Investors Face Hefty Taxes on Cryptocurrency Purchases 4 227

Lately, it feels like there’s never any good news to come out of the crypto community. And the rollercoaster ride for so many US investors is about to take another dramatic drop. The latest monkey wrench in the works comes in the shape of the taxman, with the IRS enforcing taxes on cryptocurrency purchases.

The Internal Revenue Service announced that all goods bought using Bitcoin, or any other digital currency, would be taxed as capital gains. What does this mean for crypto owners? That if they bought or sold anything that might have capital gains using cryptocurrency, they will have to report them to the IRS.

But What About the Volatility?

Once again, the pesky little issue of price volatility raises its ugly head. How, for example, is it possible to calculate taxes owed on a past purchase, when Bitcoin value went from less than a dollar in 2010 to just shy of $20,000 at the end of last year, and back down to around $8,000, at latest check?

The taxman is not taking these fluctuations into account. And unwitting investors are exposed to tax bills that their digital stashes can no longer cover.

Taxes on Cryptocurrency Purchases

Earlier this week, a Reddit user posted an entry entitled “I just discovered that I owe the IRS $50k that I don’t have, because I traded in cryptos. Am I fu**ed?” Which sparked a flurry of nerves and backlash within the crypto community.

The contributor reported a tax liability of $50,000 on some trades he had carried out with $120,000 of Bitcoin — which now has a value hovering around $30,000. “I feel like I might have accidentally ruined my life because I didn’t know about the taxes,” he lamented.

Not Operating Outside the Tax Authorities

Many cryptocurrency investors believe that the system operates without government and financial institution oversight. This, up until now at least, may be true. However, US tax authorities still regard cryptocurrency as a property and not a currency. This means that many investors may face hefty taxes on cryptocurrency purchases and exchanges. And some other nasty surprises, as well.

To be fair, it’s currently a little confusing, seeing as crypto-brokers don’t legally have to issue 1099 disclosure forms on digital currencies. These are the forms used to report any income other than wages or bonuses.

But there’s a caveat. Individuals are still responsible for reporting any and all gains to the IRS. And in the cryptocurrency community, individuals are responsible for their own worth.

Court Intervention

Last November, Bitcoin trading platform Coinbase, was ordered to turn over information on all accounts worth $20,000 or more, during 2013 to 2015. The ruling was concluded by a US district court judge in California.

This case came about after the IRS found that only around 800 taxpayers had claimed gains made with Bitcoin during that time. The Coinbase agreement only affects some 10,000 accounts, though, and does not extend to the original 480,000 accounts first requested by the IRS.

The lesson? Not reporting gains to the IRS is tax evasion. And tax evasion isn’t good.

It Gets Worse

The ruling of capital gains is not the only complication when it comes to cryptocurrency investors and the IRS. It’s a lot more complicated than that. Say an investor sells some cryptocurrency after a year of holding it. The profits would be considered long-term capital gains. Moreover, losses are not deductible against any future tax years to come.

The problem is that many accountants don’t understand, or aren’t willing, to get to grips with taxes on cryptocurrency purchases.

Investors are unaware that there are so many ways in which the IRS can come back to bite them. A simple transaction, such as using Bitcoin to buy Ethereum or Litecoin, for example, is taxable.

Moreover, when you use your cryptocurrency to buy something, it’s not only sales tax that you’re liable for. You’re purchasing a property that is denominated in dollars and if you then exchange that, there is a tax liability. So, be sure to keep it in mind before you forget to declare your earnings.

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Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.


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Kenya Looks to Blockchain for Affordable Housing Project 9 380

The “Silicon Savannah” is moving deeper in direction of tech. The Kenyan government has announced a plan to manage the property allocation and funding of 500,000 affordable housing units with blockchain technology.

The units, which the government aims to build by 2022, will be set aside for households with an annual income below 100,000 Kenyan Shillings, about $990 USD. The World Bank estimates Kenya’s gross national income per capita at $1,290, according to Business Daily.

Blockchain will help ensure that the affordable housing is in fact going to those who fall below the average income bracket. Land title fraud has caused problems for Kenyans, as land grabbers target homes and even schools for illegal sales and development. Blockchain’s ability to store verifiable proof of title could help safeguard against fraudsters.

“Kenya will use blockchain technology to ensure the rightful owners live in government funded housing projects,” said Principal Secretary of Housing and Urban Development Charles Hinga, speaking with the World Bank on Monday.

Hinga said the plan will be financed by the National Housing Fund, which will raise over $59.5 million per month to get the project underway. But Cabinet Secretary for Transport, Infrastructure, Housing and Urban Development James Macharia said it will take $31.7 billion to build a million homes, each of which will cost between $3,000 and $30,000. Macharia called for support from private sector financing.

Under the financing plan, working Kenyans will contribute 1.5 percent of their salary, which will be matched by their employers. “On affordable housing one should not spend more than 30% of their disposable income for housing,” Hinga tweeted yesterday. “Anything above 30% is not affordable.”

A Trustless Relationship Between People and Government

The initiative represents a considerable push to solve housing and title problems for the nation’s lower income families. But how will the government decide to whom the housing units will go? With so much talk about financing underway, people are already calling on the government to outline a plan for how they’ll distribute the affordable housing units.

The government will need to deliver the housing projects in a time when, Hinga acknowledges, the public is skeptical. Earlier this year $78 million went missing in a corruption scandal involving the National Youth Services. Where there is little trust between the people and their government, Kenya hopes to establish transparency through the blockchain’s distributed ledger system.

Kenya’s Move Toward Tech

In March, Kenya’s Ministry of Information, Communications and Technology appointed a blockchain taskforce to explore the ways the nation could use blockchain technology in the public and private sectors. They called it the Distributed Ledgers and Artificial Intelligence taskforce, and by September its chairman, Bitange Ndemo, was calling on the government to tokenize the economy.

Ndemo also proposed government implementation of blockchain to certify the authenticity of retail goods, so consumers can be sure of where their food is coming from, for example.

Governor of Kenya’s central bank Patrick Njoroge has also voiced support for the use of blockchain technology to strengthen service delivery, although he’s opposed the use of tokens and digital currencies.

But the affordable housing initiative could be the Kenyan government’s first real world implementation of the blockchain.

There’s an Inflatable ‘Bitcoin Rat’ Staring Down the Fed 91 1418

Someone has put a giant inflatable rat outside the Federal Reserve Bank in New York.

It’s covered in Bitcoin code, printed in rainbow colors, and is apparently a piece of installation art aimed at subverting the federal institution that controls the US dollar. Or is it pale, puffed-up pariah a commentary on Bitcoin bros themselves? Or does it have something to do with Warren Buffett, who earlier this year called Bitcoin “rat poison squared”? According to CoinDesk, who first reported on the inflatable rat, the meaning is intentionally ambiguous.

The artist behind the puzzling prank is Nelson Saiers. He describes his own work as “mystifying” and “singularly original”, notwithstanding the long history of rats being inflated as protests or used as economic and political icons in art and entertainment around the world.

“It’s art, so I hope they’re entertained by it,” he said, apparently implying that art is entertainment. “It’s informative, I hope people will learn [and] I’m hoping it’ll at least help people understand bitcoin better and be kind of faithful to what Satoshi would have wanted,” he added, citing the mysterious pseudonym of Bitcoin’s founder with a touch of reverence.

A $50 Million Artist

Saiers, a phD in theoretical mathematics, was a hedge fund manager who did that thing where you give up all the money to chase your dream of being an artist.

His financial experience includes a stint as managing director at Deutsche Bank’s prop trading desk, before becoming CIO of Saiers Capital, the hedge fund that bears his name. His creative career gives credence to the theory that working as an artist is more and more a privilege of the very wealthy.

CNBC estimated Saiers’s wealth to be around $50 million at the time of he departed from the financial industry to pick up his paintbrushes.

The Rat Joins a Tradition of Sculpture-as-Commentary in FiDi

The Bitcoin rat, which stands on Maiden Lane, isn’t the first pop up sculpture to grace Manhattan’s financial district. Last year, Kristen Visbal’s 50 inch bronze ‘Fearless Girl’ statue made waves by staring down the famous ‘Charging Bull’, to the outrage of ‘Charging Bull’ sculptor Arturo Di Modica. The 3.5 ton ‘Charging Bull’ itself was left on Wall Street in the middle of the night when Di Modica originally created it, obstructing traffic and drawing the curiosity of passers by.

When Saiers placed the Bitcoin rat, he initially set it up on private property and was promptly ushered off by security guards, who he says were good natured about the situation. He expects the sculpture to be more temporary than the aforementioned Wall Street bronzes, and will probably only be around for a few days.

A Critique of the 2008 Bailouts

The placement of the rat on Maiden Lane seems to be no accident, but rather a reference to the Maiden Lane Transactions, more commonly known as that time when the Fed bailed out the big banks after they all caused the 2008 market crash. The Bitcoin crowd’s antipathy towards the Fed and the big banks is palpable in Sairs’s rat sculpture, and while a more specific meaning eludes, perhaps the success of the piece depends upon its ability to start conversations about the state of finance.

We’ll leave it to the viewers to decide who’s the rat—the Federal Reserve, or Bitcoin itself—and what that means for the future of currencies.

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