The Bitcoin Saga

[Lantz]

@AK_Icebear

You invest in 1000 in crypto. Your investment turns into 10,000. You have 9,000 in potential capital gains. You donate 4,500 worth to a charity, creating a tax credit in that amount. You liquidate the remaining holdings, with a capital gain worth 4,500, that are fully offset. At least this is what exchanges like Gemini are advertising based on IRS notices.

Now do sales tax and property tax.

[Enidigm]

This isn’t how charitable deductions work (in the USA).

[Andy_Bates]

@AK_Icebear

I think the follow example would allow it.

Yes, you can donate cryptocurrency to offset tax obligations, just like you can by donating stock or non-monetary assets. No, it doesn’t mean that you’re paying your taxes in cryptocurrency, just like I’m not paying my taxes in the form of an old couch or a 1983 Toyota Celica GT-S.

[anonymgeist]

The charitable donations deduction is also limited by your income. Never mind that you have to itemize your deductions vs taking the standard deduction to make use of it.

[justkevin]

I don’t think that’s correct. Charitable donations aren’t a tax loophole. The IRS just doesn’t make you pay taxes on income you gave away to a qualified institution. If you make $9000 in LTG and give away $4500, you still pay taxes on the remaining $4500.

[Timex]

@AK_Icebear

I think the follow example would allow it.

You invest in 1000 in crypto. Your investment turns into 10,000. You have 9,000 in potential capital gains. You donate 4,500 worth to a charity, creating a tax credit in that amount. You liquidate the remaining holdings, with a capital gain worth 4,500, that are fully offset. At least this is what exchanges like Gemini are advertising based on IRS notices.

I’m talking about paying all the other taxes you owe, man.

Like, of I owe 50k in income taxes for the year, I’m pretty sure I can’t just donate 50k to charity and then not give the IRS anything. Not to mention state and local taxes.

[Mark_Weston]

@Timex

Well, a long historical record does in fact create a lot of inertia… but Perky highlighted a more important aspect, which is that you are literally required to use USD to pay your taxes, or else you go to jail. That creates some fundamental floor of demand for it.

The US government can obviously try to enforce use of its own currency within its own borders. Nearly all governments manage to achieve this, even for otherwise shitty currencies that everyone outside those borders see as valueless; Zimbabwe managed it for several decades. So it doesn’t seem like much of a measure of a currency’s intrinsic worth, or utility as a medium of exchange really. It’s just a measure of the government’s power to enforce compliance.

@Lantz

Do you see the difference between US Federal Criminal laws and the rules to ice hockey? They are just rules for conduct enforceable by getting put in a box but could not be enforced.

I don’t understand this metaphor at all. Where do you think it’s taking the argument?

[AK_Icebear]

I double checked - you can only deduct up to 60% of your adjusted gross income using donations. So yes, there would still be some tax due in USD in the example I gave.

[Strollen]

@inactive_user

Come for the greatest Twitter handle of all time, stay for the fire .

twitter.com

yr himbo boyfriend (swolecialism)

Bitcoin has basically been a speedrun of teaching libertarians how we got all our banking regulations

5:48 PM - 19 May 2021 12K 1.9K

Definitely in the top 5 tweets of the year. I’m still laughing.

[Timex]

@AK_Icebear

I double checked - you can only deduct up to 60% of your adjusted gross income using donations. So yes, there would still be some tax due in USD in the example I gave.

Also, I think you were making a mistake in thinking that if you donated away all the money you owe the IRS, then you wouldn’t owe them anything.

Charitable donations are deducted from your income, not what you owe. In order to not owe anything, you would need to donate 100% of your income. (Which, as you note, you aren’t allowed to do… You would still owe the IRS.)

[AK_Icebear]

In my example, your income is 4500 and you donated 4500. Given the 60% rule, the optimal approach would be to donate 3375 to offset 60% of your remain incoming of 5625 in capital gains.

I assumed a person had no other income besides this. Of course if you had more of your own income your could donate 60% of that with your bitcoin earnings.

The main point was the IRS recognizes bitcoin and other crypto donations as a tax offset, regardless of whatever limits are in place.

[anonymgeist]

They recognize bitcoin/crypto in the same sense (in the case of charitable donations) that they recognize that 1983 Toyota Celica GT-S from above. It’s an asset with an identifiable market value.

[Perky_Goth]

Demand of currency for taxes anchors the value, but if the economy isn’t managed well, like, say, to provide essentials because it underproduces food and needs a significant amount of imports that someone else can dictate the price of, well, then it collapses the connection between the economy and currency.
Otherwise, the day to day injections and the obligations of accepting legal tender probably have a big impact for reasons of practicality and laziness. And, if it loses value, the companies within that economy also become much more attractive suppliers, anchoring it as well.

[Andy_Bates]

@AK_Icebear

The main point was the IRS recognizes bitcoin and other crypto donations as a tax offset, regardless of whatever limits are in place.

They recognize the dollar value of whatever you donate at the time of donation. If I donate an old couch worth $10, then I get a tax offset of $10. The IRS doesn’t “recognize” my old couch as a form of currency.

[Timex]

@AK_Icebear

In my example, your income is 4500 and you donated 4500.

But even if that were possible… You then have no income. So you can’t buy food or shelter.

@AK_Icebear

The main point was the IRS recognizes bitcoin and other crypto donations as a tax offset, regardless of whatever limits are in place.

Sure, just like donating an old car or whatever.

But you are still going to need to pay some amount of taxes to the government, and you need to pay them in dollars.

[Juan_Raigada]

@AK_Icebear

In my example, your income is 4500 and you donated 4500. Given the 60% rule, the optimal approach would be to donate 3375 to offset 60% of your remain incoming of 5625 in capital gains.

I assumed a person had no other income besides this. Of course if you had more of your own income your could donate 60% of that with your bitcoin earnings.

The main point was the IRS recognizes bitcoin and other crypto donations as a tax offset, regardless of whatever limits are in place.

So I think this is what you are saying…

You don’t earn 9k, because you are donating 3.3k before making it income (converting it to USD and generating a capital gain). Thus, you only “gain” 5.7k, so your gross income is calculated from that capital gain.

The question I have is whether the donation of a non-monetary asset allows for deduction on income tax or not. It feels very weird if so, but tax regimes are generally weird, so whatever.

[Enidigm]

There’s almost never a 1:1 donation / tax offset (I say almost never because IANATL and i haven’t looked this up in every possible circumstance). What’s getting mixed up with here is gain and loss in a business sense.

[Ginger_Yellow]

@Juan_Raigada

You don’t earn 9k, because you are donating 3.3k before making it income (converting it to USD and generating a capital gain).

Capital gains liability is crystallised at the point of donation.

[Juan_Raigada]

@Ginger_Yellow

@Juan_Raigada

You don’t earn 9k, because you are donating 3.3k before making it income (converting it to USD and generating a capital gain).

Capital gains liability is crystallised at the point of donation.

In the US? This article seems to say there’s no trigger of capital gain tax for stock donations.

[Timex]

Stock donations have a special loophole created by rich people so they can pass wealth to their kids.