Tax Implications for Exchanging MaidSafeCoin for Safecoin


#61

You are assuming the IRS is actively tracking every transaction and every holder of crypto under its jurisdiction. Maybe the NSA is doing that, but I highly doubt the IRS has any clue on where to start to pull that off, especially since reporting rules for exchanges is a rather recent thing.

It’s highly doubtful the IRS would know someone actually burned their coin to exchange for Safecoin. Whether or not one should report that seems like a personal decision. By letter of the law, that is likely a taxable event, at the least the IRS would see it as one. By logic, until you sell your Safecoin, you shouldn’t owe any taxes.


#62

There is no logic in taxation. It is just stealing of money enforced by power. If there is a way how to protect MaidSafe owners from this problem, than it should be done. If MaidSafe delivers what MAID holders believe in, than every tax office in the World will know how was MAIDSafe token used. Nobody wants to be chased 5-10 years later when Safenet goes mainstream.


#63

No, if you bought a coupon or ticket or gift card (for business purposes) then at the point you bought those is the taxable event.

If you sell them then that is a taxable event.

If you exchange them for what the coupon/ticket/giftcard was bought for then it very could be a non-taxable event. No one would consider that pre-purchase of big-priced item is going to be taxed when you hand over the coupon for the item. So is a MAID, it is a pre-purchased safecoin. The taxable event is mostly when you bought the token for the goods, not when you receive the goods. OR you sold/disposed the token.

Yes some tax systems may tax both but that would be a draconian tax system


#64

That isn’t correct. According to the IRS, cryptocurrency is taxed when spent, when mined (mining for profit counts as a business and is taxed as self-employment!), and sale. More information from the IRS: https://www.irs.gov/pub/irs-drop/n-14-21.pdf

The only saving grace is indeed the self-reporting, though exchanges, payment processors and the like in the USA are forced to comply with tax laws which can cause a paper trail to lead to you.

I wish that was the case. The last time I used a gift card in the USA (this spring) the item I bought with it was taxed. The card was also taxed when it was purchased. Business or not, it’s taxed both ways.

The US system is fairly draconian and I suspect it’s intentionally confusing. (Tinfoil hat time!) I suspect the confusion is there to help discourage new users. It also gives more ways for people to get snared. After all, Al Capone was nailed for tax evasion and not the thousands of other illegal things he did. (tinfoil hat time over)


#65

First, yes, you get taxed for acquiring and spending/selling crypto, but you don’t get taxed on it simply because you have it. That is what I was addressing.

Second, gift cards should not be taxed at purchase. If you were taxed, you got screwed.


#66

It depends on the classification of the token, and that’s going to be decided either by tax authorities or in court.

For example, if you acquire an ‘option’ to buy shares, it is taxable in the UK both on any gain in value when you exchange the option for the shares, and when you sell the shares. The crucial point, and the reason this makes sense is that the value of the thing you end up with may be higher when you do the exchange than when you acquired the option - and possibly the same for a ‘token’ such as MAID (though that is no doubt going to be argued about!).

But it does seem logical to me that any gain in value during the time you hold something will be regarded as taxable when you do an exchange for something else, in the UK at least.

Taxing each exchange isn’t draconian because you don’t get taxed twice, you only get taxed on the gain in the relevant period, so you can actually reduce your liability if you time the exchange and final sale to make use of allowances in different tax years for example.

Whether this applies to MAID -> Safecoin -> storage PUTS -> actual storage transactions is unknown, but I would assume for planning purposes that the first two will be regarded as taxable by the relevant authority. The third not, because gains there are unlikely to be significant. So you can probably reduce your liability by using any allowances you have to the full - by exchanging during different tax years as noted.

An exception in the UK (I think, but don’t take this as advice), is when you can show that you make your living as a professional trader. In that case they don’t always require you to account for tax on every single transaction, but may allow all trades to be rolled up during a specified period, such as the overall ‘book value’ at the end of the day compared to the beginning of the day. As I said, don’t take that as true, just what I think happens!

Having said all that, I’m not a tax expert and things do change all the time, and cryptocurrency etc are a new area, so I really don’t know how all this will actually be treated. My understanding is that tax advisors don’t yet know either. They have their theories and expectations, and often they disagree between each other, so only time will tell.

Planning for the worst is probably advisable, expect to pay the full rate of tax on all your gains and you should be fine, then anything less will seem like a bonus. Oh, and use up any allowances you have available (for example a capital gains allowance which applies in some countries).


#67

Nothing like options. This has always been a pre-purchase and stated as that in the ICO if I read correctly.

But you are correct and I have tried to make it clear that it does in the end depend on the country.


#68

I have had some thoughts similar to you @happybeing about how to compare SAFE with for example options. My thoughts is that the conversion from Maidsafecoin to SAfecoin probably should be seen in a similar way to convertible stocks and here is the way I think of it.

Options:
"An option gives the holder the right to purchase property at a specified price that is good until a certain date — the expiration date. If the option is not exercised before the expiration date, then it ceases to exist, it becomes worthless. The person who grants the option is known as the option writer or grantor, while the person who receives the option in exchange for a payment — the premium — is the option holder, or grantee.

When an option holder closes a transaction, then there is a capital gain or loss if the underlying asset is a capital asset; otherwise, it is an ordinary gain or loss. If the holder held an option for a capital asset for longer than 1 year, then the closing transaction will be a long-term capital gain or loss; otherwise, it is short term."

Short example (Tried to keep it simple, this example excludes the premium): When exercising a call option on expiration date, strike was 100 and on expiration date the price is 120, the buyer of the call recives 120-100 x amount and makes an instant profit of 20 x amount, which is taxable.

Convertibles:
"When a convertible bond or a convertible preferred stock is converted into the common stock of the same corporation, then no gain or loss is recognized as long as the conversion feature was one of the characteristics of the bond or preferred stock when it was purchased.

The tax basis of the converted stock is equal to the tax basis of the convertible security. However, if there is a cash payment that is required for the conversion, then both the holding period and the tax basis of the acquired stock must be apportioned between the portion attributed to the original purchase of the convertible security and the cash paid for the conversion to stock.

The conversion of the bond to the common stock is not a taxable event, regardless of the fair market value of the stock when the conversion takes place. However, although a bondholder can choose either to amortize a premium paid for a bond or to add it to its basis, no amortization is allowed for that part of the premium that was paid for the conversion feature."

https://thismatter.com/money/tax/options-convertible-securities-taxation.htm


#69

No “state income tax” does not mean no “capital gains tax”. Wyoming and other states (like your old Florida) that have no state income tax still have capital gains tax. But my friend, don’t listen to me, contact the IRS directly. They will tell you “for free” all you need to know about taxation. And much to the surprise of some on this forum, reporting income IS obligatory. Those that don’t think so are either in prison, are getting ready for prison, or are broke from paying attorneys to keep them out of prison. Taxation pays for the many public services that are necessary to live and raise a family in a safe and secure society.
I agree that public monies are wasted by many and understand there are corrupt political regimes, but the alternative is worse.


#70

Lucky countries which have this rule already.

If one exchange will have at time of first day of new Safecoinsa price same as MAID, than no taxes If you will no wait for price encrease in next days and change it imidiatelly.

It also could be price set on same price on some page (not even exchange) and you may say that this was only price at that moment when you change MAID to Safecoin.

Should be working like this in our country.


#71

Yeah @Mendrit cool such laws exist but there is no Maid/USD or Maid/EUR pair so you have to exchange your Maid for BTC and then you have to wait another year :smiley: If I would make profits where I have to think about taxes :money_mouth_face: I wouldn’t realize my coins in my homeland. Would go to the next authority give them my citizenship back and would go to an caribbean island where I have to pay exactly 0.00% taxes.:joy: