Paying an invoice? Never considered that!
Tax deductible transaction? With crypto huh, never asked!
Receiving crypto for services rendered? What do you mean using crypto for what it was designed for I’m so confused!
The asset doesnt matter, only the nature of the transaction matters
Who would you need to hear it from?
If you got paid and liquidated immediately, the price change was not worth mentioning and the income tax is.
If you bought crypto to immediately pay for a server, the price change is not worth mentioning because it likely didn’t change more than a fraction of a percent and the expense is worth mentioning.
Current law factors that in, because current law doesn't factor in what asset was used for payment.
With rise of stablecoins like DAI and USDC where equally large volumes are being used, focusing exclusively on capital gain/loss is even more misguided.
But to your point, RSUs - unless you did an 83b election - have a bigger income tax component, especially in your sell immediately example. Which reinforces my point that the prioritization is wrong and that focusing exclusively on capital gain/loss is misguided. This time I’ll italicize exclusively, for emphasis, lest that somehow gets lost in the message.
So the assumption is flawed. The priorities in reporting are flawed.
Its the borrower that amplifies their risk.
But if a borrower collateralizes well enough it is much more tax efficient for them.
These are solved problems for 2 years.
And yes, that is an additional example about why assuming there is a capital gain or loss merely from seeing the flow of crypto through a Coinbase account is misguided.
Could be just a tax deductible interest payment to service a business debt in a sole proprietorship. Its simply not up to Coinbase to determine or the IRS to assume either.
Coinbase is getting better about it if you use their own products for staking and earning. (1099-Misc, 1099-K). But they are still doing it wrong for people that use crypto properly and keep personal off-exchange custody of assets.
Congress could easily delegate additional discretion to the IRS, they just haven't yet as they have been unprepared for this outcome.
When you look at the universe of assets, they either exist in walled gardens (brokerage accounts that there is no expectation to withdraw from, or that you simply can't withdraw from), are not easily divisible or have separate denominations if they were, or are impractical to transport (a barrel of oil, other spot commodities), or are not fungible (art, collectibles, barter assets).
All crypto assets transcend and overlap with the fungibility of every other asset class all at once, while being able to function as non-fungible assets if desired.
Congress has considered this matter already, and they have chosen not to treat cryptocurrency as a domestic currency by refusing to consider bills that would classify cryptocurrency as a domestic currency.
Non-domestic currency (i.e., foreign currency) is treated as an asset under US tax law, and as a currency not issued by the US government, cryptocurrency is a non-domestic currency and is thus subject to the same tax treatment.
All of that other stuff you said is irrelevant.
The nature of the transaction is irrelevant to (2).
If you pay an invoice with bitcoins that have experienced capital gains, you have to pay capital gains tax.
>Tax deductible transaction? With crypto huh, never asked!
What is a tax deductible transaction? If you donate bitcoins to a charity by sending the bitcoins to the charity's bitcoin address that is indeed fully tax deductible and you don't need to pay capital gains tax (and you get an income tax deduction of the entire value). But is coinbase really trying to get you to pay capital gains tax when you simply send bitcoins from one address to another? That doesn't make sense.
>Receiving crypto for services rendered?
How does receiving crypto have anything do do with capital gains? Capital gains come into play only when you get rid of the crypto.
>The asset doesnt matter, only the nature of the transaction matters
Yes, and any time you exchange cryptocurrencies for something else (dollars, goods, services) that is a capital gains relevant transaction.
Also could be true you were part of a data leak from one of the exchanges. The IRS actively pursues collecting this data, and I've had some very interesting conversations with one of the contractors they use to help scan the Internet for such things.
If you were included in the mtgox leak, you probably got such a letter too.