Loophole – Cryptocurrencypanther

Biden Administration Seeks to End Crypto Tax Subsidies and Fix the Loophole

admin — Fri, 10 Mar 2023 16:35:52 +0000

The Biden administration seeks to terminate the tax-loss harvesting strategy for crypto investors which would help the White House save $31 billion over a ten year period.

On Thursday, March 9, the Biden administration proposed some important changes to crypto tax treatment in the federal budget. This could be a major game-changer for crypto investors putting an additional tax burden on them.

Currently, US crypto investors use the “Tax-loss harvesting strategy” which gives investors the ability to sell their digital assets at a loss and immediately buy the same crypto the next day. This allows investors to book losses and carry forward that to reduce their tax burden.

The Biden administration is now looking to eliminate tax deductions and the White House believes that this would help them save $31 billion over a ten-year budget window. Furthermore, the budget includes additional crypto-related line items such as information reporting by “certain financial institutions and digital asset brokers for purposes of exchange of information.”

Besides, it also proposes changes to mark-to-market tax rules by including digital assets. Furthermore, the budget asks US individuals with large holdings in foreign digital assets to report them to Internal Revenue Service (IRS).

The IRS currently treats cryptocurrencies as property, and not a security. As a result, they could easily bypass the “wash sale” rules.

30% Tax on Crypto Electricity Usage

The federal budget from the Biden administration seeks to target crypto miners. Crypto miners in the US might eventually face a 30% tax on electricity costs as the budget proposal from President Joe Biden aims at “reducing mining activity”.

On Thursday, March 9, the Department of the Treasury released a supplementary budget explainer paper that noted that any firm using resources would be “subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.”

Additionally, crypto miners will have to follow reporting requirements on the “amount and type of electricity used as well as the value of that electricity”. Crypto miners who acquire their electricity off-grid will still have to pay tax.

Explaining their decision, the Treasury noted that energy consumption of crypto mining operations could have “negative environmental effects”. “An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms,” it added.

Amid the current developments in the crypto space and the shutdown of crypto-friendly Silvergate Bank, the Biden administration is taking things much more seriously.

On Thursday, the crypto market plummeted sharply falling the move on Wall Street with Nasdaq Composite (INDEXNASDAQ: .IXIC) dropping over 2%. The Bitcoin (BTC) price has tanked under $20,000 for the first time in seven weeks.

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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Drug dealer gets back $1.5M of BTC due to legal loophole

admin — Mon, 23 Aug 2021 10:10:55 +0000

No precedent on how to treat profits earned via crypto, says prosecutor

In a bizarre turn of events, the Swedish government is being forced to pay Bitcoin worth $1.5 million to a convicted drug dealer after the digital asset that the convict amassed illegally, skyrocketed in value during his time in prison.

The case has highlighted the need not only for prosecutors to be educated on the workings of cryptocurrencies but also to determine a protocol for treating illegal profits earned via digital assets.

The dealer was convicted by the Swedish court two years ago after he was caught selling drugs online and illegally earning 36 BTC from the sales. Prosecutor Tove Kullberg was successful in proving the crime and argued that the illegally earned Bitcoin, whose value then was estimated as 1.3 million Swedish kronor ($149,000), should be confiscated.

However, the prosecutor used the fiat value of Bitcoin while making her initial case. “It is unfortunate in many ways,” Kullberg told Swedish Radio. “It has led to consequences I was not able to foresee at the time,” she explained.

Over the course of the last two years, the price of Bitcoin increased almost tenfold. Thus, when the Swedish Enforcement Authority decided to auction the illegally earned Bitcoin, they only had to sell 3 BTC to generate the 1.3 million Swedish kronor sanctioned by the court.

The remaining 33 BTC is now being returned to the drug dealer despite his confession that the assets were earned illegally by selling drugs online. 33 Bitcoins is worth about $1.5 million today.

The prosecutor stated that there has been no precedent in Swedish legal history on the treatment of Bitcoin profits in court.

She added that the profit from the crime should have been 36 BTC regardless of the value of the cryptocurrency at the time of argument. The unusual situation could also have been avoided if the auction was conducted immediately post-conviction.

“I think we should probably invest in an internal education in the [prosecution] authority, as cryptocurrency will be a factor we’ll be dealing with to a much greater extent than we are today,” Kullberg said.

“The more we increase the level of knowledge within the organization, the fewer mistakes we will make,” the prosecutor concluded.

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How Bitcoin, Ethereum, Dogecoin Holders Are Saving On Federal Taxes Using A Loophole

admin — Mon, 26 Jul 2021 12:03:55 +0000

A key tax loophole can help holders of cryptocurrencies such as Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) and Dogecoin (CRYPTO: DOGE) to save on their federal tax bills in the U.S., according to a report by CNBC.

What Happened: Onramp Invest CEO Tyrone Ross said that while wash sale rules apply to stocks and mutual funds, they do not apply to cryptocurrencies because they are treated as “property” by the IRS, as per the report.

See Also: How To Buy Bitcoin (BTC)

Investors can sell their holdings in cryptocurrencies and buy them right back, unlike the waiting period of 30 days required in the case of stock transactions. This loophole allows investors to bypass the wash sales rules and harvest cryptocurrency tax losses more aggressively than stock losses.

Shehan Chandrasekera, a CPA and head of tax strategy at cryptocurrency tax software company CoinTracker.io., was quoted by the report as saying that cryptocurrency investors can harvest an unlimited amount of losses and carry them forward into an unlimited number of tax years.

Why It Matters: The tax loophole provides an opportunity for cryptocurrency investors to harvest some of their losses and reduce their tax bills as the cryptocurrency markets remain below their all-time highs reached earlier this year.

Bitcoin is down 40.6% from its all-time high of $64,863.10 reached in April. Ethereum and other altcoins have also witnessed similar downturns this year.

Price Action: Bitcoin is up 12.8% during the last 24 hours, trading at $38,879.99 at press time, while Ethereum traded almost 9.3% higher at $2,365.45 over 24 hours. Dogecoin is up 17.4% at $0.2318.

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