Gains Manual suggests otherwise:

 

 

https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies

"CT, IT and CGT treatment of Bitcoin and similar cryptocurrencies

As with any other activity, whether the treatment of income received from, and charges made in connection with, activities involving Bitcoin and other similar cryptocurrencies will be subject to CT, IT or CGT depends on the activities and the parties involved.

Whether any profit or gain is chargeable or any loss is allowable will be looked at on a case-by-case basis taking into account the specific facts. Each case will be considered on the basis of its own individual facts and circumstances. The relevant legislation and case law will be applied to determine the correct tax treatment. Therefore, depending on the facts, a transaction may be so highly speculative that it is not taxable or any losses relievable.. For example gambling or betting wins are not taxable and gambling losses cannot be offset against other taxable profits."

Just PHONE them up, like I did. If you are like me who buys and sells crypto for fiat without trying to sell services/goods as a business then youre good! I've sold >£300,000 worth of xrp, phoned HMRC up, told them all relevant facts and they said it wouldn't be taxed at all. They mentioned its just like gambling, unless you are a certified trader. It also helps with my accountant being smart unlike most accountants who google the first thing they find. I cringe at all the people paying tax when they dont need to due to pure laziness on their part. I'll stop replying about this now, not looking to help blind people.

Edited by Inequivalent

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2 minutes ago, Inequivalent said:

It also helps with my accountant being smart

They will go after people who don't have smart accountants. All civil servants are lazy and crooked, so they pick soft targets whom they can lie to more easily. We've seen this with the Windrush scandal (they victimize legal immigrants because tracking illegal migrants is too much like hard work), and HMRC are no different.

The Capital Gains Manual has been updated since the January 2018 bubble, and anyone who relies on a 2014 document is gambling that their tax collector is too lazy to read the new policy. Since civil servants are lazy, this gamble could pay off, but it's not a risk to take blindly.

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