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Tax season is here and advisors with clients who sold crypto in 2020 will probably get plenty of questions. The tax laws can be complex and fuzzy.

Heres what you need to know:

Is cryptocurrency taxable? Since 2014, the IRS has considered cryptocurrency to be property, not a virtual currency. This means that a transaction can result in a taxable gain or loss.

What is a cryptocurrency capital gain or loss? It is similar to a stock transaction. The gain or loss is the price you sold the cryptocurrency for, minus the cost basis.

For example, suppose you buy one Ethereum coin for $2,500. After a few months, the value soars to $3,500. You exchange your Ethereum coin for $3,500 of another cryptocurrency. In this case, you will have a capital gain of $1,000.

This is a short-term gain because you held onto the Ethereum coin for less than a year, and your taxes will be at your ordinary income tax rates. If you held for over a year, the transaction would have been taxed as a long-term capital gain, which has a maximum rate of 23.8%.

You can subtract your total losses from the total gains each year, thereby reducing gainsand taxes on gains. And you can deduct up to $3,000 in net losses against your ordinary income. If you have losses above this amount, you can carry them forward to future years.

How do you report a transaction on your tax return? Some cryptocurrency exchanges send you a 1099-B that lists the cost basis and net gains and losses from your transactions. With this information, you will fill out Schedule D and Form 8949 for your 1040 return. If an exchange does not issue a 1099-B, then you will need to track the information using your own records.

This can easily get complicated. For example, suppose you spend $100,000 on cryptocurrency. Then during the yearas the price appreciatesyou sell some to buy a Tesla, some other cryptocurrencies, fast food, clothes, and so on. All these are likely taxable transactions.

Any new rules? President Bidens $1.2 trillion infrastructure bill includes provisions to require exchangesby 2023to report cryptocurrency transactions and include them on 1099-B forms. The goal is to generate $28 billion in tax revenues during the next decade.

The bill also will require exchanges to report identifying information about crypto sellers for amounts over $10,000. The provision will go into effect in 2024.

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Should clients be worried about the IRS? Definitely. The 2021 Form 1040 has the following question: At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency? In other words, the IRS is getting more aggressive with enforcement. The agency has already had success in obtaining client information from exchanges.

If you do not properly report your crypto gains, you could be subject to back taxes, interest, penalties and even jail time.

What about wash sales? The wash-sale rule prevents investors from engaging in short-term stock trading to harvest tax losses. For example, if you sell a stock at a loss and then quickly buy it back, the IRS will deny the deduction. You have to wait at least 30 days to buy back the same stock or a security that is substantially similar.

A loophole exempted cryptocurrency transactions from the wash rule. This could change in 2022, according to pending legislation.

Tom Taulli is a freelance writer, author, and former broker. He is also an enrolled agent, which allows him to represent clients before the IRS.

Originally posted here:
Cryptocurrency Taxes: What Advisors Need to Know - Barron's

New Delhi: Most of the top 10 cryptocurrencies by market value were trading lower in Wednesday's trade, with the biggest falls seen in BNB and Cardano.

Among key cryptos, Bitcoin was down 1.18 per cent at $43,406.01. The largest cryptocurrency in m-cap was still up 12 per cent in the last seven days.

Ethereum was quoting at $3,080.69, down 1.84 per cent.

Polkadot and Dogecoin, number 11 and 12 in m-cap terms, were also down 5 per cent each.

The global crypto market cap stood at the $1.97 trillion mark, down 2 per cent. The total crypto market volume jumped 8.67 per cent to $102.96 billion.

Meanwhile, the non-fungible tokens (NFT) community has said that the government was being unfair to the emerging digital asset class by lumping it in with cryptocurrencies in the recently announced digital asset tax regime.

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Original post:
Top cryptocurrency prices today: Bitcoin, Ethereum, Dogecoin fall up to 5% - Economic Times

On Feb. 1, a cryptic gold cube worth nearly $12 million appeared in New Yorks Central Park. On display for one day only, the cube was an art installation by artist Niclas Castello. Made exclusively of pure 24-karat gold and weighing a staggering 400 pounds, it came with its own security team to guard it.

If you thought the Castello Cube, as it is called, is a statement on wealth disparity, you could easily be forgiven. New York State has the highest income inequality in the country: In 2020, the average income in Manhattan for the top 1 percent was 113 times that of the bottom 99 percent. And according to the 2020 Census, approximately 129 homeless people live in Central Park. Surely a $12 million cube in the middle of the park has to be some kind of critique about the way we overlook poverty and fetishize wealth?

Unfortunately not. The cube is an advertisement for Mr. Castellos new cryptocurrency, named after himself: CastCoin. The installation isnt about wealth disparityjust wealth. After being on display in the park for less than 24 hours, the Castello Cube was carted off to a Wall Street dinner party reportedly filled with celebrities.

Cryptocurrency is a digital currency that uses blockchain technology and therefore is decentralized, creating an online exchange that is not reliant on a government or bank to uphold its value. Bitcoin was the first and most famous cryptocurrency, but today there are thousands, with Castellos CastCoin being one of the latest. Some hope that crypto will usher in a more democratic future where currencies and transactions can be certified without any backing institution. But those hopes for the future overlook that crypto raises some serious ethical questions. Much like the Castello Cube itself, cryptocurrency does not hold up to a deeper look.

An Empty Obsession

Online, the Castello Cube is billed as being made of solid gold and appears to tower high above the lawn. But this is just hype. The cube is solid gold, insofar as it is made of gold and nothing else. But it is not, in fact, a solid cubethe inside is hollow, and the walls only a quarter of an inch thick. Its also much smaller than it appears online, only about a foot and a half tall, in fact. (To have to speak of only that much pure gold is a condemnation of the work in and of itself.)

Its an excellent metaphor for cryptocurrencies. The outside glitters; the inside is empty. It looms large online but amounts to little in the real world. Crypto has soared in popularity: A 2021 survey found that 13 percent of Americans had traded in crypto in the past 12 months, with another 11 percent reporting they were likely to invest in the next year. A 2021 survey by Pew Research found that 43 percent of men aged 18 to 29 report having invested in cryptocurrency. Some see it as a get-rich-quick scheme, a high-stakes, high-reward trading opportunity that can easily bestow millions. Cryptocurrency is famed for its volatility. In April 2011, one Bitcoin cost $1; in April 2021, the same cost almost $65,000; today its worth is about $40,500.

For others, it is as much of a cultural movement as a financial one, becoming something of a lifestyle with financiers and tech fans. Advertisements for cartoon dog-themed cryptocurrency shine over Times Square, and figures like Elon Musk use their cults of personality to encourage their followers to buy in. R/CryptoCurrency on Reddit, which describes itself as The leading community for cryptocurrency news, discussion, and analysis, has 4.4 million members, obsessively watching and discussing the crypto market.

Our New Golden Calf

In the apostolic exhortation Evangelii Gaudium, Pope Francis warned of the dangers of idolizing money like this. He writes:

Idolatry of money has been a problem for as long as money has existed. But part of what makes crypto different is the way its extreme volatility rewards constant anxious monitoring and encourages obsession not only with investing but with pressuring others to invest as well. Because there is a limited amount of Bitcoin, for example, higher demand for it drives higher prices.

Cryptocurrency has been regarded as democratizing finance because it gives anybody with a computer the ability to get in on the ground floor of an investment that can then take off astronomically. But the dark side of this democratization is that it has spread an obsession with consumption and unhealthy market watching to ever-larger populations than ever before.

And while cryptocurrencies make some people rich, their environmental effects ultimately impoverish all of us. Cryptocurrency is created through an electronic process called mining, which uses computers to solve complex equations and create small amounts of the digital currency. Some cryptocurrencies have a cap on how many units can be mined, which makes the equations progressively more complex, requiring increasing amounts of energy and computational power to continue to mine. (If trying to understand this makes your head hurt, dont worrymine does, too.)

The Bitcoin mining process alone has usedmore electricity than some small countries, including Ukraine, Norway, Sweden and the United Arab Emirates. One single Bitcoin transaction uses enough energy to power an average U.S. household for 75 days. And much of the energy used to power Bitcoin mining and transactions comes from burning fossil fuels. Its impact on the climate is immense. As the environment continues to deteriorate, crypto miners continue to use staggering amounts of resources to create digital monopoly money.

The fact of the matter is that crypto is bad for us. Crypto is what leads to a $12 million hollow box made out of gold being displayed in public parks. The greater risk, however, is that it will lead to such a fixation on wealth that we wont see the poverty around us. That it will lead us to forget our common home and ignore how we are destroying our climate. In the words of Pope Francis, that it will reduce us to mere consumers.

Nine countries have banned cryptocurrencies outright, with another 42 enacting regulations and policies that ban it implicitly. We can stop believing in cryptocurrency and reject its power over us and over our climate. Its time to throw the golden calf back into the fire it came from.

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Cryptocurrency has taken the idolatry of wealth to a new level of sinfulness - America Magazine