Crypto Currency

How are Cryptocurrencies Taxed in the US?

The value of most Cryptocurrencies has skyrocketed over the last six months. Although there has been a recent fall in…

The value of most Cryptocurrencies has skyrocketed over the last six months. Although there has been a recent fall in prices, if you invested in a Cryptocurrency or received it as payment before December 2017 you are still probably sitting on a substantial financial gain.

As with any financial transaction you are subject to tax in the United States if you are a US citizen. The IRS has been very clear on this since 2014, it’s therefore important for you to understand whether you have a tax liability and how much that liability may be.

This short article will give you some guidance as to how you might begin to figure out what that tax liability might be.

 

How Cryptocurrency is defined by the government

 

According to the IRS virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. That describes Bitcoin or any Altcoin you may hold or have sold at a profit. The IRS has stated that the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability.

For federal tax purposes, Cryptocurrency is treated as property. General tax principles applicable to property transactions apply to transactions using Cryptocurrency. Under the currently applicable law, Cryptocurrency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.

This is an important technical distinction to note as many people view Crypto trading like forex trading, the IRS ,however, view it as a sale of property.

 

When does a tax liability arise?

 

Taking payment in Cryptocurrency

 

A taxpayer who receives Cryptocurrency as payment for goods or services must, in computing gross income, include the fair market value of the Cryptocurrency, measured in U.S. dollars, as of the date that the Cryptocurrency was received.

For U.S. tax purposes, transactions using Cryptocurrency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of Cryptocurrency in U.S. dollars as of the date of payment or receipt. There is an easy way to calculate the fair market value If a Cryptocurrency is listed on an exchange and the exchange rate is established by market supply and demand.

The fair market value of the Cryptocurrency is determined by converting the Cryptocurrency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.

If you are self-employed and received Crypto as payment this includes you too. Self-employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. The fair market value of Cryptocurrency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt is such income too.

 

Making an investment gain from trading Cryptocurrency

 

A taxpayer generally realizes capital gain or loss on the sale or exchange of Cryptocurrency that is a capital asset in the hands of the taxpayer. For example, stocks, bonds, and other investment property are generally capital assets. For most investors in Cryptocurrency, their coins will be a capital asset as they are bought as an investment, not as part of any business.

If this is you then you have to make a capital gains tax (CGT) payment on any gain.

For tax and accounting purposes, capital gains and losses are calculated by determining how much your cost basis has gone up or down from the time you acquired the asset. When you calculate your basis, you’ll figure the purchase price plus any related costs, such as commissions.

You need to pay the CGT when you sell or dispose of the Crypto. You may have a taxable event even if you don’t formally cash out. Anyone using cryptocurrency to pay for goods or services must treat each purchase as a sale.

Some exchanges will offer a summary of transactions which can be used to help you file your taxes but if you withdraw cryptocurrency from an exchange, the exchange can no longer track what happens, so you must make sure that you do.

 

What about mining Cryptocurrency?

 

When a taxpayer successfully “mines” Cryptocurrency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.

If a taxpayer’s “mining” of Cryptocurrency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self-employment income and are subject to the self-employment tax.

 

What if I swap my Crypto for something else?

 

If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the Cryptocurrency, the taxpayer also has a taxable gain.

 

In summary

 

Whilst trading or taking Bitcoin or any Altcoin may seem like fun, as many projects involving blockchain technology most certainly are, these activities generate serious financial obligations in the United States.

It is important that you are careful and maintain detailed records of any transactions you make using Crypto, in particular, the equivalent US dollar value of the Crypto at the time of the transaction.

As summarised above your tax liability, be it CGT or otherwise, depends on how you are using Cryptocurrency. This short guide will give you a start, but it is always best to get professional advice when it comes to your exact tax liability, especially if your activity in this area is substantial.

Taxpayers may be subject to penalties for failure to comply with tax laws and they can be very large.

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Crypto Currency

‘Fortnite’ vulnerability put millions of accounts at risk

It turns out that for the millions of people playing Fortnite, there was more than just a Victory Royale at stake.  On Jan. 16, internet security firm Check Point Research disclosed a vulnerability in the popular online video game that could have allowed malicious actors to take over practically any Fortnite account — all a…


It turns out that for the millions of people playingFortnite, there was more than just a Victory Royale at stake. 

On Jan. 16, internet security firm Check Point Research disclosed a vulnerability in the popular online video game that could have allowed malicious actors to take over practically anyFortniteaccount — all a player had to do was click a malicious link. 

“By discovering a vulnerability found in some of [Fortnite owner] Epic Games’ sub-domains, an XSS attack was permissible with the user merely needing to click on a link sent to them by the attacker,” explains the report. “Once clicked, with no need even for them to enter any login credentials, their Fortnite username and password could immediately be captured [by] the attacker.”

Epic Games confirmed the now-patc

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Crypto Currency

The sad story of a lonely alleged SIM swapper who stole millions

You probably shouldn’t feel sorry for Nicholas Truglia. It’s just that his story is so pathetic. The 21-year old Manhattan resident was arrested last November and extradited to California in December. There, he’d face 21 felony counts relating to accusations of SIM swapping his way to a million dollars worth of stolen cryptocurrency. While Truglia’s…


You probably shouldn’t feel sorry for Nicholas Truglia. It’s just that his story is so pathetic.

The 21-year old Manhattan resident was arrested last November and extradited to California in December. There, he’d face 21 felony counts relating to accusations of SIM swapping his way to a million dollars worth of stolen cryptocurrency. While Truglia’s fate remains unclear, details of his life leading up to the arrest have begun to emerge thanks to a lawsuit filled by a separate alleged victim, and oh man is it a wild ride. 

As Krebs on Security reports, a lawsuit filed by Michael Terpin — a cryptocurrency investor and self-described “thought leader” — against Truglia claims he lost over $23 million after Truglia SIM swapped him and drained his crypto accounts in January of 2018. That document, and a supporting affidavit by one of Truglia’s former friends, tells the story of a cash-flush young man who saw himself as untouchable. 

And, perhaps unsurprisingly, they also paint Truglia as kind of an asshole. 

The now-deleted Twitter profile pic of @erupts, the account allegedly once belonging to Truglia.

The now-deleted Twitter profile pic of @erupts, the account allegedly once belonging to Truglia.

Image: twitter / waybackmachine

“Nick likened himself to Robin Hood who robs from the rich but did not give to the poor,” explained Chris David, former associate of Truglia’s, in the aforementioned affidavit. 

Instead, the documents paint a picture of someone who delighted in giving to himself — in the form of a Rolex, a $6,000-a-month apartment, and a $100,000 stack of cash he kept on his credenza. But that clearly wasn’t enough for him.

According to David, Truglia operated the now-suspended Twitter account @erupts, where he lamented that his wealth didn’t bring him friends, and even bra

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Crypto Currency

Ethereum is about to get a big upgrade. Here’s what you need to know.

Ethereum, the third-largest cryptocurrency by market cap and the most popular platform for decentralized applications (dApps), is getting an upgrade on (roughly) Jan. 16.  The upgrade is called Constantinople and it makes the Ethereum network a bit more efficient, paving the way for bigger changes further ahead. It also brings some important changes for miners…


Ethereum, the third-largest cryptocurrency by market cap and the most popular platform for decentralized applications (dApps), is getting an upgrade on (roughly) Jan. 16. 

The upgrade is called Constantinople and it makes the Ethereum network a bit more efficient, paving the way for bigger changes further ahead. It also brings some important changes for miners on the network. 

Here’s an overview of what, exactly, is happening, and the steps owners of ether should undertake ahead of the fork. 

The answer to the second question is really easy: There’s no need to do anything. The upcoming upgrade, while technically a fork, will very likely be non-contentious, meaning there’s no disagreement on whether it should happen. This means Ethereum won’t split into two separate coins next Wednesday. If everything goes well — and chances are good that it will — your ether holdings will be exactly the same before and after the fork, regardless of whether your ether is located on a private wallet or an exchange. 

And no, ether holders will not be getting a new coin; if you see info about it anywhere, it’s either a scam or a mostly-irrelevant project that’s just trying to get some attention out of the confusion that surrounds every cryptocurrency fork (which is why I’m primarily calling Constantinople an upgrade and not a fork). 

Ethereum node operators and miners will have to update their software ahead of the upgrade; the links can be found here. 

Note that the January 16th date for the upgrade is approximate. The upgrade should happen when block 7,080,000 on the Ethereum blockchain is mined, which is currently approximately Wednesday, Jan, 16, 8pm UTC, but the exact time will shift a little as new blocks aren’t always found in the same amount of time. 

Paving the way for a faster future

With that out of the way, there are still a few things you should know about this upgrade. 

Constantinople consists of five Ethereum Improvement Proposals (EIPs), which are documents explaining a new feature or change in Ethereum’s code. Explaining them in detail might

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Crypto Currency

Attack on Ethereum Classic Highlights a Crypto Weakness

bitcoin is that you don't need to trust the people to whom you send or receive money, because the software makes it technically impossible for anyone to cheat the system. Instead of relying on humans and their flawed judgment, you rely on the laws of mathematics. But a recent attack on the cryptocurrency Ethereum Classic—not…


bitcoin is that you don’t need to trust the people to whom you send or receive money, because the software makes it technically impossible for anyone to cheat the system. Instead of relying on humans and their flawed judgment, you rely on the laws of mathematics. But a recent attack on the cryptocurrency Ethereum Classic—not to be confused with the original Ethereum project—shows once again how hard it is to remove human frailty from digital systems.

Like other cryptocurrencies, Ethereum Classic relies on a decentralized ledger known as a blockchain created and shared by the machines that process transactions on the network. This ledger ensures that no one can spend their virtual tokens twice. Unless, that is, someone could take over at least 51 percent of the machines in the network. That’s what appears to have happened last weekend.

Currency exchange Coinbase said Monday it had detected double spends on the Ethereum Classic platform on Saturday and that it had suspended transactions involving Ethereum Classic. Kraken, another exchange, followed suit with a similar announcement. Coinbase security engineer Mark Nesbitt wrote in a blog post that the company had spotted 12 instances of double spending Ethereum Classic tokens, involving a total value of about $1.1 million.1Ethereum Classic is not as popular as some other cryptocurrencies: It had a total market value of $553.5 million on Friday, according to CoinMarketCap; by comparison, ether, the currency created by the original Ethereum project, had a value of $16.3 billion, and bitcoin a value of $67.5 billion.

Nesbitt told WIRED that Coinbase is “very confident” that the d

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