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Comment by throwaway2331 | Hacker News Reader

Apologies if this is off-topic, but I have a question that may be up your alley:

Are crypto taxes recursive?

For example: Person A gets paid $1,000 BUSD for services rendered to company B. The transaction/movement of crypto from Company B to Person A is treated as a transfer of property and is taxed at 10% for short-term capital gains tax of $100.

Assume Person A wishes to pay these taxes using crpyto, and then sells/swaps $100 BUSD for USD (with no transaction fees). Would this then constitute another transfer of property that would then be taxed another 10%?

I've been having some trouble wrapping my head around how it would like for a person to live a crypto-only life.

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Wait, your example seems a bit weird.

If person A gets paid $1,000 BUSD for services rendered to company B, that's not transfer of property, that's definitely income and taxed as income at the appropriate income tax rate no matter if the compensation for services rendered was paid out in USD, BUSD, gold, goats or other services (e.g. barter of services according to https://www.irs.gov/taxtopics/tc420) - in all non-USD cases, you just use the USD value of the non-USD-thing, which should be simple for stablecoins. On the other hand, if BUSD is stable and does not grow in value, then short-term capital tax does not apply, since there are no capital gains.

If person A was paid 1000 randomcoin that was worth $1000 at the time of payment, and by the time they needed to sell some of them to pay taxes they had doubled in value, then yes, they would have to pay 10% of the value increase as well. That sale/capital gains trigger would likely be in the next tax period, so the "recursive" tax would be due a year later than the "initial" tax.

in the US the transfers you describe are not capital gains (either short of long term). The first, payment for services, is just income of $1k. The second, swapping BUSD for USD, is not income, nor cap gains, so has no tax applied.

Capital gain is difference between buy and sell prices in country's currency. $1000 BUSD are always worth $1000 USD (assuming you're taking about stablecoins). So there's no gain to tax.

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