You are comingling two transactions to get the result you want. This is what the IRS is saying as well. When you RECEIVE an airdrop, in order to calculate the gain. it is zero basis, and then you include the entire amount in income. When you SELL the currency your basis is the FMV at the time you recieved it. Basis is calculated on each transaction. Basis when you receive it is not the same as the basis calculation when you sell it. Ask yourself this question, is the IRS going to let you earn income via an airdrop and not tax you. The answer is no. The IRS says the same thing I did just now. if you look at question 23 it answers what to do when it is received. 24 is what to do when you sell.
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Gottt it. 
Perrrfect.
Hello!
After watching the course, i have some specific questions regarding staking rewards.
Do I need to report unclaimed staking profits? I.e. I have some tokens staked, and I can claim the
staking rewards at any time. and I am the only one who can claim these profits. do I need to report them as they accrue? or only when I claim them to my wallet?
My thinking is that even though the rewards are not in my wallet, they are effectively mine. So i wasnāt sure how would the IRS treat that.
You mentioned that we need to report staking profits as interest.
Letās say I have some token TKN from staking profits. I assume I need to report itās USD value as interest.
a few questions here:
- When should the USD value be determined? (when I claim it? In the end of year?)
- What happens if the next year that TKN drops in value? do I get a refund? how do I report that?
- Assuming I donāt get a refund if TKN drops, I may want to hedge against that by selling TKN in the USD amount I owe in taxes.
when I do that, is this needs to be reported for capital gains? - How do I determine the USD value that TKN? Iām asking as some of my tokens are low-caps, that are traded against ETH.
can I just take the ETH USD value at the time of the transaction from etherscan?
Thank you very much!
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This is an awesome question.
Yes, you do need to report āunclaimedā staking rewards as ordinary income. The IRS uses the phrase ādomion and controlā to determine when you should report income. Once you have ādominion and controlā then you need to report the income.
You need to calculate the income to report from the time you received it, not at the end of the year. If you recieved the staking rewards in april then you need to report the value of the asset on the day that you received it.
If the token drops in value you donāt get a refund.
I am not sure about the āhedgeā described here.
Taking the value from Etherscan or any other reliable exchange is fine if you are consistent in the source of information that you use.
Again I am not sure about the āhedgeā you have described here, but great questions.
This is very helpful, thank you very much!
As we donāt get a refund, Iāll probably want to sell part of the token immediately so I can pay taxes in case the token drops to zero (i.e. iām trying to āhedgeā against the token loosing value)
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Hi, I am a German citizen (green card holder, permanent citizen) and we might plan on leaving the USA to go back to Germany for e.g. in Summer of this year. How do we handle tax for the tax year 2021? Do we need to file tax year in the usa?
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I love the course! It is very informative and simple to follow along!
Question: Say someone makes 50K in profit trading within a given year and that profit remains in USDT well past that year only to be turned into USD after a 12 month period.
Is that profit a long term capital gain (because it took more than 12 months to go from USD to USD), or a short term capital gain ( because it took less than a year to go from USD to USDT)?
Thanks in advance
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You may have a filing requirement depending on how long you have been in the states. Its called the āsubstantial presence testā. Set up a 30 min consult and I should be able to tell you yes or no after a few questions.
David,
Would you agree that the absolute safest investment strategy is to approach all cryptocurrency trading with the idea that we need to price things out so that expected margins factor in a 37% tax on gains? I just want to understand the āworst-caseā rules of the game before getting into it.
Does IRS treat the appreciation/depreciation/use of a platform token differently from, say, that of a security token vs. a transaction token vs. utility token?
If I author a smart contract that requires users to pay for a service related to that smart contract, could I ever be liable for tax on the aggregate of gas payments associated with calls to my contract? Conversely, can I deduct the cost of gas associated with a call I make to any given contract if that call is correlated to a business activity?
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Hi @DKSCPA,
I currently reside in Malaysia where cryptocurrency is not recognized as an asset nor is it illegal as our Securities Commission regulate it.
As Iāve done my research and according to recent news, only active trading of crypto need to declare their tax, but I only invest and stake for the past few months.
Any tips on what questions to ask or what I should know beforehand going to tax consultants in my local area?
Thank you and much appreciated.
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Hi, so I hold some Eth and swapped it with some Alt coins which I swapped with other coins, I also hold virtual land but I havenāt sold to make a profit yet as in I did not buy an altcoin and then sell it when the price is raised. Also, I am not employed currently, do I have to report this or do I only have to report it when I make a gain by selling something?
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Hi David,
There was nothing in the course about inheriting digital assets. Letās say a deceased parent leaves their unreported hardware wallet to their child. In terms of reporting, would this work the same way as an airdrop?
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Hello David,
So the long term gain is added to your regular income to determine where a person is on the long term gain taxation. Thus, if someone makes over $80K taxable in their work (w-2) income, then the long term capital gains are 15% ā¦ There wouldnāt be any zero interest part because they make over the $80K (married amount of course). Am I understanding this correctly?
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Sounds like you have a few transactions that need reporting. Try one of the crypto tax services. Most are reasonably priced.
Awesome Question. No this would fall under the rules related to inheritance and the recipient would get a step up in basis to the value at time of death. Usually a tax-free windfall.
Yes. If you are over 80k in taxable income no part would fall into the 0% bucket. Still favorable but not 0%.
Let me check on that. Maybe set up a 15 min meeting to discuss.
I think Iām a bit late on your question. Those some good ones worth discussion. Letās schedule a time to chat!
I wanted to make sure I responded to your question. The time is calculated between each token so you would have a short term due to the time frame between the USDT and the other coins.
Generally, as business people we donāt want tax implications to drive decisions but they are always a factor. You should factor is taxation on gains but I am not sure that it should be the deciding factor because you cant change it. you are going to pay some tax regardless so just make as much as possible and have plenty of pie to share with uncle samā¦
The IRS does not differentiate between tokens. If it is a āvirtual Currencyā they receive the same treatment. This may change in the future but for the time being they are all treated the same.
While not legal advise I would say that you 100% should be paying tax on the income received from charging customers a fee to use your service. That is taxable income. Great questions and thank you!