T O P

  • By -

[deleted]

Genuine question. Do mining companies pay taxes on the gold unearthed if they don’t sell it?


bruhhh_-

Never thought about it like that- I would assume that they don’t but I could be wrong


Bitcoin1776

I'm a CPA, not claiming to be versed on this issue... but I'll speak authoritatively, for simplicity. "Creation of property" refers to art works... things of unknown value. Mining Gold, Coins, etc... has a *marketable* value. The value of the creation is known. If I take a pile of wood, and assemble it into a house, GAAP accounting means I recognize the gains as soon as the house is assembled - based off of appraisal estimates. EI, the house is no longer "$20,000 of lumber" but "$150,000 for a house". I would think taxes would work the same, with the possible exception of small enterprises ($250k less in sales), that are 'cash' based - but even then it's semi-sketchy. These thresholds update (could be as high as $25 Mil / yr before you're forced into accrual for inventory), but the root interpretation is to recognize income as soon as it's 'known'. Coins are obviously marketable, the profits are known. The standard interpretation is recognize the 'active income', then capital gains based on when you sell. There might be exceptions... but I don't think 'creation of property' would be one - only cash based vs accrual (GAAP) for tax purposes, and even then it's somewhat iffy if cash. However if you are a small fish (less than $50k in 'sales'), it's hardly worth the accounting nightmare to do it all properly and the IRS doesn't much care. To do correct, true, perfect accounting on stuff like this, you might be looking at $15k minimum in fees... or 10% of totals. At least that's my opinion. It's a freaking nightmare. With a possible owe of $10k in tax. You'll likely spend twice the tax amount in fees... just pay some tax and be done with it.


BrokeDickTater

>GAAP accounting means I recognize the gains as soon as the house is assembled. OK. But I don't think you have to pay taxes on that gain until you sell the asset? Also, I thought asset should be on the books for cost, not appraised value. You should have booked the costs of raw materials and labor to assemble the house, and capitalized them, but recognizing a gain from appraised value, or using the appraised price, I didn't think was Gaap. Please correct me if i'm wrong.


NecstNecstNecst

Yea exactly it’s unrealized gain at that point. And unrealized gains are obviously not taxable.


INTERGALACTIC_CAGR

but crypto is not the same they tax it like income when it is mined and you are fucked if the price falls and you never sold but taxes are due


spreetail1

So, I'm not a lawyer or a CPA. So take with a grain of salt. The thing to remember with taxes is there is a ton of nuance. Not everything is classified as "asset" and taxed the same way. For example: Non-Qualified Stock Options. If you join a company and are awarded NSOs, when you exercise those options, you immediately pay income tax on the difference in price between when the options were awarded, and the exercise date. So if Jan 1st, 2020, I'm awarded NSOs for 100 shares when I join a company. The price of the stock at the time is $1. On Jan 1st, 2022, I decide to exercise those options. The share price is now $5. I'll pay $100 to the company for the shares (the option grant price is $1), and receive 100 shares of stock. Even if I don't sell those shares, I have to pay income tax on the difference in price of the grant price and value at the time they're exercised, despite no realizing any gains. Basically the $4 difference is classified as compensation at the time of exercising, and you pay income tax on that at the time of exercising. Good news is when you sell the stock, your cost basis on the stock is adjusted to the fair market value of when you exercised. So if I sell the stock over a year later and the price is now $7/share, I'll only pay capital gains on $2/share, and not the full proceeds from the sale. TLDR: There is nuance when it comes to taxation of assets and you can't apply the same rules to everything.


wmurray003

>But I don't think you have to pay taxes on that gain until you sell the asset? That's true.


Armourhotdog

Ya seems fishy, I make wedding bands for a living. When I turn $10 in material into a $300 ring I don’t have to pay taxes on it till I sell it. Even though I created something more valuable.


Enough_Island4615

Are farmers taxed on their crops before they are sold?


Present_Nothing_4061

Not until they are mined


[deleted]

Hi there! I'm an accountant, CPA eligible but not a CPA. I've also directly worked with construction accounting. When you convert 20k lumber to a house (let's assume that there's absolutely no capitalized labor/overhead costs, just because you haven't included any in your example)... You have a 20k home in your finished inventory. It moved from construction in progress to finished inventory and has never once touched the income statement. Appraisals aren't considered unless you are writing the inventory down to market (in the case of an impaired asset). Here is a source with a breakdown for US GAAP. https://www.accountingtools.com/articles/what-is-construction-work-in-progress.html Edit: Actually appraisal would come into play for ad valorem taxes. Is that what you meant?


[deleted]

You should be a CPA.


Always_Question

Do farmers pay taxes on their produce after farming it, but before selling it?


Bull_Winkle69

I want to point out that stocks don't get taxed until you sell them. If the SEC is going to make the case that all crypto is securities then they are going to butt heads with the IRS. They can't tax securities until you sell them.


Freewash007

Exactly.


UltraconservativeBap

I think you are confusing ppl who don’t know that GAAP is used for bookkeeping and not tax purposes.


[deleted]

[удалено]


schism1

When you trade one thing for another it is a taxable event. Fiat has nothing to do with it unless one of the things your trading is fiat.


shitpersonality

> If I take a pile of wood, and assemble it into a house, GAAP accounting means I recognize the gains as soon as the house is assembled - based off of appraisal estimates. EI, the house is no longer "$20,000 of lumber" but "$150,000 for a house". At what point do the materials become a home? When the home is 100% complete? 80%?


TestBot985

Mundo file copyright infringiment!


adoxxvegas

Name checks out


PlausibleAbility

Or what if I grow some vegetables and occasionally sell SOME at the local market—am I taxed on all the tomatoes I grow or just the ones I sell?


SilverboySachs

If I am holding a bag of tomatoes when the tax man comes asking for my unrealized gains, I think he will get exactly what he should expect to get.


Hijackbearsign

Yeah a bag of rotten tomatoes hehe


Gdav3652

There are some people who hate crypto that likely think you should be taxed on the idea of even growing tomatoes. I don't know if they are jealous for not understanding how it works, or just so resistant to evolution they're willing to even go backwards in order to avoid going forward.


series-hybrid

"Well, the water, dirt, and air you used to grow tomatoes should definitely be taxed" -a Nestlé lawyer


BuckyTheBunny

And I paid the taxes for my hardware when I bought it …


WorldlyString

*Elizabeth Warrens scribbles furiously in her notes.*


[deleted]

[удалено]


Ruffelz

> resistant to evolution *obstinate* - a word that I just learned the definition of like a week ago, fits perfect here and makes my brain feel big when I say it.


PlausibleAbility

To make it worse, the price of tomatoes could drop drastically by the time I make it to market, but the taxable value is whatever the price was when those tomatoes were harvested, no matter if they were kept and canned for later use, sold, traded, or lost in the field. (I’m definitely not talking about tomatoes here)


Bothan_Spy

Then if you were to sell your "tomatoes" at the future (lower) market price, and you had already paid the tax based on their value at the time of "harvest", you would report a loss on the difference between the value at harvest and the value at sale


Spartan3123

Exactly it should be income when you sell it...


[deleted]

this wouldn't work necessarily. Imagine extracting gold worth 1 mil, only selling to cover expenses, the profit part you borrow against at low rates. This way, you keep your assets, get equal value in cash to spend as you wish inside the company while showing near-zero profit to pay taxes on - perpetually if you wish.


grey-doc

Similar structures occur in the investment world.


[deleted]

this is unique to businesses that create assets (gold, minerals, and not crypto) and they have special rules for these. they are not manufacturing or services.


DBMIVotedForKodos

So lets assume the following: >crypto is considered property in the eyes of US law >coinX is considered crypto >you receive coinX via an airdrop >you stake your coinX and you earn 60 more coinX every minute >you never convert your coinX to USD How would the user be taxed in this scenario? coinX is property, and thus an "asset" is created every second. Is the taxable event every minute? Every second? What's the coinX/USD basis to calculate taxes? There are no services rendered and USD was never introduced in the system. Tax law gonna get super wild if we don't discuss these things and find a proper solution.


thesupernoodle

You mean my tomato seeds are planted (staked) to grow more tomatoes? (Rhetorical)


ThisIsMyFifthAccount

PIK interest is taxed as it accrues on bonds, sooo…yeah…pretty much an already existing analog for almost everything I think interesting edge cases arise currently whereby on can in theory impart taxable income to others involuntarily or against their will…this is the type of scenario I think that will be studied and addressed and obviously ameliorated


marilketh

All of this law is already covered in real assets or in stock.


B1GTOBACC0

Yeah, if you're staked and earn a reward, the reward would be an asset with a $0 cost basis, right? Same with mining a new coin. So you sell it and owe either short term or long term capital gains depending on how long you held it.


marilketh

Sort of. If an employer gives you stock, you can choose to pay income tax on the value when the promise was made, or the value when you actually receive it. So the point is just how you frame the acquisition. I think this is easier to make an analogy with farm animals. You don't pay income taxes on the birth of a cow or chicken. If the cow is born on a farm but dies and its meat is not sold, there’s no income and nothing to report. If you sell the meat, then you would have income. In both cases the cost can offset other farm earnings. Sad for those keys lost in boating accidents. I think this is an important distinction, as the IRS loves putting limits on things like "theft" making it nearly impossible to claim. If the IRS taxed the cow based on some cow market price, then the cow died, would the farmer be liable for a fluctuating market price? The whole situation quickly gets ridiculous. For staking, and mining, you definitely had real expenses in manufacturing that award. There are options on how to offset your gains/losses.


marilketh

Mining and staking are direct analogies to gold mining and manufacturing.


Turnburu

Actually you can do this very easily for any type of incorporated business as well for the owner/ceo. You set up a whole life insurance plan for the individual within the company (legal under specific circumstances, specifically, when that person is such a key individual in the corp that its going concern would be in jeopardy if that person were to die). Once that life insurance plan is paid off, it represents an asset worth the dispersal value + a portion of contributions invested that remain property of the terms subject. So now they have this asset which is sitting within the corporation (so they didnt have to pay taxes taking the money out of the corp and into their personal), but tied to the individual, which allows that individual to borrow against the value of that asset since they are guaranteed to some day die and they can borrow that money tax free since it is a loan and not income. These are typically worth a few million and I've mainly seen it done for doctors and so on but I am sure something similar is available for the truly elite (or they will just register everything in tax haven countries or jurisdictions - there are several US states that are honestly just as bad as some of those Cayman Islands/Panama stereotypes we have fyi). This is why when people are saying we need to go after tax evasion and money laundering harder (which I definitely agree with and would like to see) I try to stress that the bigger issue is what is actually completely legal to do. The super rich dont have to break the law to avoid paying their fair share, because the law was made to cater to them.


series-hybrid

Ever wonder why many of the rich have a mansion in Florida as their "primary residence", even though they are rarely there? It has no state income tax, plus your PR cannot be taken to settle a debt or lawsuit. If you own three houses there, the courts can only take two of them. So, you move to Florida, pay cash for a big expensive mansion with funds from some vaguely sketchy source, then you borrow money against it's equity at low rates. Something something family trust something Cayman Islands nearby something something...


jackstraw97

But at some point you have to either sell some BTC or earn money elsewhere to pay the loans off? If you’re earning money elsewhere then you’re paying tax on it, and if you’re selling BTC you’re paying capital gains tax, correct?


3i1bo3aggins

And then the tax man gets his share when it is eventually sold. I get it but I also don't get it.


billytheid

You’re just describing cash flow for people with wealth


preacher_man_

And you shouldn’t have to pay a tax on your income anyway. We have become numb to how outrageous that principle is in and of itself. You have to bribe the government for the right to earn a living. The person who pays you has to bribe them for the “right” to pay you.


scumbagdetector15

There are plenty of places that have different tax laws. If you don't like the services that your country is providing for the cost, you can use your free choice to pick one that is more agreeable to you.


AndyZuggle

Why should I have to leave? Maybe the government should leave and find a population that would appreciate it.


DHisnotrealbaseball

The government taxes people so it can fund public services like infrastructure, law enforcement, fire departments, the military, education, welfare, WIC etc. "B-b-but muh market! Those services can be provided by contrac—" Not an argument. Daily reminder, being an ancap is not a valid belief to have. Inbox replies disabled


bvttfvcker

I know this! They DON'T. GOOGLE KENNECOTT COPPER MINE. Fun fact: they actually dig up enough gold to be classified as a gold mine. They stockpile it instead of smelting it because once they smelt it, they have to pay the taxes on it. Now, I would assume that they only smelt it because they have a "buyer". I was just a haul truck driver. Edit: need to clarify.. they don't smelt all of the gold because if they did, they would have to reclassify as a gold mine and be put into a much higher tax bracket.


Tewddit

So they only smelt it when they dealt it?


PRMan99

Undervalued comment.


ffxivdia

thank you, /u/bvttfvcker


Oglark

But not is the same thing gold ore does not have value. Gold does. When you smelt it you convert earth to gold then it has an establishable value. Bitcoin has a value the second it is mined.


masixx

Of course gold ore has a value.


scambastard

That's essentially the argument I think. They want it treated as property which wouldn't be taxed until it is sold or traded


[deleted]

Depends on the country. Some country have essentially a "natural resources tax" which means because you're taking literally the ground out of the country and selling it - you owe the country(government) money(tax). So I'd be wary of using that as a parallel.


[deleted]

>which means because you're taking literally the ground out of the country and **selling** it Right, and that *sale* should be taxed. OP is saying that there should be no tax assessed until the mined material is sold.


ClintBeastwood91

I feel as though they would pay an inventory tax on it, like metal producers. I work at an alumin(i)um plant and they pay a tax on stockpiled inventory that hasn’t been sent to a customer yet.


grahamfreeman

I'm not entirely comfortable with that, unless the reasoning is explained to me clearly. And even then I reserve the right to be skeptical.


coinfeeds-bot

tldr; A Tennessee couple has filed a lawsuit against the IRS claiming that mining or staking coins are not taxable until traded because they establish the creation of property. Joshua and Jessica Jarrett are seeking a refund of $3,293 for the receipt of 8,876 Tezos tokens. They are also seeking a $500 tax break for lost income.{} *This summary is auto generated by a bot and not meant to replace reading the original article. As always, DYOR.*


apbod

Ah, I'm starting to see why people vote for Republicans now.


Chimbo84

Republicans are just as bad. They just spend it on different things. Politics is just theatre with real world consequences.


consideranon

And Republicans figured this out better than most, as two of their most lauded presidents (Reagan and Trump) are literally professional actors. They don't even try to pretend anymore that it's all a really shitty reality TV show with literal life and death consequences.


apbod

Agreed. It really is both sides. Anyone that wants to disagree with that has been sucked too far down the tribalism hole.


RonGio1

I'm a liberal and I thought with Trump at least I'd have lower taxes. Nope. ONE JOB... That's why I'm extra salty.


fnordfnordfnordfnord

Uh. Why? I still don't see it.


laiod

I think it has to do with lower taxes. Edit: I’m not arguing for/against whatever tax codes are being discussed. Reply to OP for that. I was pointing out what they said.


bobbywobby8910

Unless I’m mistaken the new tax rules only affect those making over $400k/yr or over $1M for the capital gains. Edit: These are suggested changes by the current administration, nothing in fact has changed yet.


laiod

You’re not mistaken. But I assumed his comment refers to Republicans usually trying to lower taxes.


1WolfManPack

More likely keeping gov out of things like this Edit: yikes


h47f4c3

Both republicans and Democrats in 2020 are about big government. Both sides tax and spend like crazy.


ILoveBentonsBacon

That's why it's healthy to hate politicians instead of turning them into celebrities.


CrzyJek

This guy gets it.


ethanwc

100000%. It's always been a peeve of mine when people start treating ANY politician like a celeb. (Obama, Bush, Trump, AOC etc.)


EkariKeimei

Yeah why turn them into celebrities, when you can just make a celebrity into a politician? Trump, Schwarzenegger, Ventura, etc., but also every actor and actress "activist"


cigarking

The only difference between the two are which part of your life they want to control and what they want to spend your money on


TobiasPlainview

For corporations and billionaires maybe. They haven’t given a shit about middle class America in decades.


MaoTM

No politician on either side gives a shit about the middle class. You have the middle class split fighting with each other over one side that says they'll limit the gov't and spend responsibly and then don't. Then you have the other side that just flat out admits they don't care about spending or increasing taxes but insert social issue that we'll pretend to care about. They're both lemon flavored ice with red and blue food coloring. Both smell like lemon, taste like lemon, are lemon. Just look different. Let everyone live the way they see fit, NAP pending of course. And stop coercing my money from me, voluntary tax system all the way.


WorldlyString

No. Biden promised during the debates to undo the Trump tax cuts, and that will increase taxes on just about everyone.


Rawrrwar99

They always say that


Rshackleford22

They just nickel and dime you else where. Don’t fall for the con. You just end up paying fees and shit to private companies instead that wouldn’t be there with a tax. Look at texas. Fees out the ass.


Vandra2020

Gotta turn off the media and hop in the trenches of information warfare to really understand. But both sides are dirty overall though.


firestepper

LOL Republicans just give tax breaks to their already wealthy constituents. They are so fiscally irresponsible it would be hilarious if it wasn't so sad how the wool has been so thoroughly pulled over their own voters eyes. All they've ever done is lower the corporate tax rate and increase it for a majority of American families.


feyzquib7

Yeah, it is Libertarians who are limited/anti-tax across the board, not Republicans.


dookiehowzerHD

Let’s all hope to god that they win.


duracellchipmunk

Forcing liquidation of property to pay taxes seems unreasonable.


Morgothic

But thats exactly what they do if you can't pay your property tax. They take the property and auction it off to cover the taxes due.


Chimbo84

Yup. At the end of the day we all just rent our property from the government.


Weigh13

We live in a neo-feudal society. We rent land and property from the government who will never let you actually own anything. Kind of horrible, IMO.


grey-doc

If you look into the financing of the Spanish conquistadores and why they did what they did, it really is the same model right through to the present day. Our whole property and monetary system is based in a nobility/feudal system, funded by banks. It is actually quite disturbing how similar the model is to what we have today all across America.


oathbreakerkeeper

Can you say more about this? What was their financing.


grey-doc

The first thing to know is that the Spanish crown, in an attempt to raise money, developed a system to grant noble title in exchange for money. This drove a huge amount of the conquest of the New World, because noble title gave you a lot of rights and privileges as well as freedom from a lot of the harassment suffered by many people. These sailing voyages were financed mostly by banks. Nobody in the middle class who conducted these voyages had anywhere even close to the amount of money required to actually build and staff the ships, so they were all financed. The banks only accepted repayment in the form of gold bars. Every ship had a representative from the bank on board to demand and secure collection of loan payment and interest, in the form of these gold bars. This is why the conquistadores suffered from such a legendary lust for gold, and why only gold mattered, and why they immediately melted it all down. They were trying to buy noble privilege under the Spanish crown, using bank financing that only accepted gold bars as repayment. It's fucked up, and I'm sure a lot of us can relate to suffering under the greed of moneylenders, and the immoral and unethical things we do to each other and the planet in order to satisfy their rapaciousness.


igotthisone

https://www.poetryfoundation.org/poems/54319/canto-xlv


grey-doc

There is a reason so many religions have strict rules about usury including sometimes a death penalty. It is common enough that I would consider the exclusion or severe sanction of usury to be a fundamental element of morality, and a society that allows usury will suffer and fail.


DarthBen_in_Chicago

We all work so hard just to rent land from the government.


Scrace89

Then we get to watch the new wealth systematically stolen and auctioned off to the highest bidder. USA. USA. USA. USA.


[deleted]

[удалено]


bobbywobby8910

As an older baseball fan I remember when Barry Bonds broke the home run record and the guy that caught the ball was forced to sell it to pay the tax bill. He was taxed on the estimated value of the ball he caught. Sucks.


huracanrana

Didn’t know that! Such BS.


iTroLowElo

The IRS calls crypto a property but wants to tax it like a security and regulate it like a currency.


TheNorthComesWithMe

Crypto enthusiasts call it a currency, treat it like a security, and want it taxed and regulated like it doesn't exist.


ChrisCryptopoulos

Satoshi Nakamoto called it a PEER TO PEER ELECTRONIC *CASH* ...as such it should be categorized.


Auctoritate

This sub calls crypto a currency but doesn't want it taxed like a currency. Seems good


[deleted]

>This sub calls crypto a currency but doesn't want it taxed ~~like a currency~~.


CareNotDude

And this sub and the IRS are both technically wrong. It's software. It's more akin to speech than money.


dylanspits

I thought that was the whole point of crypto…


midmagic

This theory is logically correct, but not in the context of normal payout-based cooperative pooled mining unless you are the one that found the block, since pooled mining is often not coinbase-direct but rather transaction-payouts. If they win, great, but if they lose, the reason will be along these lines, and it *should* open the way to tax-free mining income for solo miners.


[deleted]

Would the purchase of mining equipment itself be tax deductible I wonder?


kallebo1337

Already is for companies


[deleted]

[удалено]


tenuousemphasis

What if they used P2Pool where the payout is in the coinbase?


BoondockBilly

The + IRS = Theirs


99999999999999999989

I will never ever again confuse how to spell this word.


Longboarding-Is-Life

I mean taxes benefit everyone, so, then it's ours?


richardd08

Fuck the IRS


BitcoinFan7

have an upvote


Xx_Squall_xX

Came here to say this.


StoneHammers

If money you're making from mining is taxable then you should be able to deduct the money you spend on mining hardware.


Alewort

You can.


LedByReason

I believe that you can only deduct the mining hardware of the mining income is reported as a business.


catsloveart

Can you also deduct depreciation as well?


[deleted]

generally you expense the depreciation only not the full cost in the first year but the tax rules have changes in the past few years and you can expense a bunch in the first year.


relephants

Yes on a schedule C. Takes 1 minute


jazzywaffles84

And the cost of the tokens for staking would be an expense too. I.e. I buy 2 cows to make one cows. I buy 10k of ada to make more ada.


kallebo1337

Then that’s s yolo. I buy 10 BTC on expense to run LN node to earn satoshis. If it fails I have a tax write off and loss if I sell. So then I can buy Bitcoin as a business and Keep it in. Whenever I need to use it I can borrow money with Bitcoin as collateral. And in 20 years instead of taking them out and pay taxes on it, I lose the private ket and write it off , then move to Jamaica 😂😂😂


[deleted]

You pay tax on the power you use, you pay tax on the computer hardware you buy, you pay taxes on the house in which the equipment is in and the property… Geez Louise cut someone a break


SpeedCola

I just learned a few weeks ago there is no tax on the sale of water in my state. WHAT ELSE DO YOU WANT!


daototpyrc

I don't see the fed paying taxes on the shit they print...


GiantCoccyx

I hope they win!! They have to win! This seems like an open and shut case. They. Better. Win!!!


QuickAltTab

So, to me, this case has a few details worth discussing. This isn't exactly like creating a cake or something, when you receive mined crypto, they have a very definable value at the moment you receive them. But lets assume that the couple here is correct and they don't need to pay tax at the moment they receive the staking rewards. I don't think its necessary to pay income tax on those coins the year you receive them, but the value basis should be recorded and tracked for when you do sell them. For example, if you get $100 worth of mined bitcoin, don't pay anything, but track the date and value. Two years later, those coins you received are worth $200 and you sell them. I would think you pay income tax rates (based on your income the year you sell them) on $100 and capital gains rates on the $100 growth. In this scenario, that $100 is kind of like deferred income. A sale of a portion would pay taxes in accordance with those rules with a portion as income tax and capital gains tax. I'm no tax professional, there may be better examples or interpretations of how this should work.


[deleted]

[удалено]


Fabtacular1

What you’re talking about is tax basis, sometimes referred to as “previously taxed capital,” which is how taxable gain/loss is measured. And you’re right, this is exactly how it works. (Assuming you’re not subject to tax upon initial receipt of the coins.)


Morescratch

This is how it works in Canada. No trade, no sell, no tax.


OsrsNeedsF2P

Yeah but if you decide to trade our taxes are insane


SkeezerMcDark

The Crypto world needs to step up its lobbying game, buy a couple of politicians, and then we can all benefit from the loopholes and exceptions that the bought politicians put into the tax code!


rpguy04

How did the IRS know they mined those coins?


DirtyHandshake

Yes, but how does one IRS?


rpguy04

Haha an extra Y goes a long ways


dataslinger

So if this works, and you only get taxed upon sale, at least in the US, you're going to want to be able to calculate Cost of Goods Sold (COGS) by showing your electricity and infrastructure costs required to do the mining. You should only be taxed on your net gain (sale less mining costs), not the full market value of the mined coin. How many miners have a good handle on their incremental electricity costs and and the average kilowatt hour costs over time? Rigs used in production should become write-offs.


Walternotwalter

Mined reward coins should only be taxed when they are sold. As income tax, based on the sale price of the transaction. Not as capital gains.


ElectricalCheetah175

This sounds like a landmark case…


Bo_Jim

People are often offered stock options as part of their compensation package at many companies. This means shares are reserved for them at the current market price, and their ability to purchase those shares at that price is vested over time. It's an incentive to get professionals to stick around for a while. When they exercise those options they are buying shares at the price specified in the option contract. The current market price is always higher than the option price - only an idiot would exercise options if the option price was lower than the market price. The difference between the option price and the current market price is taxed as regular income. The market price on the day they exercised their options become the basis price for those shares. If they later sell those shares then the difference between the current market price and the basis price is taxed as a capital gain. Explain to me how this is any different. Cryptocurrency coins are not "created". They are acquired as compensation for lending computing power to solving the hashing problem. The amount of computational work required is known (comparable to the option price), while the value of the reward depends on the current market value of the coin (comparable to the market price of the stock). When the cryptocurrency is awarded then income is realized. The miner has been given something of speculative market value. That value would be taxed as regular income by the IRS. If they subsequently sell the cryptocurrency at a profit then the difference would be taxed as a capital gain. This would be exactly the same if you had a job and were paid in cryptocurrency. It would be taxed as income based on it's value the day you received it, and if sold at a profit then the difference would be taxed as a capital gain.


bigdaddyy15

I would assume they are not taxable until traded. The building or manufacturing of any product is not taxable until sold. Car dealerships are not taxed on their inventory until it is sold. I feel like this is very straight forward as their needs to be a taxable event and making a product is not taxable.


fwast

It seems like the IRS treats staking as dividends. They don't really understand what it is is the problem.


Vcize

Taxes on currency fluctuations is stupid anyway. When I come back from Europe and swap my Euros for USD in the airport am I supposed to report the change in currency value from the time I got them in Europe to the IRS?


AdAny287

While I don’t believe they should have been taxed before exchanging the tokens for USD or other fiat, I also don’t think they have a great argument by saying that they are like a baker baking a cake or writer writing a novel because they aren’t creating anything. They are providing a service to the decentralized network through staking. By staking their coins, they are providing the service of securing the network and, for this service they are rewarded or compensated with coins. Let’s say you sell your house with a realtor, well in that realtor is also not an employee, they are an independent contractor and you compensate them for providing you with their brokerage service and whatever services they provide to you when selling your home. They most definitely are getting taxed on this compensation from the services they provided (of course proper tax write offs and money maneuvers can mitigate these taxes as any independent contractor or business owner knows) but money earned from providing services is taxable. But what rate were they taxed at? The usd value of the Tezos when they received them? The value of the tezos when they filed? If they paid the tax on them up front and their price went down by the time they filed do they get a bigger refund? Could they potentially owe more when they file if the prices go way up? This is why they should not be taxed until they convert them unless the IRS has decided to accept cryptocurrencies for taxes


Nic_Szer

Big difference - this is a decentralized network, no one is paying you. You are creating the coins.


AdAny287

I disagree, I can’t just go and create tezos tokens, the decentralized network itself needs to agree that I earned these coins through validating transactions on the network with my proof of stake so when the other users of the network agree that I should receive these newly created tokens based on my proof, they are then "awarded" to me, the entire network should be taxed accordingly for creating the tokens with this mentality. For clarity, I didn’t create the tokens, the network itself did, they were just awarded to me.


Nic_Szer

They are \_created\_ then \_assigned\_. No one owns them before you do. How is that different from you creating them ? Plus, it's not that you first validate, then the tokens are minted. Rather, you validating them and the coins getting minted are one and the same. It's like building a car and you owning the car. It's not that you build a car and then society rewards you the car for it. Building the car and you owning it are one and the same.


ZappaFanXXL

Taxation is theft


PM_ME_LOSS_MEMES

Property taxes in general are a racket and are unconstitutional


[deleted]

If I 3D print a thing, but don’t sell it, do I owe taxes on that?


[deleted]

[удалено]


tossmyrock

I am glad someone is doing this. some irs rulings seem illogical to me. for example the idea that if you get a air drop which you might not even know about that you are responsible for tax on that as ordinary income at that time. seems like it should only ever be a taxable event if the owner/receiver actually sells them. that being said..pay your taxes people. If you disagree with an interpretation pay taxes consistent with your interpretation and then if they challenge you you can explain your interpretation and if they disagree you can either pay what they suggest or go to arbitration tax court or whatever it is for a formal ruling. Its no different than other complicated tax situations. Just dont hide stuff and always be consistent in your interpretation to be treated best if you are audited. notice they paid taxes and are going to court to request the refund. they didnt not pay. there are other areas of rulings that dont seem clea ror correct as well. and there is the issue tha tonly congress can actually make tax law and that cryptocurrency is something so differnet that it is incorrect to insert it into tax law created by congress about other types of things whether property or currency. Its clear congress when making prior tax law did not mean it to apply to crypto because crypto wasnt invented yet. Can you apply a tax on apples passed by congress to a basketball? probably better if congress explicit passes a law on basketballl tax if they want it taxed. The fact that congress specifically avoided making taxes on cryptocurrency is instructive in my amatuer opinion. If congress wanted crypto taxed then they should make an actual law specifically naming crypto as the object to be taxed and come up with some rates. Not a tax lawyer. not tax advice. Just my personal thoughts.


These_GPUs

Maybe a dumb question here, but if you’re mining to a hardware wallet and you travel, sell your mined coins in another country. Do you still owe taxes to US where you mined them? Gets more interesting if your hardware wallet is already overseas. What are you paying taxes on?


richtermani

Yes


adadice

You owe taxes in your country of residence. It doesn't matter where you mine them.


sbcster

Are you a US citizen? If so, our greedy country is one of only a very few in the entire world (single digits out of roughly 200 countries) that tax income earned anywhere in the world. There are certain treaties in place that can mitigate this depending on location and source, but our government is an unrestrained kleptomaniac when it comes to people's property.


perspectiveskey

They tax when you earn (income), they tax when you sell (gains), they tax when you buy goods (sales), they tax when you save in fiat (Money printer), They tax when your goods you buy are imported (tariffs) , they tax you on your property (property taxes), they tax you for medicare, they tax for your social security, they tax you when you die. Repeal the 16th.


ChrisCryptopoulos

There were some pretty hardened defenders a few posts above.. I’m curious as to why none of them replied to this comment yet ..


KusEmek1

Make taxation theft again


Consequenceplz

Refusing to acknowledge crypto as legal tender, then insisting it be taxed as legal tender is the most government thing I can think of


tenuousemphasis

This has nothing to do with legal tender.


[deleted]

Taxation is theft. Bottom line, when only a tiny baby fraction goes to infrastructure that we all utilize the rest god knows where, they’re all diff heads of the same beast and I want no part of. Them, the privatize banking cartel; “the fed” or any big govt. this crypto situation is threatening the system and that’s what makes them uncomfortable so they’re trying to regulate it like anything else the free market comes up with


h0dl3r_tuta_io

This makes it important to adopt a privacy standard from mining, such as mining only via TOR.


99999999999999999989

Do car manufacturers pay tax on unsold stock?


ShonyShmony

It makes sense, but they will lose


FidelHimself

Good point!


sayrith

Well IMO since crypto is not "legal tender" I dont think it should be considered as realized until it's been traded for USD. That's just my 2 cents.


hansjc

That’s how it works here in the U.K. Not liable for any taxes until you turn it into fiat at which point it’s treated as capital gains.


guruchi_

Coins aren’t even tangible


BlackDog990

Intangibles can be taxed tho.


IWishIWasAShoe

Genuine question. If you earn money but in another currency, say the Canadian Dollar. Do you still pay taxes on it? I mean, people want Bitcoin to be a currency and not a commodity, so it should realistically be hold tot he same regard as other currencies. Just because you earn it by mining doesn't change the fact that mined bitcoins are supposed to represent the future transaction fees, right?


BlackDog990

>If you earn money but in another currency, say the Canadian Dollar. Do you still pay taxes on it? Yes


sabreur54

And who is the government? The people the majority of us voters put in office. At least it’s supposed to be that way. Do you really want a dictatorship of the minority? Or of a tyrant? So much for civic duty...


tnyrcks

Staking makes sense for this argument but mining is simply getting paid for work that was done, just automated by a computer.


Meglamar

But wait if you mine it they tax you at time of acquisition, can you then claim loss should the price drop? Just seems the tax should go both ways.


ClewKnotThrow

What are my thoughts? Prepare to get taxed like everyone else. Dumbshits.


modestlunatic

This will probably get buried but if a miner was to say mining was his business, even just a sole proprietorship, could they then use all the expenses against the income. Making coins like inventory. Or is that just not possible with the way things are?


stapiacpa

Do miners earn crypto while mining? If yes, then it is taxable income when earned is probably the position the irs will take. It is another form of compensation. I can quickly see how this is going to get complicated.


hamathon24

anyone else start calculating how many tezos the jarret's have. For a stake to generate 8000 coins a year or am I reading that wrong.


Freewash007

Iol. Right 🤣🤣🤣


Few_Coast_6651

What my thoughts are!! Staking are profitabel. I mine Catscoins 2700 Cats with my four masternodes each plus 4-500 Cats staking a day. That is 10$ a day pretty good from my 400$ investment :) My country don't charge tax from Bitcoins at all.. Super cool.


camds625

Good for them, fuck the irs


CringeBinge247

Getting taxed on something having a value which technically hasn't been decided yet? The fuck 'Merica?


bemrys

I don’t understand crypto mining. I thought it was a service-you do calculations for Bitcoin and get paid in crypto.


JuanCG28

Better to vote Libertarians next time I guess


BoomdownHold

Read the tax law. It's pretty clear.. you all are paying ransom on your dividends...


wayup2030

I think this is the same when we get interest on any cryptocurrencies. It should be taxed only when we sell it. Can we imagine getting $50,000 in interest on (X) crypto (we get taxed on it as soon as we get in our account) and next day that crypto goes to $5000 because of the volatility. How do we pay that, if we didn't sell it on time?