If that's true, that makes a huge difference. AFAIK, the fraction of transactions for goods is minuscule.
The intention of the original law is exactly like the example I provided; we don’t want people to have to account for trivial gains and losses every time they travel overseas and spend in a foreign currency. The law is not intended to provide a loophole to recognize tax-free gains in currency trading, and if you tried that you would probably lose in court.
If I understand right, they could then use that without paying any taxes on all transactions under $200?
I assume you would still have to account for that somewhere? Even if only in your personal accounts, in case you do some larger transactions or trading. For example if you decide to sell $5,000 of your BTC for US dollars. That now becomes a capital gain tax. You need to list the date you purchased it (date in 2005) & the date you sold it (now).
Your accounting software or books would still need to keep record of when you bought/sold/lost/used BTC though to properly mark which ones are long term gains and which are short and which were used for small transactions.
Please correct me if I'm wrong.
My big question is how this will work for accounting purposes as far as which basis is used. When you sell, say, a stock, you have to designate exactly which stock you are selling to calculate gains. If this works the same, you can choose in ways that get you as close to that $200 line as possible.
100% yes. I've heard some arguments about needing to be consistent with a formula, FIFO or LIFO. Though I'm not sure how true that is. I'm also not sure how you would do that if you have currency split among different apps.
> transaction does not have to be less than $200; the gain needs to be less than $200
Thank you for this clarification.
If you bought 3 at 100 and sold them at 150, you would have a net capital gain of 3x(150-100) = 150 and wouldn't have to report it.
If you sold them at 1100 gain is 3x(1100-100) = 3000 and you would report as capital gain on your taxes. Right now you have to do this for any amount.
Structuring is a separate issue. Typically that would mean that you can't break up a large gain into a bunch of < 200 gains to take advantage of this.
Note that the language is pretty specific though, and I don't think it applies to any transaction.
What's still not clear to me is at what point does it become structuring. I've found plenty of obvious examples such as splitting two deposits of $8,000 into a bank after selling an item for $16,000.
But what about someone who just buys their groceries and fills their vehicle up with gas with BTC that is worth much more than they paid for it years ago? Is it structuring if you're spending this money in multiple transactions that only add up to $1,000/month every month for the rest of your life?
After reading up on a few structuring cases all, my conclusion is that there is no black & white rule on this & it is up to the prosecution to show that the accused knew that they were structuring & that it was illegal. If that's the case, I would assume the above example could be found guilty.
Side note, I'm in no way able to benefit on this. I just have an interest in IRS rules and politics.
You are right that it is all a bit fuzzy because real life use is complicated.
Exceptions on reporting like this are meant to make "normal life" transactions less burdensome. For example in general you have to report gains/losses made on foreign exchange, but typically countries have an allowance so that you don't have to calculate this every time you go on vacation.
The proposed amendment would add virtual "currency" transactions to that.
At the same time, I also think this is an incredibly difficult policy to get right.
I think structuring could become a common thing among those who have done well with digital currencies to either avoid taxes or purely out of convenience & without ill intent.
What would be problematic here is, say, buying a car with BTC in multiple "transactions", each of which is individually below the $200 gain threshold. It's really a single transaction taking place: BTC for a car. That could be interpreted as intentionally structuring the payments in a way that obviously works around the spirit of the proposed law.
It is separate from the rules about what you are legally obligated to pay in taxes, which generally apply to total amount transacted/gained and aren't affected by the size of individual transactions.
Yes, it’s a commodity, not currency.... yet, if ever.
IMO, there is still a huge opportunity for sub 1 cent transaction fees when buying a soda at a vending machine or at small shops.
The vast majority of people don't understand doing taxes for day trading.
There are plenty of cryptocurrencies with very low transaction fees. That doesn't fix the issue.
Well that's new. There was no "BCH attack" that drove up the fees.
BTC simply couldn't keep up with the demand and the fomo that made people pay ridiculous fees to not miss out on the crazy pump.
Don’t forget buying bitcoin’s also has transaction fees and you get real volatility, so it needs very low fees not just seemingly reasonable ones.
Anyway, a 10+cent transaction fee is not really a downside as long as it’s competitive, but it does reduce the incentives for adoption.