State of Bitcoin 2015: Ecosystem Grows Despite Price Decline

Effectively handle bad debts of credit institutions and enterprises

Effectively handle bad debts of credit institutions and enterprises
In 2019, the Vietnam Debt Trading Company Limited (DATC) directly purchased and handled nearly VND 3,000 billion of bad debts from credit institutions and enterprises. Revenue from trading and handling debts and assets was 1,785 billion VND, equal to 124% compared to 2018 ...
DATC will participate in restructuring loss projects
DATC auctioned the debt of over 1.1 trillion dong
DATC entered the prevention and control of the Covid-19 epidemic
DATC sells debts and assets at two debtor enterprises
In addition, the company received debts and excluded assets in 15 enterprises with a value of 21,378 billion dong, of which, assets were 9,897 billion dong, debt was 11,481 billion dong, enterprises themselves. processing before handover is 2,803 billion dong.

https://preview.redd.it/zhpxw0ypfrt51.jpg?width=948&format=pjpg&auto=webp&s=522b0aa9f901fc7b11c6a4c461ea4b082728a7d8
The result of the actual value recovered from asset handling and debt collection received in 2019 is 20.2 billion VND, revenue from receiving activities is 6,057 billion VND (in which: property is 4,155 billion dong, debt recovery is 0.988 billion dong and debt collection handled by the business before handover is 0.994 billion dong), reaching 121% of the plan for 2019.
Fast online transactions: bitcoin to paypal
During the operation, the company also encountered many difficulties and challenges due to the inadequacies in the operating mechanism, which was not consistent with the changes of the market. Along with that, the regulations have not been promptly amended and supplemented, leading to limited performance of assigned roles and tasks, reducing the efficiency of DATC's debt settlement plan.

Along with the difficult market, banks continue to promote the auction of collateral to recover debts / unsuccessfully auction debts to negotiate to sell debts to DATC; Due to the high asking price of debt (usually 100% of the principal and interest) and having to devalue many times to get closer to DATC's offer, it affects the progress, plan to buy and process structure to convert debt into capital contribution.

However, the Company still achieved excellent results in 2019 with a total revenue of more than 2,000 billion VND; Profit before tax is estimated at 213 billion VND. Compared to the previous 5-year period from 2010 to 2014, accumulated in the period 2015-2019, the total revenue of DATC is 10,488 billion VND (an increase of 229% compared to the 2010-2014 period), purchasing debt and assets with total sales was 9,471 billion VND (increased by 442% compared to the period 2010-2014), contribution to State budget of DATC in the same period was over 400 billion VND.



In addition, the Company continues to carry out the tasks assigned by the Government related to debt restructuring of State Groups and Corporations, thereby contributing to improving financial capacity, restoring operations. units in order to speed up the restructuring progress under the Government-approved scheme associated with the recovery of Government debts.

In 2020, DATC will actively coordinate with ministries, branches, People's Committees of provinces and cities to promptly receive eliminated debts and assets in the transformed ownership enterprises. Regularly review and classify debts and assets as non-in-kind expenses, loss of assets in receiving to continue handling. Complete the proceedings in court, at the same time closely coordinate with the judgment enforcement agency to recover debt after receiving from businesses.

Along with that, the company will promote debt trading, restructuring, divestment ... commensurate with its size and capacity, affirming its position and role in debt trading, restructuring enterprises in the Vietnamese debt trading market.
submitted by Ill_Preparation_2814 to u/Ill_Preparation_2814 [link] [comments]

Crypto-Currency: A Guide to Common Tax Situations

STATUS: Majority of questions have been answered. If yours got missed, please feel free to post it again.
Introduction
All,
Based on the rapid increase in popularity and price of bitcoin and other crypto currencies (particularly over the past year), I expect that lots of people have questions about how crypto currency will impact their taxes. This thread attempts to address several common issues. I'm posting similar versions of it here, in several major crypto subs, and eventually in the weekly "tax help" threads personalfinance runs.
I'd like to thank the /personalfinance mod team and the /tax community for their help with this thread and especially for reading earlier versions and offering several valuable suggestions/corrections.
This thread is NOT an endorsement of crypto currency as an investing strategy. There is a time and a place to debate the appropriateness of crypto as part of a diversified portfolio - but that time is not now and that place is not here. If you are interested in the general consensus of this sub on investing, I would urge you to consult the wiki while keeping in mind the general flowchart outlining basic steps to get your finances in order.
Finally, please note that this thread attempts to provide information about your tax obligations as defined by United States law (and interpreted by the IRS under the direction of the Treasury Department). I understand that a certain portion of the crypto community tends to view crypto as "tax free" due to the (actual and perceived) difficulty for the IRS to "know" about the transactions involved. I will not discuss unlawfully concealing crypto gains here nor will I suggest illegal tax avoidance activities.
The Basics
This section is best for people that don't understand much about taxes. It covers some very basic tax principles. It also assumes that all you did during the year was buy/sell a single crypto currency.
Fundamentally, the IRS treats crypto not as money, but as an asset (investment). While there are a few specific "twists" when it comes to crypto, when in doubt replace the word "crypto" with the word "stock" and you will get a pretty good idea how you should report and pay tax on crypto.
The first thing you should know is that the majority of this discussion applies to the taxes you are currently working on (2017 taxes). The tax bill that just passed applies to 2018 taxes (with a few very tiny exceptions), which most people will file in early 2019.
In general, you don't have to report or pay taxes on crypto currency holdings until you "cash out" all or part of your holdings. For now, I'm going to assume that you cash out by selling them for USD; however, other forms of cashing out will be covered later.
When you sell crypto, you report the difference between your basis (purchase price) and proceeds (sale price) on Schedule D. Your purchase price is commonly referred to as your basis; while the two terms don't mean exactly the same thing, they are pretty close to one another (in particular, there are three two ways to calculate your basis - your average cost, a first-in, first-out method, and a "specific identification" method. See more about these here and here). EDIT - you may not use average cost method with crypto - see here. If you sell at a gain, this gain increases your tax liability; if you sell at a loss, this loss decreases your tax liability (in most cases). If you sell multiple times during the year, you report each transaction separately (bad news if you trade often) but get to lump all your gains/losses together when determining how the trades impact your income.
One important thing to remember is that there are two different types of gains/losses from investments - short term gains (if you held an asset for one year or less) and long term gains (over one year; i.e. one year and one day). Short term gains are taxed at your marginal income rate (basically, just like if you had earned that money at a job) while long term gains are taxed at lower rates.
For most people, long term capital gains are taxed at 15%. However, if you are in the 10% or 15% tax bracket, congrats - your gains (up to the maximum amount of "unused space" in your bracket) are tax free! If you are in the 25%, 28%, 33%, or 35% bracket, long term gains are taxed at 15%. If you are in the 39.6% bracket, long term gains are taxed at 20%. Additionally, there is an "extra" 3.8% tax that applies to gains for those above $200,000/$250,000 (single/married). The exact computation of this tax is a little complicated, but if you are close to the $200,000 level, just know that it exists.
Finally, you should know that I'm assuming that you should treat your crypto gains/losses as investment gains/losses. I'm sure some people will try and argue that they are really "day traders" of crypto and trade as a full time job. While this is possible, the vast majority of people don't qualify for this status and you should really think several times before deciding you want to try that approach on the IRS.
"Cashing Out" - Trading Crypto for Goods/Services
I realize that not everyone that "cashes out" of crypto does so by selling it for USD. In fact, I understand that some in the crypto community view the necessity of cashing out itself as a type of myth. In this section, I discuss what happens if you trade your crypto for basically anything that isn't cash (minor sidenote - see next section for a special discussion on trading crypto for crypto; i.e. buying altcoins with crypto).
The IRS views trading crypto for something of value as a type of bartering that must be included in income. From the IRS's perspective, it doesn't matter if you sold crypto for cash and bought a car with that cash or if you just traded crypto directly for the car - in both cases, the IRS views you as having sold your crypto. This approach isn't unique to crypto - it works the same way if you trade stock for something.
This means that if you do trade your crypto for "stuff", you have to report every exchange as a sale of your crypto and calculate the gain/loss on that sale, just as if you had sold the crypto for cash.
Finally, there is one important exception to this rule. If you give your crypto away to charity (one recognized by the IRS; like a 501(c)(3) organization), the IRS doesn't make you report/pay any capital gains on the transaction. Additionally, you still get to deduct the value of your donation on the date it was made. Now, from a "selfish" point of view, you will always end up with more money if you sell the crypto, pay the tax, and keep the rest. But, if you are going to make a donation anyway, especially a large one, giving crypto where you have a big unrealized/untaxed gain is a very efficient way of doing so.
"Alt Coins" - Buying Crypto with Crypto
The previous section discusses what happens when you trade crypto for stuff. However, one thing that surprises many people is that trading crypto for crypto is also a taxable event, just like trading crypto for a car. Whether you agree with this position or not, it makes a lot of sense once you realize that the IRS doesn't view crypto as money, but instead as an asset. So to the IRS, trading bitcoin for ripple isn't like trading dollars for euros, but it is instead like trading shares of Apple stock for shares of Tesla stock.
Practically, what this means is that if you trade one crypto for another crypto (say BTC for XRP just to illustrate the point), the IRS views you as doing the following:
  • Selling for cash the amount of BTC you actually traded for XRP.
  • Owing capital gains/losses on the BTC based on its selling price (the fair market value at the moment of the exchange) and your purchase price (basis).
  • Buying a new investment (XRP) with a cost basis equal to the amount the BTC was worth when you exchanged them.
This means that if you "time" your trade wrong and the value of XRP goes down after you make the exchange, you still owe tax on your BTC gain even though you subsequently lost money. The one good piece of news in this is that when/if you sell your XRP (or change it back to BTC), you will get a capital loss for the value that XRP dropped.
There is one final point worth discussing in this section - the so called "like kind exchange" rules (aka section 1031 exchange). At a high level, these rules say that you can "swap" property with someone else without having to pay taxes on the exchange as long as you get property in return that is "like kind". Typically, these rules are used in real estate transactions. However, they can also apply to other types of transactions as well.
While the idea is simple (and makes it sound like crypto for crypto should qualify), the exact rules/details of this exception are very fact specific. Most experts (including myself, but certainly not calling myself an expert) believe that a crypto for crypto swap is not a like kind exchange. The recently passed tax bill also explicitly clarifies this issue - starting in 2018, only real estate qualifies for like kind exchange treatment. So, basically, the vast majority of evidence suggests that you can't use this "loophole" for 2017; however, there is a small minority view/some small amount of belief that this treatment would work for 2017 taxes and it is worth noting that I'm unaware of any court cases directly testing this approach.
Dealing with "Forks"
Perhaps another unpleasant surprise for crypto holders is that "forks" to create a new crypto also very likely generate a taxable event. The IRS has long (since at least the 1960s) held that "found" money is a taxable event. This approach has been litigated in court and courts have consistently upheld this position; it even has its own cool nerdy tax name - the "treasure trove" doctrine.
Practically, what this means is that if you owned BTC and it "forked" to create BCH, then the fair market value of the BCH you received is considered a "treasure trove" that must be reported as income (ordinary income - no capital gain rates). This is true whether or not you sold your BCH; if you got BCH from a fork, that is a taxable event (note - I'll continue using BTC forking to BCH in this section as an example, but the logic applies to all forks).
While everything I've discussed up to this point is pretty clearly established tax law, forks are really where things get messy with taxes. Thus, the remainder of this section contains more speculation than elsewhere in this post - the truth is that while the idea is simple (fork = free money = taxable), the details are messy and other kinds of tax treatment might apply to forks.
One basic practical problem with forks is that the new currency doesn't necessarily start trading immediately. Thus, you may have received BCH before there was a clear price or market for it. Basically, you owe tax on the value of BCH when you received it, but it isn't completely clear what that value was. There are several ways you can handle this; I'll list them in order from most accurate to least accurate (but note that this is just my personal view and there is ongoing disagreement on this issue with little/no authoritative guidance).
  • Use a futures market to determine the value of the BCH - if reliable sources published realistic estimates of what BCH will trade for in the future once trading begins, use this estimate as the value of your BCH. Pros/cons - futures markets are, in theory, pretty accurate. However, if they are volatile/subject to manipulation, they may provide an incorrect estimate of the true value of BCH. It would suck to use the first futures value published only to have that value plummet shortly thereafter, leaving you to pay ordinary income tax but only have an unrealized capital loss.
  • Wait until an exchange starts trading BCH; use the actual ("spot" price) as the value. Pros/cons - spot prices certainly reflect what you could have sold BCH for; however, it is possible that the true value of the coin was highelower when you received it as compared to when it started trading on the exchange. Thus this method seems less accurate to me than a futures based approach, but it is still certainly fairly reasonable.
  • Assume that the value is $0. This is my least preferred option, but there is still a case to be made for it. If you receive something that you didn't want, can't access, can't sell, and might fail, does it have any value? I believe the answer is yes (maybe not value it perfectly, but value it somewhat accurately), but if you honestly think the answer is no, then the correct tax answer would be to report $0 in income from the fork. The IRS would be most likely to disagree with this approach, especially since it results in the least amount of income reported for the current year (and the most favorable rates going forward). Accordingly, if you go this route, make extra sure you understand what it entails.
Note, once you've decided what to report as taxable income, this amount also becomes your cost basis in the new crypto (BCH). Thus, when you ultimately sell your BCH (or trade it for something else as described above), you calculate your gain/loss based on what you included in taxable income from the fork.
Finally, there is one more approach to dealing with forks worth mentioning. A fork "feels" a lot like a dividend - because you held BTC, you get BCH. In a stock world, if I get a cash dividend because I own the stock, that money is not treated as a "treasure trove" and subject to ordinary income rates - in most cases, it is a qualified dividend and subject to capital gain rates; in some cases, some types of stock dividends are completely non taxable. This article discusses this idea in slightly more detail and generally concludes that forks should not be treated as a dividend. Still, I would note that I'm unaware of any court cases directly testing this theory.
Ultimately, this post is supposed to be practical, so let me make sure to leave you with two key thoughts about the taxation of forks. First, I believe that the majority of evidence suggests that forks should be treated as a "treasure trove" and reported as ordinary income based on their value at creation and that this is certainly the "safest" option. Second, out of everything discussed in this post, I also believe that the correct taxation of forks is the murkiest and most "up for debate" area. If you are interested in a more detailed discussion of forks, see this thread for a previous version of this post discussing it at even more length and the comments for a discussion of this with the tax community.
Mining Crypto
Successfully mining crypto coins is a taxable event. Depending on the amount of effort you put into mining, it is either considered a hobby or a self-employment (business) activity. The IRS provides the following list of questions to help decide the correct classification:
  • The manner in which the taxpayer carries on the activity.
  • The expertise of the taxpayer or his advisors.
  • The time and effort expended by the taxpayer in carrying on the activity.
  • Expectation that assets used in activity may appreciate in value.
  • The success of the taxpayer in carrying on other similar or dissimilar activities.
  • The taxpayer’s history of income or losses with respect to the activity.
  • The amount of occasional profits, if any, which are earned.
If this still sounds complicated, that's because the distinction is subject to some amount of interpretation. As a rule of thumb, randomly mining crypto on an old computer is probably a hobby; mining full time on a custom rig is probably a business.
In either event, you must include in income the fair market value of any coins you successfully mine. These are ordinary income and your basis in these coins is their fair market value on the date they were mined. If your mining is a hobby, they go on line 21 (other income) and any expenses directly associated with mining go on schedule A (miscellaneous subject to 2% of AGI limitation). If your mining is a business, income and expenses go on schedule C.
Both approaches have pros and cons - hobby income isn't subject to the 15.3% self-employment tax, only normal income tax, but you get fewer deductions against your income and the deductions you get are less valuable. Business income has more deductions available, but you have to pay payroll (self-employment) tax of about 15.3% in addition to normal income tax.
What if I didn't keep good records? Do I really have to report every transaction?
One nice thing about the IRS treating crypto as an asset is that we can look at how the IRS treats people that "day trade" stock and often don't keep great records/have lots of transactions. While you need to be as accurate as possible, it is ok to estimate a little bit if you don't have exact records (especially concerning your cost basis). You need to put in some effort (research historical prices, etc...) and be reasonable, but the IRS would much rather you do a little bit of reasonable estimation as opposed to just not reporting anything. Sure, they might decide to audit you/disagree with some specifics, but you earn yourself a lot of credit if you can show that you honestly did the best you reasonably could and are making efforts to improve going forward.
However, concerning reporting every transaction - yes, sorry, it is clear that you have to do this, even if you made hundreds or thousands of them. Stock traders have had to go through this for many decades, and there is absolutely no reason to believe that the IRS would accept anything less from the crypto community. If you have the records or have any reasonable way of obtaining records/estimating them, you must report every transaction.
What if I don't trust you?
Well, first let me say that I can't believe you made it all the way down here to this section. Thanks for giving me an honest hearing. I would strongly encourage you to go read other well-written, honest guides. I'll link to some I like (both more technical IRS type guides and more crypto community driven guides). While a certain portion of the crypto community seems to view one of the benefits of crypto as avoiding all government regulation (including taxes), I've been pleasantly surprised to find that many crypto forums contain well reasoned, accurate tax guides. While I may not agree with 100% of their conclusions, that likely reflects true uncertainty around tax law that is fundamentally complex rather than an attempt on either end to help individuals unlawfully avoid taxes.
IRS guides
Non-IRS guides
submitted by Mrme487 to personalfinance [link] [comments]

IoT Testing !!!

IoT is a whole ecosystem that contains intelligent devices equipped with sensors (sensors) that provide remote control, storage, transmission and security of data. The Internet of Things (IoT) is an innovative solution in various areas such as healthcare, insurance, labor protection, logistics, ecology, etc. To unleash the full potential of using IoT devices, it is necessary to solve many problems related to standards, security, architecture, ecosystem construction, channels and device connection protocols. Today in the world, large organizations such as NIST, IEEE, ISO / IEC, and others make enormous efforts in addressing the issues of standardization, security, and the architecture of developed devices. Analysis of recent scientific research in the field of solving information security issues and data privacy of IoT devices showed positive results, but these methods and approaches are based on traditional methods of network security. The development and application of security mechanisms for IoT devices is a complex and heterogeneous task. In this regard, ensuring information security and the protection of sensitive data, as well as the availability of IoT devices, is the main purpose of writing this article. Given the above, many questions arise related to the security status of IoT devices, namely: What are the current standards and protocols for IoT? What are the requirements for ensuring information security of IoT devices? What security mechanisms do IoT devices have? What methods of testing IoT devices exist? Manufacturers and developers of IoT devices do not pay enough attention to security issues. With the development of cyber-attacks, attack vectors are becoming more sophisticated and aimed at several infrastructure elements at the same time. IoT infrastructure typically includes millions of connected objects and devices that store and share confidential information. Scenarios of theft and fraud, such as hacking and falsifying personal data, pose a serious threat to such IoT devices. Most IoT devices use the public Internet to exchange data, which makes them vulnerable to cyber-attacks. Modern approaches to information security often offer solutions to individual problems, when multi-level approaches offer increased resistance to cyber-attacks.
Challenges of testing IoT devices
To a request to name essential items, many would answer: food, a roof over your head, clothes … With one caveat: this was the case in the last century.
Since then, the species Homo Sapiens has accumulated needs. We need automatic sensors to control the lighting, not just switches, for smart systems to monitor health and car traffic. The list goes on … In general, we can make life easier and better.
Let’s try to figure out how all this Internet of things works before moving on to testing.
IoT testing
Content
What is the Internet of Things (IoT)? Examples of IoT devices # 1) Wearable technology: # 2) Infrastructure and development # 3) Health Technologies that are present in IoT IoT Testing # 1) Usability: # 2) IoT Security: # 3) Network features: # 4) Efficiency: # 5) Compatibility testing: # 6) Pilot testing: # 7) Check for compliance: # 8) Testing updates: IoT testing challenges # 1) Hard / soft # 2) Device Interaction Model # 3) Testing data coming in real time # 4) UI # 5) Network Availability IoT Testing Tools # 1) Software: # 2) Hard: Total What is the Internet of Things (IoT)? The Internet of things (or IoT) is a network that combines many objects: vehicles, home automation, medical equipment, microchips, etc. All these constituent elements accumulate and transmit data. Through this technology, the user controls the devices remotely.

Examples of IoT devices

# 1) Wearable technology: Fitbit Fitness Bracelets and Apple Watch smart watches sync seamlessly with other mobile devices.

IoT – watches and bracelets

Itís easier to collect health information: heart rate, body activity during sleep, etc.
# 2) Infrastructure and development The CitySense app analyzes lighting data online and turns lights on and off automatically. There are applications that control traffic lights or report on the availability of parking lots.
# 3) Health Some health monitoring systems are used in hospitals. The basis of their work is indicative data. These services control the dosage of drugs at different times of the day. For example, the UroSense application monitors the level of fluid in the body and, if necessary, increases this level. And doctors will learn about patient information wirelessly.
Technologies that are present in IoT RFID (Radio Frequency Identification), EPC (Electronic Product Code) NFC (ìNear Field Communicationî) provides two-way communication between devices. This technology is present in smartphones and is used for contactless transactions.
Bluetooth It is widely used in situations where near-field communication is sufficient. Most often present in wearable devices. Z-Wave. Low frequency RF technology. Most often used for home automation, lighting control, etc. WiFi. The most popular network for IoT (file, data and message transfer). IoT Testing Consider an example : a medical system that monitors health status, heart rate, fluid content, and sends reports to healthcare providers. Data is displayed in the system; archives available. And doctors are already deciding whether to take medication for the patient remotely.
IoT architecture
There are several approaches for testing the IoT architecture.
# 1) Usability: It is necessary to provide usability testing of each device. A medical device that monitors your health should be portable.
Sufficiently thought out equipment is needed that would send not only notifications, but also error messages, warnings, etc. The system must have an option that captures events, so that the end user understands. If this is not possible, event information is stored in the database. The ability to process data and exchange tasks between devices is carefully checked. # 2) IoT Security: Data is at the heart of all connected devices. Therefore, unauthorized access during data transfer is not ruled out. From the point of view of software testing, it is necessary to check how secure / encrypted the data is. If there is a UI, you need to check if it is password protected. # 3) Network features: Network connectivity and IoT functionality are critical. After all, we are talking about a system that is used for health purposes. Two main aspects are tested: The presence of a network , the possibility of data transfer (whether jobs are transferred from one device to another without any hitch). The scenario when there is no connection . Regardless of the level of reliability of the system, it is likely that the status of the system will be ìofflineî. If the network is unavailable, employees of the hospital or other organization need to know about it (notifications). Thus, they will be able to monitor the condition of the patient themselves, and not wait for the system to work. On the other hand, in such systems there is usually a mechanism that saves data if the system is offline. That is, data loss is eliminated. # 4) Efficiency: It is necessary to take into account the extent to which the healthcare solution is applicable in specific conditions. In testing, from 2 to 10 patients participate, data is transmitted to 10-20 devices. If the entire hospital is connected to the network, this is already 180-200 patients. That is, there will be more actual data than test data. In addition, it is necessary to test the utility for monitoring the system: current load, power consumption, temperature, etc. # 5) Compatibility testing: This item is always present in the plan for testing the IoT system. The compatibility of different versions of operating systems, browser types and their respective versions, devices of different generations, communication modes [for example, Bluetooth 2.0, 3.0] is extremely important for IoT. # 6) Pilot testing: Pilot testing is a mandatory point of the test plan. Only tests in the laboratory will allow us to conclude that the system is functional. In pilot testing, the number of users is limited. They make manipulations with the application and express their opinion. These comments turn out to be very helpful, they make a reliable application. # 7) Check for compliance: The system, which monitors the state of health, undergoes many compliance checks. It also happens that a software product passes all stages of testing, but fails the final test for compliance [testing is carried out by the regulatory body]. It is more advisable to check for compliance with norms and standards before starting the development cycle. # 8) Testing updates: IoT is a combination of many protocols, devices, operating systems, firmware, hardware, network layers, etc. When an update occurs – be it a system or something else of the above – rigorous regression testing is required. The overall strategy is being amended to avoid the difficulties associated with the upgrade.

IoT testing challengesIoT testing

# 1) Hard / soft IoT is an architecture in which software and hardware components are closely intertwined. Not only software is important, but also hard: sensors, gateways, etc.
Functional testing alone will not be enough to certify the system. All components are interdependent. IoT is much more complicated than simpler systems [only software or only hard].
# 2) Device Interaction Model Components of the network must interact in real time or close to real. All this becomes a single whole – hence the additional difficulties associated with IoT (security, backward compatibility and updates).
# 3) Testing data coming in real time Obtaining this data is extremely difficult. The matter is complicated by the fact that the system, as in the described case, may relate to the health sector.
# 4) UI An IoT network usually consists of different devices that are controlled by different platforms [iOS, Android, Windows, linux]. Testing is possible only on some devices, since testing on all possible devices is almost impossible.
# 5) Network Availability Network connectivity plays an important role in IoT. The data rate is increasing. IoT architecture should be tested under various connection conditions, at different speeds. Virtual network emulators in most cases are used to diversify network load, connectivity, stability, and other elements of load testing . But the evidence is always new scenarios, and the testing team does not know where the difficulties will arise in the future.

IoT Testing ToolsIoT and software

There are many tools that are used in testing IoT systems.
They are classified depending on the purpose:
# 1) Software: Wireshark : An open source tool. Used to monitor traffic in the interface, source / given host address, etc. Tcpdump : This tool does a similar job. The utility does not have a GUI, its interface is the command line. It enables the user to flash TCP / IP and other packets that are transmitted over the network. # 2) Hard: JTAG Dongle: A tool similar to debuggers in PC applications. Allows you to find defects in the code of the target platform and shows the changes step by step. Digital Storage Oscilloscope : checks various events using time stamps, power outages, signal integrity. Software Defined Radio : emulates a transmitter and receiver for various wireless gateways. IoT is an emerging market and many opportunities. In the foreseeable future, the Internet of things will become one of the main areas of work for tester teams. Network devices, smart gadget applications, communication modules – all this plays an important role in the study and evaluation of various services.
Total The approach to testing IoT may vary depending on the specific system / architecture.
Itís difficult to test IoT, but at the same time itís an interesting job, since testers have a good place to swing – there are many devices, protocols and operating systems.
PS You should try out the TAAS format (“tests from the user’s point of view”), and not just fulfill the formal requirements.
—————
Smart watches, baby-sitters, wireless gadgets and devices such as, for example, a portable radio station have long been part of everyday life.
Hackers have already proven that many of these attacks on IoT are possible.
Many people in general first learned about IoT security threats when they heard about the Mirai botnet in September 2016.
According to some estimates, Mirai infected about 2.5 million IoT devices, including printers, routers and cameras connected to the Internet.
The botnetís creators used it to launch distributed denial of service (DDoS) attacks, including an attack on the KrebsonSecurity cybersecurity blog.
In fact, the attackers used all devices infected with Mirai to try to connect to the target site at the same time, in the hope of suppressing the servers and preventing access to the site.
Since Mirai was first published on the news, attackers launched other botnet attacks on IoT, including Reaper and Hajime.
Experts say that such attacks are most likely in the future.
The Internet of Things (IoT) can bring many advantages to modern life, but it also has one huge drawback: security threats.
In its 2018 IOT forecasts, Forroter Research notes: ìSecurity threats are a major concern for companies deploying IoT solutions – in fact, this is the main task of organizations looking to deploy IoT solutions.
However, most firms do not regularly prevent IoT-specific security threats, and business pressure suppresses technical security issues. î
IoT security risks can be even more significant on the consumer side, where people are often unaware of potential threats and what they should do to avoid threats.
A 2017 IoT security survey sponsored by Gemalto Security Provider found that only 14 percent of consumers surveyed consider themselves IoT-aware.
This number is particularly noteworthy because 54 percent of the respondents owned an average of four IoT devices.
And these IoT security threats are not just theoretical.
Hackers and cybercriminals have already found ways to compromise many IoT devices and networks, and experts say that successful attacks are likely to increase.
Forrester predicted: “In 2018, we will see more attacks related to IoT … except that they will increase in scale and loss.”
What types of IoT security threats will enterprises and consumers face in 2018?
Based on historical precedent, here are ten of the most likely types of attacks.
  1. Botnets and DDoS attacks
  2. Remote recording The possibility that attackers can hack IoT devices and record owners without their knowledge is not revealed as a result of the work of hackers, but as a result of the work of the Central Intelligence Agency (CIA).
Documents released by WikiLeaks implied that the spy agency knew about dozens of zero-day exploits for IoT devices, but did not disclose errors, because they hoped to use vulnerabilities to secretly record conversations that would reveal the actions of alleged opponents of America.
Documents pointed to vulnerabilities in smart TVs, as well as on Android and iOS smartphones.
The obvious consequence is that criminals can also exploit these vulnerabilities for their vile purposes.
  1. Spam In January 2014, one of the first known attacks using IoT devices used more than 100,000 Internet-connected devices, including televisions, routers, and at least one smart refrigerator to send 300,000 spam emails per day.
The attackers sent no more than 10 messages from each device, which makes it very difficult to block or determine the location of the incident.
This first attack was not far from the last.
IoT spam attacks continued in the fall with the Linux.ProxyM IoT botnet.
  1. APTs In recent years, advanced persistent threats (APTs) have become a serious concern for security professionals.
APTs are carried out by funded and widespread attackers such as nation states or corporations that launch complex cyberattacks that are difficult to prevent or mitigate.
For example, the Stuxnet worm, which destroyed Iranian nuclear centrifuges and hacking Sony Pictures 2014, was attributed to nation states.
Because the critical infrastructure is connected to the Internet, many experts warn that APTs may launch a power-oriented IoT attack, industrial control systems, or other systems connected to the Internet.
Some even warn that terrorists could launch an attack on iOT, which could harm the global economy.
  1. Ransomware Ransomware has become too common on home PCs and corporate networks. Now experts say that it is only a matter of time before the attackers begin to block smart devices. Security researchers have already demonstrated the ability to install ransomware on smart thermostats. For example, they can raise the temperature to 95 degrees and refuse to return it to its normal state until the owner agrees to pay a ransom in Bitcoins. They can also launch similar attacks on garage doors, vehicles, or even appliances. How much would you pay to unlock your smart coffee pot first thing in the morning?
  2. Data theft Obtaining important data, such as customer names, credit card numbers, social security numbers, and other personal information, is still one of the main goals of cyber attacks.
IoT devices represent a whole new vector of attack for criminals looking for ways to invade corporate or home networks.
For example, if an improperly configured device or IoT sensor is connected to corporate networks, this can give attackers a new way to enter the network and potentially find the valuable data that they need.
  1. Home theft As smart locks and smart garage doors become more commonplace, it is also more likely that cybercriminals can become real thieves.
Home systems that are not properly protected can be vulnerable to criminals with sophisticated tools and software.
Security researchers are unlikely to have shown that itís quite easy to break into a house through smart locks from several different manufacturers, and smart garage doors do not seem to be much safer.
  1. Communication with children One of the most disturbing IoT security stories came from children.
One couple discovered that the stranger not only used his monitor for children to spy on their three-year-old son, this stranger also spoke with his child through the device.
Mother heard an unknown voice: ìWake up, boy, dad is looking for you,î and the child said that he was scared because at night someone was talking to him on an electronic device.
As more and more children’s gadgets and toys connect to the Internet, it seems likely that these frightening scenarios may become more common.
  1. Remote control of a vehicle As vehicles become smarter and more accessible on the Internet, they also become vulnerable to attack.
Hackers have shown that they can take control of a jeep, maximize air conditioning, change the radio station, start the wipers, and ultimately slow down the car.
The news led to the recall of 1.4 million cars, but whitehat researchers, following the original exploit, said they discovered additional vulnerabilities that were not fixed by the Chrysler patch applied to the recalled cars.
Although experts say the automotive industry is doing a great job of ensuring vehicle safety, it is almost certain that attackers will find new vulnerabilities in such smart cars.
  1. Personal attacks Sometimes IoT covers more than just devices – it can also include people who have connected medical devices implanted in their bodies.
An episode of the television series Homeland attempted a murder aimed at an implanted medical device, and former vice president Dick Cheney was so worried about this scenario that he turned off the wireless capabilities on his implanted defibrillator.
This kind of attack has not yet happened in real life, but it remains possible, as many medical devices become part of the IoT.
submitted by farabijfa to u/farabijfa [link] [comments]

Bitcoin and Minning

Bitcoin[a] () is a cryptocurrency. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.[8]
Transactions are verified by network nodes) through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto[15] and was released as open-source software in 2009.[16] Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.[17] Research produced by University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.[18]
Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, thefts from exchanges, and by reputable economists stating that "it should have a zero price".[19] Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.[20][21]
Mining is a record-keeping service done through the use of computer processing power.[f] Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes.[80] Each block contains a SHA-256 cryptographic hash of the previous block,[80] thus linking it to the previous block and giving the blockchain its name.[7]:ch. 7[80]
To be accepted by the rest of the network, a new block must contain a proof-of-work (PoW).[80] The system used is based on Adam Back's 1997 anti-spam scheme, Hashcash.[91][failed verification][4] The PoW requires miners to find a number called a nonce, such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.[7]:ch. 8 This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash, miners must try many different nonce values (usually the sequence of tested values is the ascending natural numbers: 0, 1, 2, 3, ...[7]:ch. 8) before meeting the difficulty target.
Every 2,016 blocks (approximately 14 days at roughly 10 min per block), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.[7]:ch. 8Between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion.[92]
The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.[93] As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.[80]
submitted by TheResearcher012 to GreatLifePostsGoTeam [link] [comments]

AN INTRODUCTION TO DIGIBYTE

DigiByte

What are cryptocurrencies?
Cryptocurrencies are peer to peer technology protocols which rely on the block-chain; a system of decentralized record keeping which allows people to exchange unmodifiable and indestructible information “coins,” globally in little to no time with little to no fees – this translates into the exchange of value as these coins cannot be counterfeit nor stolen. This concept was started by Satoshi Nakamoto (allegedly a pseudonym for a single man or organization) whom described and coded Bitcoin in 2009.
What is DigiByte?
DigiByte (DGB) is a cryptocurrency like Bitcoin. It is also a decentralized applications protocol in a similar fashion to Neo or Ethereum.
DigiByte was founded and created by Jared Tate in 2014. DigiByte allows for fast (virtually instant) and low cost (virtually free) transactions. DigiByte is hard capped at 21 billion coins which will ever be mined, over a period of 21 years. DigiByte was never an ICO and was mined/created in the same way that Bitcoin or Litecoin initially were.
DigiByte is the fastest UTXO PoW scalable block-chain in the world. We’ll cover what this really means down below.
DigiByte has put forth and applied solutions to many of the problems that have plagued Bitcoin and cryptocurrencies in general – those being:
We will address these point by point in the subsequent sections.
The DigiByte Protocol
DigiByte maintains these properties through use of various technological innovations which we will briefly address below.
Why so many coins? 21 Billion
When initially conceived Bitcoin was the first of a kind! And came into the hands of a few! The beginnings of a coin such as Bitcoin were difficult, it had to go through a lot of initial growth pains which following coins did not have to face. It is for this reason among others why I believe Bitcoin was capped at 21 million; and why today it has thus secured a place as digital gold.
When Bitcoin was first invented no one knew anything about cryptocurrencies, for the inventor to get them out to the public he would have to give them away. This is how the first Bitcoins were probably passed on, for free! But then as interest grew so did the community. For them to be able to build something and create something which could go on to have actual value, it would have to go through a steady growth phase. Therefore, the control of inflation through mining was extremely important. Also, why the cap for Bitcoin was probably set so low - to allow these coins to amass value without being destroyed by inflation (from mining) in the same way fiat is today! In my mind Satoshi Nakamoto knew what he was doing when setting it at 21 million BTC and must have known and even anticipated others would take his design and build on top of it.
At DigiByte, we are that better design and capped at 21 billion. That's 1000 times larger than the supply of Bitcoin. Why though? Why is the cap on DigiByte so much higher than that of Bitcoin? Because DigiByte was conceived to be used not as a digital gold, nor as any sort of commodity, but as a real currency!
Today on planet Earth, we are approximately 7.6 billion people. If each person should want or need to use and live off Bitcoin; then equally split at best each person could only own 0.00276315789 BTC. The market cap for all the money on the whole planet today is estimated to have recently passed 80 trillion dollars. That means that each whole unit of Bitcoin would be worth approximately $3,809,523.81!
$3,809,523.81
This is of course in an extreme case where everyone used Bitcoin for everything. But even in a more conservative scenario the fact remains that with such a low supply each unit of a Bitcoin would become absurdly expensive if not inaccessible to most. Imagine trying to buy anything under a dollar!
Not only would using Bitcoin as an everyday currency be a logistical nightmare but it would be nigh impossible. For each Satoshi of a Bitcoin would be worth much, much, more than what is realistically manageable.
This is where DigiByte comes in and where it shines. DigiByte aims to be used world-wide as an international currency! Not to be hoarded in the same way Bitcoin is. If we were to do some of the same calculations with DigiByte we'd find that the numbers are a lot more reasonable.
At 7.6 billion people, each person could own 2.76315789474 DGB. Each whole unit of DGB would be worth approximately $3,809.52.
$3,809.52
This is much more manageable and remember in an extreme case where everyone used DigiByte for everything! I don't expect this to happen anytime soon, but with the supply of DigiByte it would allow us to live and transact in a much more realistic and fluid fashion. Without having to divide large numbers on our phone's calculator to understand how much we owe for that cup of coffee! With DigiByte it's simple, coffee cost 1.5 DGB, the cinema 2.8 DGB, a plane ticket 500 DGB!
There is a reason for DigiByte's large supply, and it is a good one!
Decentralisation
Decentralisation is an important concept for the block-chain and cryptocurrencies in general. This allows for a system which cannot be controlled nor manipulated no matter how large the organization in play or their intentions. DigiByte’s chain remains out of the reach of even the most powerful government. This allows for people to transact freely and openly without fear of censorship.
Decentralisation on the DigiByte block-chain is assured by having an accessible and fair mining protocol in place – this is the multi-algorithm (MultiAlgo) approach. We believe that all should have access to DigiByte whether through purchase or by mining. Therefore, DigiByte is minable not only on dedicated mining hardware such as Antminers, but also through use of conventional graphics cards. The multi-algorithm approach allows for users to mine on a variety of hardware types through use of one of the 5 mining algorithms supported by DigiByte. Those being:
Please note that these mining algorithms are modified and updated from time to time to assure complete decentralisation and thus ultimate security.
The problem with using only one mining algorithm such as Bitcoin or Litecoin do is that this allows for people to continually amass mining hardware and hash power. The more hash power one has, the more one can collect more. This leads to a cycle of centralisation and the creation of mining centres. It is known that a massive portion of all hash power in Bitcoin comes from China. This kind of centralisation is a natural tendency as it is cheaper for large organisations to set up in countries with inexpensive electricity and other such advantages which may be unavailable to the average miner.
DigiByte mitigates this problem with the use of multiple algorithms. It allows for miners with many different kinds of hardware to mine the same coin on an even playing field. Mining difficulty is set relative to the mining algorithm used. This allows for those with dedicated mining rigs to mine alongside those with more modest machines – and all secure the DigiByte chain while maintaining decentralisation.
Low Fees
Low fees are maintained in DigiByte thanks to the MultiAlgo approach working in conjunction with MultiShield (originally known as DigiShield). MultiShield calls for block difficulty readjustment between every single block on the chain; currently blocks last 15 seconds. This continuous difficulty readjustment allows us to combat any bad actors which may wish to manipulate the DigiByte chain.
Manipulation may be done by a large pool or a single entity with a great amount of hash power mining blocks on the chain; thus, increasing the difficulty of the chain. In some coins such as Bitcoin or Litecoin difficulty is readjusted every 2016 blocks at approximately 10mins each and 2mins respectively. Meaning that Bitcoin’s difficulty is readjusted about every two weeks. This system can allow for large bad actors to mine a coin and then abandon it, leaving it with a difficulty level far too high for the present hash rate – and so transactions can be frozen, and the chain stopped until there is a difficulty readjustment and or enough hash power to mine the chain. In such a case users may be faced with a choice - pay exorbitant fees or have their transactions frozen. In an extreme case the whole chain could be frozen completely for extended periods of time.
DigiByte does not face this problem as its difficulty is readjusted per block every 15 seconds. This innovation was a technological breakthrough and was adopted by several other coins in the cryptocurrency environment such as Dogecoin, Z-Cash, Ubiq, Monacoin, and Bitcoin Gold.
This difficulty readjustment along with the MultiAlgo approach allows DigiByte to maintain the lowest fees of any UTXO – PoW – chain in the world. Currently fees on the DigiByte block-chain are at about 0.0001 DGB per transaction of 100 000 DGB sent. This depends on the amount sent and currently 100 000 DGB are worth around $2000.00 with the fee being less than 0.000002 cents. It would take 500 000 transactions of 100 000 DGB to equal 1 penny’s worth. This was tested on a Ledger Nano S set to the low fees setting.
Fast transaction times
Fast transactions are ensured by the conjunctive use of the two aforementioned technology protocols. The use of MultiShield and MultiAlgo allows the mining of the DigiByte chain to always be profitable and thus there is always someone mining your transactions. MultiAlgo allows there to a greater amount of hash power spread world-wide, this along with 15 second block times allows for transactions to be near instantaneous. This speed is also ensured by the use DigiSpeed. DigiSpeed is the protocol by which the DigiByte chain will decrease block timing gradually. Initially DigiByte started with 30 second block times in 2014; which today are set at 15 seconds. This decrease will allow for ever faster and ever more transactions per block.
Robust security + The Immutable Ledger
At the core of cryptocurrency security is decentralisation. As stated before decentralisation is ensured on the DigiByte block chain by use of the MultiAlgo approach. Each algorithm in the MultiAlgo approach of DigiByte is only allowed about 20% of all new blocks. This in conjunction with MultiShield allows for DigiByte to be the most secure, most reliable, and fastest UTXO block chain on the planet. This means that DigiByte is a proof of work (PoW) block-chain where all transactional activities are stored on the immutable public ledger world-wide. In DigiByte there is no need for the Lightning protocol (although we have it) nor sidechains to scale, and thus we get to keep PoW’s security.
There are many great debates as to the robustness or cleanliness of PoW. The fact remains that PoW block-chains remain the only systems in human history which have never been hacked and thus their security is maximal.
For an attacker to divert the DigiByte chain they would need to control over 93% of all the hashrate on one algorithm and 51% of the other four. And so DigiByte is immune to the infamous 51% attack to which Bitcoin and Litecoin are vulnerable.
Moreover, the DigiByte block-chain is currently spread over 200 000 plus servers, computers, phones, and other machines world-wide. The fact is that DigiByte is one of the easiest to mine coins there is – this is greatly aided by the recent release of the one click miner. This allows for ever greater decentralisation which in turn assures that there is no single point of failure and the chain is thus virtually un-attackable.
On Chain Scalability
The biggest barrier for block-chains today is scalability. Visa the credit card company can handle around 2000 transactions per second (TPS) today. This allows them to ensure customer security and transactional rates nation-wide. Bitcoin currently sits at around 7 TPS and Litecoin at 28 TPS (56 TPS with SegWit). All the technological innovations I’ve mentioned above come together to allow for DigiByte to be the fastest PoW block-chain in the world and the most scalable.
DigiByte is scalable because of DigiSpeed, the protocol through which block times are decreased and block sizes are increased. It is known that a simple increase in block size can increase the TPS of any block-chain, such is the case with Bitcoin Cash. This is however not scalable. The reason a simple increase in block size is not scalable is because it would eventually lead to some if not a great amount of centralization. This centralization occurs because larger block sizes mean that storage costs and thus hardware cost for miners increases. This increase along with full blocks – meaning many transactions occurring on the chain – will inevitably bar out the average miner after difficulty increases and mining centres consolidate.
Hardware cost, and storage costs decrease over time following Moore’s law and DigiByte adheres to it perfectly. DigiSpeed calls for the increase in block sizes and decrease in block timing every two years by a factor of two. This means that originally DigiByte’s block sizes were 1 MB at 30 seconds each at inception in 2014. In 2016 DigiByte increased block size by two and decreased block timing by the same factor. Perfectly following Moore’s law. Moore’s law dictates that in general hardware increases in power by a factor of two while halving in cost every year.
This would allow for DigiByte to scale at a steady rate and for people to adopt new hardware at an equally steady rate and reasonable expense. Thus so, the average miner can continue to mine DigiByte on his algorithm of choice with entry level hardware.
DigiByte was one of the first block chains to adopt segregated witness (SegWit in 2017) a protocol whereby a part of transactional data is removed and stored elsewhere to decrease transaction data weight and thus increase scalability and speed. This allows us to fit more transactions per block which does not increase in size!
DigiByte currently sits at 560 TPS and could scale to over 280 000 TPS by 2035. This dwarfs any of the TPS capacities; even projected/possible capacities of some coins and even private companies. In essence DigiByte could scale worldwide today and still be reliable and robust. DigiByte could even handle the cumulative transactions of all the top 50 coins in coinmarketcap.com and still run smoothly and below capacity. In fact, to max out DigiByte’s actual maximum capacity (today at 560 TPS) you would have to take all these transactions and multiply them by a factor of 10!
Oher Uses for DigiByte
Note that DigiByte is not only to be used as a currency. Its immense robustness, security and scalability make it ideal for building decentralised applications (DAPPS) which it can host. DigiByte can in fact host DAPPS and even centralised versions which rely on the chain which are known as Digi-Apps. This application layer is also accompanied by a smart contract layer.
Thus, DigiByte could host several Crypto Kitties games and more without freezing out or increasing transaction costs for the end user.
Currently there are various DAPPS being built on the DigiByte block-chain, these are done independently of the DigiByte core team. These companies are simply using the DigiByte block-chain as a utility much in the same way one uses a road to get to work. One such example is Loly – a Tinderesque consensual dating application.
DigiByte also hosts a variety of other platform projects such as the following:
The DigiByte Foundation
As previously mentioned DigiByte was not an ICO. The DigiByte foundation was established in 2017 by founder Jared Tate. Its purpose is as a non-profit organization dedicated to supporting and developing the DigiByte block-chain.
DigiByte is a community effort and a community coin, to be treated as a public resource as water or air. Know that anyone can work on DigiByte, anyone can create, and do as they wish. It is a permissionless system which encourages innovation and creation. If you have an idea and or would like to get help on your project do not hesitate to contact the DigiByte foundation either through the official website and or the telegram developer’s channel.
For this reason, it is ever more important to note that the DigiByte foundation cannot exist without public support. And so, this is the reason I encourage all to donate to the foundation. All funds are used for the maintenance of DigiByte servers, marketing, and DigiByte development.
DigiByte Resources and Websites
DigiByte
Wallets
Explorers
Please refer to the sidebar of this sub-reddit for more resources and information.
Edit - Removed Jaxx wallet.
Edit - A new section was added to the article: Why so many coins? 21 Billion
Edit - Adjusted max capacity of DGB's TPS - Note it's actually larger than I initially calculated.
Edit – Grammar and format readjustment
Hello,
I hope you’ve enjoyed my article, I originally wrote this for the reddit sub-wiki where it generally will most likely, probably not, get a lot of attention. So instead I've decided to make this sort of an introductory post, an open letter, to any newcomers to DGB or for those whom are just curious.
I tried to cover every aspect of DGB, but of course I may have forgotten something! Please leave a comment down below and tell me why you're in DGB? What convinced you? Me it's the decentralised PoW that really convinced me. Plus, just that transaction speed and virtually no fees! Made my mouth water!
-Dereck de Mézquita
I'm a student typing this stuff on my free time, help me pay my debts? Thank you!
D64fAFQvJMhrBUNYpqUKQjqKrMLu76j24g
https://digiexplorer.info/address/D64fAFQvJMhrBUNYpqUKQjqKrMLu76j24g
submitted by xeno_biologist to Digibyte [link] [comments]

Crypto-Currency: A Guide to Common Tax Situations

Introduction
All,
Based on the rapid increase in popularity and price of bitcoin and other crypto currencies (particularly over the past year), I expect that lots of people have questions about how crypto currency will impact their taxes. This thread attempts to address several common issues. I'm posting similar versions of it here, in several other major crypto subs, and in personalfinance.
I'd like to thank the /personalfinance mod team and the /tax community for their help with this thread and especially for reading earlier versions and offering several valuable suggestions/corrections.
Finally, please note that this thread attempts to provide information about your tax obligations as defined by United States law (and interpreted by the IRS under the direction of the Treasury Department). I understand that a certain portion of the crypto community tends to view crypto as "tax free" due to the (actual and perceived) difficulty for the IRS to "know" about the transactions involved. I will not discuss unlawfully concealing crypto gains here nor will I suggest illegal tax avoidance activities.
The Basics
This section is best for people that don't understand much about taxes. It covers some very basic tax principles. It also assumes that all you did during the year was buy/sell a single crypto currency.
Fundamentally, the IRS treats crypto not as money, but as an asset (investment). While there are a few specific "twists" when it comes to crypto, when in doubt replace the word "crypto" with the word "stock" and you will get a pretty good idea how you should report and pay tax on crypto.
The first thing you should know is that the majority of this discussion applies to the taxes you are currently working on (2017 taxes). The tax bill that just passed applies to 2018 taxes (with a few very tiny exceptions), which most people will file in early 2019.
In general, you don't have to report or pay taxes on crypto currency holdings until you "cash out" all or part of your holdings. For now, I'm going to assume that you cash out by selling them for USD; however, other forms of cashing out will be covered later.
When you sell crypto, you report the difference between your basis (purchase price) and proceeds (sale price) on Schedule D. Your purchase price is commonly referred to as your basis; while the two terms don't mean exactly the same thing, they are pretty close to one another (in particular, there are three ways to calculate your basis - your average cost, a first-in, first-out method, and a "specific identification" method. See more about these here and here). If you sell at a gain, this gain increases your tax liability; if you sell at a loss, this loss decreases your tax liability (in most cases). If you sell multiple times during the year, you report each transaction separately (bad news if you trade often) but get to lump all your gains/losses together when determining how the trades impact your income.
One important thing to remember is that there are two different types of gains/losses from investments - short term gains (if you held an asset for one year or less) and long term gains (over one year; i.e. one year and one day). Short term gains are taxed at your marginal income rate (basically, just like if you had earned that money at a job) while long term gains are taxed at lower rates.
For most people, long term capital gains are taxed at 15%. However, if you are in the 10% or 15% tax bracket, congrats - your gains (up to the maximum amount of "unused space" in your bracket) are tax free! If you are in the 25%, 28%, 33%, or 35% bracket, long term gains are taxed at 15%. If you are in the 39.6% bracket, long term gains are taxed at 20%. Additionally, there is an "extra" 3.8% tax that applies to gains for those above $200,000/$250,000 (single/married). The exact computation of this tax is a little complicated, but if you are close to the $200,000 level, just know that it exists.
Finally, you should know that I'm assuming that you should treat your crypto gains/losses as investment gains/losses. I'm sure some people will try and argue that they are really "day traders" of crypto and trade as a full time job. While this is possible, the vast majority of people don't qualify for this status and you should really think several times before deciding you want to try that approach on the IRS.
"Cashing Out" - Trading Crypto for Goods/Services
I realize that not everyone that "cashes out" of crypto does so by selling it for USD. In fact, I understand that some in the crypto community view the necessity of cashing out itself as a type of myth. In this section, I discuss what happens if you trade your crypto for basically anything that isn't cash (minor sidenote - see next section for a special discussion on trading crypto for crypto; i.e. buying altcoins with crypto).
The IRS views trading crypto for something of value as a type of bartering that must be included in income. From the IRS's perspective, it doesn't matter if you sold crypto for cash and bought a car with that cash or if you just traded crypto directly for the car - in both cases, the IRS views you as having sold your crypto. This approach isn't unique to crypto - it works the same way if you trade stock for something.
This means that if you do trade your crypto for "stuff", you have to report every exchange as a sale of your crypto and calculate the gain/loss on that sale, just as if you had sold the crypto for cash.
Finally, there is one important exception to this rule. If you give your crypto away to charity (one recognized by the IRS; like a 501(c)(3) organization), the IRS doesn't make you report/pay any capital gains on the transaction. Additionally, you still get to deduct the value of your donation on the date it was made. Now, from a "selfish" point of view, you will always end up with more money if you sell the crypto, pay the tax, and keep the rest. But, if you are going to make a donation anyway, especially a large one, giving crypto where you have a big unrealized/untaxed gain is a very efficient way of doing so.
"Alt Coins" - Buying Crypto with Crypto
The previous section discusses what happens when you trade crypto for stuff. However, one thing that surprises many people is that trading crypto for crypto is also a taxable event, just like trading crypto for a car. Whether you agree with this position or not, it makes a lot of sense once you realize that the IRS doesn't view crypto as money, but instead as an asset. So to the IRS, trading bitcoin for ripple isn't like trading dollars for euros, but it is instead like trading shares of Apple stock for shares of Tesla stock.
Practically, what this means is that if you trade one crypto for another crypto (say BTC for XRP just to illustrate the point), the IRS views you as doing the following:
  • Selling for cash the amount of BTC you actually traded for XRP.
  • Owing capital gains/losses on the BTC based on its selling price (the fair market value at the moment of the exchange) and your purchase price (basis).
  • Buying a new investment (XRP) with a cost basis equal to the amount the BTC was worth when you exchanged them.
This means that if you "time" your trade wrong and the value of XRP goes down after you make the exchange, you still owe tax on your BTC gain even though you subsequently lost money. The one good piece of news in this is that when/if you sell your XRP (or change it back to BTC), you will get a capital loss for the value that XRP dropped.
There is one final point worth discussing in this section - the so called "like kind exchange" rules (aka section 1031 exchange). At a high level, these rules say that you can "swap" property with someone else without having to pay taxes on the exchange as long as you get property in return that is "like kind". Typically, these rules are used in real estate transactions. However, they can also apply to other types of transactions as well.
While the idea is simple (and makes it sound like crypto for crypto should qualify), the exact rules/details of this exception are very fact specific. Most experts (including myself, but certainly not calling myself an expert) believe that a crypto for crypto swap is not a like kind exchange. The recently passed tax bill also explicitly clarifies this issue - starting in 2018, only real estate qualifies for like kind exchange treatment. So, basically, the vast majority of evidence suggests that you can't use this "loophole" for 2017; however, there is a small minority view/some small amount of belief that this treatment would work for 2017 taxes and it is worth noting that I'm unaware of any court cases directly testing this approach.
Dealing with "Forks"
Perhaps another unpleasant surprise for crypto holders is that "forks" to create a new crypto also very likely generate a taxable event. The IRS has long (since at least the 1960s) held that "found" money is a taxable event. This approach has been litigated in court and courts have consistently upheld this position; it even has its own cool nerdy tax name - the "treasure trove" doctrine.
Practically, what this means is that if you owned BTC and it "forked" to create BCH, then the fair market value of the BCH you received is considered a "treasure trove" that must be reported as income (ordinary income - no capital gain rates). This is true whether or not you sold your BCH; if you got BCH from a fork, that is a taxable event (note - I'll continue using BTC forking to BCH in this section as an example, but the logic applies to all forks).
While everything I've discussed up to this point is pretty clearly established tax law, forks are really where things get messy with taxes. Thus, the remainder of this section contains more speculation than elsewhere in this post - the truth is that while the idea is simple (fork = free money = taxable), the details are messy and other kinds of tax treatment might apply to forks.
One basic practical problem with forks is that the new currency doesn't necessarily start trading immediately. Thus, you may have received BCH before there was a clear price or market for it. Basically, you owe tax on the value of BCH when you received it, but it isn't completely clear what that value was. There are several ways you can handle this; I'll list them in order from most accurate to least accurate (but note that this is just my personal view and there is ongoing disagreement on this issue with little/no authoritative guidance).
  • Use a futures market to determine the value of the BCH - if reliable sources published realistic estimates of what BCH will trade for in the future once trading begins, use this estimate as the value of your BCH. Pros/cons - futures markets are, in theory, pretty accurate. However, if they are volatile/subject to manipulation, they may provide an incorrect estimate of the true value of BCH. It would suck to use the first futures value published only to have that value plummet shortly thereafter, leaving you to pay ordinary income tax but only have an unrealized capital loss.
  • Wait until an exchange starts trading BCH; use the actual ("spot" price) as the value. Pros/cons - spot prices certainly reflect what you could have sold BCH for; however, it is possible that the true value of the coin was highelower when you received it as compared to when it started trading on the exchange. Thus this method seems less accurate to me than a futures based approach, but it is still certainly fairly reasonable.
  • Assume that the value is $0. This is my least preferred option, but there is still a case to be made for it. If you receive something that you didn't want, can't access, can't sell, and might fail, does it have any value? I believe the answer is yes (maybe not value it perfectly, but value it somewhat accurately), but if you honestly think the answer is no, then the correct tax answer would be to report $0 in income from the fork. The IRS would be most likely to disagree with this approach, especially since it results in the least amount of income reported for the current year (and the most favorable rates going forward). Accordingly, if you go this route, make extra sure you understand what it entails.
Note, once you've decided what to report as taxable income, this amount also becomes your cost basis in the new crypto (BCH). Thus, when you ultimately sell your BCH (or trade it for something else as described above), you calculate your gain/loss based on what you included in taxable income from the fork.
Finally, there is one more approach to dealing with forks worth mentioning. A fork "feels" a lot like a dividend - because you held BTC, you get BCH. In a stock world, if I get a cash dividend because I own the stock, that money is not treated as a "treasure trove" and subject to ordinary income rates - in most cases, it is a qualified dividend and subject to capital gain rates; in some cases, some types of stock dividends are completely non taxable. This article discusses this idea in slightly more detail and generally concludes that forks should not be treated as a dividend. Still, I would note that I'm unaware of any court cases directly testing this theory.
Ultimately, this post is supposed to be practical, so let me make sure to leave you with two key thoughts about the taxation of forks. First, I believe that the majority of evidence suggests that forks should be treated as a "treasure trove" and reported as ordinary income based on their value at creation and that this is certainly the "safest" option. Second, out of everything discussed in this post, I also believe that the correct taxation of forks is the murkiest and most "up for debate" area. If you are interested in a more detailed discussion of forks, see this thread for a previous version of this post discussing it at even more length and the comments for a discussion of this with the tax community.
Mining Crypto
Successfully mining crypto coins is a taxable event. Depending on the amount of effort you put into mining, it is either considered a hobby or a self-employment (business) activity. The IRS provides the following list of questions to help decide the correct classification:
  • The manner in which the taxpayer carries on the activity.
  • The expertise of the taxpayer or his advisors.
  • The time and effort expended by the taxpayer in carrying on the activity.
  • Expectation that assets used in activity may appreciate in value.
  • The success of the taxpayer in carrying on other similar or dissimilar activities.
  • The taxpayer’s history of income or losses with respect to the activity.
  • The amount of occasional profits, if any, which are earned.
If this still sounds complicated, that's because the distinction is subject to some amount of interpretation. As a rule of thumb, randomly mining crypto on an old computer is probably a hobby; mining full time on a custom rig is probably a business.
In either event, you must include in income the fair market value of any coins you successfully mine. These are ordinary income and your basis in these coins is their fair market value on the date they were mined. If your mining is a hobby, they go on line 21 (other income) and any expenses directly associated with mining go on schedule A (miscellaneous subject to 2% of AGI limitation). If your mining is a business, income and expenses go on schedule C.
Both approaches have pros and cons - hobby income isn't subject to the 15.3% self-employment tax, only normal income tax, but you get fewer deductions against your income and the deductions you get are less valuable. Business income has more deductions available, but you have to pay payroll (self-employment) tax of about 15.3% in addition to normal income tax.
What if I didn't keep good records? Do I really have to report every transaction?
One nice thing about the IRS treating crypto as an asset is that we can look at how the IRS treats people that "day trade" stock and often don't keep great records/have lots of transactions. While you need to be as accurate as possible, it is ok to estimate a little bit if you don't have exact records (especially concerning your cost basis). You need to put in some effort (research historical prices, etc...) and be reasonable, but the IRS would much rather you do a little bit of reasonable estimation as opposed to just not reporting anything. Sure, they might decide to audit you/disagree with some specifics, but you earn yourself a lot of credit if you can show that you honestly did the best you reasonably could and are making efforts to improve going forward.
However, concerning reporting every transaction - yes, sorry, it is clear that you have to do this, even if you made hundreds or thousands of them. Stock traders have had to go through this for many decades, and there is absolutely no reason to believe that the IRS would accept anything less from the crypto community. If you have the records or have any reasonable way of obtaining records/estimating them, you must report every transaction.
What if I don't trust you?
Well, first let me say that I can't believe you made it all the way down here to this section. Thanks for giving me an honest hearing. I would strongly encourage you to go read other well-written, honest guides. I'll link to some I like (both more technical IRS type guides and more crypto community driven guides). While a certain portion of the crypto community seems to view one of the benefits of crypto as avoiding all government regulation (including taxes), I've been pleasantly surprised to find that many crypto forums contain well reasoned, accurate tax guides. While I may not agree with 100% of their conclusions, that likely reflects true uncertainty around tax law that is fundamentally complex rather than an attempt on either end to help individuals unlawfully avoid taxes.
IRS guides
Non-IRS guides
submitted by Mrme487 to CryptoCurrency [link] [comments]

Crypto-Currency: A Guide to Common Tax Situations

Introduction
All,
Based on the rapid increase in popularity and price of bitcoin, litecoin, and other crypto currencies (particularly over the past year), I expect that lots of people have questions about how crypto currency will impact their taxes. This thread attempts to address several common issues. I'm posting similar versions of it here, in several other major crypto subs, and in personalfinance.
I'd like to thank the /personalfinance mod team and the /tax community for their help with this thread and especially for reading earlier versions and offering several valuable suggestions/corrections.
Finally, please note that this thread attempts to provide information about your tax obligations as defined by United States law (and interpreted by the IRS under the direction of the Treasury Department). I understand that a certain portion of the crypto community tends to view crypto as "tax free" due to the (actual and perceived) difficulty for the IRS to "know" about the transactions involved. I will not discuss unlawfully concealing crypto gains here nor will I suggest illegal tax avoidance activities.
The Basics
This section is best for people that don't understand much about taxes. It covers some very basic tax principles. It also assumes that all you did during the year was buy/sell a single crypto currency.
Fundamentally, the IRS treats crypto not as money, but as an asset (investment). While there are a few specific "twists" when it comes to crypto, when in doubt replace the word "crypto" with the word "stock" and you will get a pretty good idea how you should report and pay tax on crypto.
The first thing you should know is that the majority of this discussion applies to the taxes you are currently working on (2017 taxes). The tax bill that just passed applies to 2018 taxes (with a few very tiny exceptions), which most people will file in early 2019.
In general, you don't have to report or pay taxes on crypto currency holdings until you "cash out" all or part of your holdings. For now, I'm going to assume that you cash out by selling them for USD; however, other forms of cashing out will be covered later.
When you sell crypto, you report the difference between your basis (purchase price) and proceeds (sale price) on Schedule D. Your purchase price is commonly referred to as your basis; while the two terms don't mean exactly the same thing, they are pretty close to one another (in particular, there are three ways to calculate your basis - your average cost, a first-in, first-out method, and a "specific identification" method. See more about these here and here). If you sell at a gain, this gain increases your tax liability; if you sell at a loss, this loss decreases your tax liability (in most cases). If you sell multiple times during the year, you report each transaction separately (bad news if you trade often) but get to lump all your gains/losses together when determining how the trades impact your income.
One important thing to remember is that there are two different types of gains/losses from investments - short term gains (if you held an asset for one year or less) and long term gains (over one year; i.e. one year and one day). Short term gains are taxed at your marginal income rate (basically, just like if you had earned that money at a job) while long term gains are taxed at lower rates.
For most people, long term capital gains are taxed at 15%. However, if you are in the 10% or 15% tax bracket, congrats - your gains (up to the maximum amount of "unused space" in your bracket) are tax free! If you are in the 25%, 28%, 33%, or 35% bracket, long term gains are taxed at 15%. If you are in the 39.6% bracket, long term gains are taxed at 20%. Additionally, there is an "extra" 3.8% tax that applies to gains for those above $200,000/$250,000 (single/married). The exact computation of this tax is a little complicated, but if you are close to the $200,000 level, just know that it exists.
Finally, you should know that I'm assuming that you should treat your crypto gains/losses as investment gains/losses. I'm sure some people will try and argue that they are really "day traders" of crypto and trade as a full time job. While this is possible, the vast majority of people don't qualify for this status and you should really think several times before deciding you want to try that approach on the IRS.
"Cashing Out" - Trading Crypto for Goods/Services
I realize that not everyone that "cashes out" of crypto does so by selling it for USD. In fact, I understand that some in the crypto community view the necessity of cashing out itself as a type of myth. In this section, I discuss what happens if you trade your crypto for basically anything that isn't cash (minor sidenote - see next section for a special discussion on trading crypto for crypto; i.e. buying altcoins with crypto).
The IRS views trading crypto for something of value as a type of bartering that must be included in income. From the IRS's perspective, it doesn't matter if you sold crypto for cash and bought a car with that cash or if you just traded crypto directly for the car - in both cases, the IRS views you as having sold your crypto. This approach isn't unique to crypto - it works the same way if you trade stock for something.
This means that if you do trade your crypto for "stuff", you have to report every exchange as a sale of your crypto and calculate the gain/loss on that sale, just as if you had sold the crypto for cash.
Finally, there is one important exception to this rule. If you give your crypto away to charity (one recognized by the IRS; like a 501(c)(3) organization), the IRS doesn't make you report/pay any capital gains on the transaction. Additionally, you still get to deduct the value of your donation on the date it was made. Now, from a "selfish" point of view, you will always end up with more money if you sell the crypto, pay the tax, and keep the rest. But, if you are going to make a donation anyway, especially a large one, giving crypto where you have a big unrealized/untaxed gain is a very efficient way of doing so.
"Alt Coins" - Buying Crypto with Crypto
The previous section discusses what happens when you trade crypto for stuff. However, one thing that surprises many people is that trading crypto for crypto is also a taxable event, just like trading crypto for a car. Whether you agree with this position or not, it makes a lot of sense once you realize that the IRS doesn't view crypto as money, but instead as an asset. So to the IRS, trading bitcoin for ripple isn't like trading dollars for euros, but it is instead like trading shares of Apple stock for shares of Tesla stock.
Practically, what this means is that if you trade one crypto for another crypto (say BTC for XRP just to illustrate the point), the IRS views you as doing the following:
  • Selling for cash the amount of BTC you actually traded for XRP.
  • Owing capital gains/losses on the BTC based on its selling price (the fair market value at the moment of the exchange) and your purchase price (basis).
  • Buying a new investment (XRP) with a cost basis equal to the amount the BTC was worth when you exchanged them.
This means that if you "time" your trade wrong and the value of XRP goes down after you make the exchange, you still owe tax on your BTC gain even though you subsequently lost money. The one good piece of news in this is that when/if you sell your XRP (or change it back to BTC), you will get a capital loss for the value that XRP dropped.
There is one final point worth discussing in this section - the so called "like kind exchange" rules (aka section 1031 exchange). At a high level, these rules say that you can "swap" property with someone else without having to pay taxes on the exchange as long as you get property in return that is "like kind". Typically, these rules are used in real estate transactions. However, they can also apply to other types of transactions as well.
While the idea is simple (and makes it sound like crypto for crypto should qualify), the exact rules/details of this exception are very fact specific. Most experts (including myself, but certainly not calling myself an expert) believe that a crypto for crypto swap is not a like kind exchange. The recently passed tax bill also explicitly clarifies this issue - starting in 2018, only real estate qualifies for like kind exchange treatment. So, basically, the vast majority of evidence suggests that you can't use this "loophole" for 2017; however, there is a small minority view/some small amount of belief that this treatment would work for 2017 taxes and it is worth noting that I'm unaware of any court cases directly testing this approach.
Dealing with "Forks"
Perhaps another unpleasant surprise for crypto holders is that "forks" to create a new crypto also very likely generate a taxable event. The IRS has long (since at least the 1960s) held that "found" money is a taxable event. This approach has been litigated in court and courts have consistently upheld this position; it even has its own cool nerdy tax name - the "treasure trove" doctrine.
Practically, what this means is that if you owned BTC and it "forked" to create BCH, then the fair market value of the BCH you received is considered a "treasure trove" that must be reported as income (ordinary income - no capital gain rates). This is true whether or not you sold your BCH; if you got BCH from a fork, that is a taxable event (note - I'll continue using BTC forking to BCH in this section as an example, but the logic applies to all forks).
While everything I've discussed up to this point is pretty clearly established tax law, forks are really where things get messy with taxes. Thus, the remainder of this section contains more speculation than elsewhere in this post - the truth is that while the idea is simple (fork = free money = taxable), the details are messy and other kinds of tax treatment might apply to forks.
One basic practical problem with forks is that the new currency doesn't necessarily start trading immediately. Thus, you may have received BCH before there was a clear price or market for it. Basically, you owe tax on the value of BCH when you received it, but it isn't completely clear what that value was. There are several ways you can handle this; I'll list them in order from most accurate to least accurate (but note that this is just my personal view and there is ongoing disagreement on this issue with little/no authoritative guidance).
  • Use a futures market to determine the value of the BCH - if reliable sources published realistic estimates of what BCH will trade for in the future once trading begins, use this estimate as the value of your BCH. Pros/cons - futures markets are, in theory, pretty accurate. However, if they are volatile/subject to manipulation, they may provide an incorrect estimate of the true value of BCH. It would suck to use the first futures value published only to have that value plummet shortly thereafter, leaving you to pay ordinary income tax but only have an unrealized capital loss.
  • Wait until an exchange starts trading BCH; use the actual ("spot" price) as the value. Pros/cons - spot prices certainly reflect what you could have sold BCH for; however, it is possible that the true value of the coin was highelower when you received it as compared to when it started trading on the exchange. Thus this method seems less accurate to me than a futures based approach, but it is still certainly fairly reasonable.
  • Assume that the value is $0. This is my least preferred option, but there is still a case to be made for it. If you receive something that you didn't want, can't access, can't sell, and might fail, does it have any value? I believe the answer is yes (maybe not value it perfectly, but value it somewhat accurately), but if you honestly think the answer is no, then the correct tax answer would be to report $0 in income from the fork. The IRS would be most likely to disagree with this approach, especially since it results in the least amount of income reported for the current year (and the most favorable rates going forward). Accordingly, if you go this route, make extra sure you understand what it entails.
Note, once you've decided what to report as taxable income, this amount also becomes your cost basis in the new crypto (BCH). Thus, when you ultimately sell your BCH (or trade it for something else as described above), you calculate your gain/loss based on what you included in taxable income from the fork.
Finally, there is one more approach to dealing with forks worth mentioning. A fork "feels" a lot like a dividend - because you held BTC, you get BCH. In a stock world, if I get a cash dividend because I own the stock, that money is not treated as a "treasure trove" and subject to ordinary income rates - in most cases, it is a qualified dividend and subject to capital gain rates; in some cases, some types of stock dividends are completely non taxable. This article discusses this idea in slightly more detail and generally concludes that forks should not be treated as a dividend. Still, I would note that I'm unaware of any court cases directly testing this theory.
Ultimately, this post is supposed to be practical, so let me make sure to leave you with two key thoughts about the taxation of forks. First, I believe that the majority of evidence suggests that forks should be treated as a "treasure trove" and reported as ordinary income based on their value at creation and that this is certainly the "safest" option. Second, out of everything discussed in this post, I also believe that the correct taxation of forks is the murkiest and most "up for debate" area. If you are interested in a more detailed discussion of forks, see this thread for a previous version of this post discussing it at even more length and the comments for a discussion of this with the tax community.
Mining Crypto
Successfully mining crypto coins is a taxable event. Depending on the amount of effort you put into mining, it is either considered a hobby or a self-employment (business) activity. The IRS provides the following list of questions to help decide the correct classification:
  • The manner in which the taxpayer carries on the activity.
  • The expertise of the taxpayer or his advisors.
  • The time and effort expended by the taxpayer in carrying on the activity.
  • Expectation that assets used in activity may appreciate in value.
  • The success of the taxpayer in carrying on other similar or dissimilar activities.
  • The taxpayer’s history of income or losses with respect to the activity.
  • The amount of occasional profits, if any, which are earned.
If this still sounds complicated, that's because the distinction is subject to some amount of interpretation. As a rule of thumb, randomly mining crypto on an old computer is probably a hobby; mining full time on a custom rig is probably a business.
In either event, you must include in income the fair market value of any coins you successfully mine. These are ordinary income and your basis in these coins is their fair market value on the date they were mined. If your mining is a hobby, they go on line 21 (other income) and any expenses directly associated with mining go on schedule A (miscellaneous subject to 2% of AGI limitation). If your mining is a business, income and expenses go on schedule C.
Both approaches have pros and cons - hobby income isn't subject to the 15.3% self-employment tax, only normal income tax, but you get fewer deductions against your income and the deductions you get are less valuable. Business income has more deductions available, but you have to pay payroll (self-employment) tax of about 15.3% in addition to normal income tax.
What if I didn't keep good records? Do I really have to report every transaction?
One nice thing about the IRS treating crypto as an asset is that we can look at how the IRS treats people that "day trade" stock and often don't keep great records/have lots of transactions. While you need to be as accurate as possible, it is ok to estimate a little bit if you don't have exact records (especially concerning your cost basis). You need to put in some effort (research historical prices, etc...) and be reasonable, but the IRS would much rather you do a little bit of reasonable estimation as opposed to just not reporting anything. Sure, they might decide to audit you/disagree with some specifics, but you earn yourself a lot of credit if you can show that you honestly did the best you reasonably could and are making efforts to improve going forward.
However, concerning reporting every transaction - yes, sorry, it is clear that you have to do this, even if you made hundreds or thousands of them. Stock traders have had to go through this for many decades, and there is absolutely no reason to believe that the IRS would accept anything less from the crypto community. If you have the records or have any reasonable way of obtaining records/estimating them, you must report every transaction.
What if I don't trust you?
Well, first let me say that I can't believe you made it all the way down here to this section. Thanks for giving me an honest hearing. I would strongly encourage you to go read other well-written, honest guides. I'll link to some I like (both more technical IRS type guides and more crypto community driven guides). While a certain portion of the crypto community seems to view one of the benefits of crypto as avoiding all government regulation (including taxes), I've been pleasantly surprised to find that many crypto forums contain well reasoned, accurate tax guides. While I may not agree with 100% of their conclusions, that likely reflects true uncertainty around tax law that is fundamentally complex rather than an attempt on either end to help individuals unlawfully avoid taxes.
IRS guides
Non-IRS guides
submitted by Mrme487 to litecoin [link] [comments]

Good news for the Dexes! Joint Statement on Broker-Dealer Custody of Digital Asset Securities

Source: https://www.finra.org/newsroom/2019/joint-statement-broker-dealer-custody-digital-asset-securities

Joint Statement on Broker-Dealer Custody of Digital Asset Securities

WASHINGTON – Market participants have raised questions concerning the application of the federal securities laws and the rules of the Financial Industry Regulatory Authority (“FINRA”) to the potential intermediation—including custody—of digital asset securities1 and transactions. In this statement, the staffs of the Division of Trading and Markets (the “Division”) and FINRA (collectively, the “Staffs”)—drawing upon key principles from their historic approach to broker-dealer regulation and investor protection—have articulated various considerations relevant to many of these questions, particularly under the SEC’s Customer Protection Rule applicable to SEC-registered broker-dealers.2
As a threshold matter, it should be recognized by market participants that the application of the federal securities laws, FINRA rules and other bodies of laws to digital assets, digital asset securities and related innovative technologies raise novel and complex regulatory and compliance questions and challenges. For example, and as discussed in more detail below, the ability of a broker-dealer to comply with aspects of the Customer Protection Rule is greatly facilitated by established laws and practices regarding the loss or theft of a security, that may not be available or effective in the case of certain digital assets.
The Staffs are aware of, and encourage and support, efforts to address these issues such that compliance with the Customer Protection Rule and other federal securities laws and FINRA rules is reasonably practicable. In recent months, the Staffs have been engaged with industry participants regarding how industry participants believe a particular custody solution for digital asset securities would meet the possession or control standards prescribed in the SEC’s Customer Protection Rule. The Staffs have found these discussions to be very informative and appreciate market participants’ ongoing engagement on these issues. The Staffs encourage and support innovation and look forward to continuing our dialogue as market participants work toward developing methodologies for establishing possession or control over customers’ digital asset securities. Contact information for Commission and FINRA staffs is provided at the end of this statement.
Importance of the Customer Protection Rule
Entities seeking to participate in the marketplace for digital asset securities must comply with the relevant securities laws.3 An entity that buys, sells, or otherwise transacts or is involved in effecting transactions in digital asset securities for customers or its own account is subject to the federal securities laws, and may be required to register with the Commission as a broker-dealer and become a member of and comply with the rules of a self-regulatory organization (“SRO”), which in most cases is FINRA. Importantly, if the entity is a broker-dealer, it must comply with broker-dealer financial responsibility rules,4 including, as applicable, custodial requirements under Rule 15c3-3 under the Securities Exchange Act of 1934 (the “Exchange Act”), which is known as the Customer Protection Rule.
The purpose of the Customer Protection Rule is to safeguard customer securities and funds held by a broker-dealer, to prevent investor loss or harm in the event of a broker-dealer’s failure, and to enhance the Commission’s ability to monitor and prevent unsound business practices. Put simply, the Customer Protection Rule requires broker-dealers to safeguard customer assets and to keep customer assets separate from the firm’s assets, thus increasing the likelihood that customers’ securities and cash can be returned to them in the event of the broker-dealer’s failure. The requirements of the Customer Protection Rule have produced a nearly fifty year track record5 of recovery for investors when their broker-dealers have failed. This record of protecting customer assets held in custody by broker-dealers stands in contrast to recent reports of cybertheft,6 and underscores the need to ensure broker-dealers’ robust protection of customer assets, including digital asset securities.
Various unregistered entities that intend to engage in broker-dealer activities involving digital asset securities are seeking to register with the Commission and have submitted New Membership Applications (“NMAs”) to FINRA. Additionally, various entities that are already registered broker-dealers and FINRA members are seeking to expand their businesses to include digital asset securities services and activities. Under FINRA rules, a firm is prohibited from materially changing its business operations (e.g., engaging in material digital asset securities activities for the first time) without FINRA’s prior approval of a Continuing Membership Application (“CMA”).7
The NMAs and CMAs currently before FINRA are diverse: Some of the NMAs and CMAs cover proposed business models that would not involve the broker-dealer engaging in custody of digital asset securities. On the other hand, some NMAs and CMAs include the custodying of digital asset securities, and therefore implicate the Customer Protection Rule, among other requirements.
Some of these entities have met with the Staffs to discuss how they propose to custody digital asset securities in order to comply with the broker-dealer financial responsibility rules. These discussions have been informative. The specific circumstances where a broker-dealer could custody digital asset securities in a manner that the Staffs believe would comply with the Customer Protection Rule remain under discussion, and the Staffs stand ready to continue to engage with entities pursuing this line of business.
Noncustodial Broker-Dealer Models for Digital Asset Securities
As noted, some entities contemplate engaging in broker-dealer activities involving digital asset securities that would not involve the broker-dealer engaging in custody functions. Generally speaking, noncustodial activities involving digital asset securities do not raise the same level of concern among the Staffs, provided that the relevant securities laws, SRO rules, and other legal and regulatory requirements are followed.8The following are examples of some of the business activities of this type that have been presented or described to the Staffs.
Considerations for Broker-Dealer Custody of Digital Asset Securities
Whether a security is paper or digital, the same fundamental elements of the broker-dealer financial responsibility rules apply. The Staffs acknowledge that market participants wishing to custody digital asset securities may find it challenging to comply with the broker-dealer financial responsibility rules without putting in place significant technological enhancements and solutions unique to digital asset securities. As the market, infrastructure, and law applicable to digital asset securities continue to develop, the Staffs will continue their constructive engagement with market participants and to gather additional information so that they may better respond to developments in the market10while advancing the missions of our respective organizations: for the SEC, to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation; and for FINRA, to provide investor protection and promote market integrity.
The Customer Protection Rule
Overview
A broker-dealer seeking to custody digital asset securities must comply with the Customer Protection Rule. As noted, the rule is designed principally to protect customers of a registered broker-dealer from losses and delays in accessing their securities and cash that can occur if the firm fails. The rule requires the broker-dealer to safeguard customer securities and cash entrusted to the firm, as discussed below. If the broker-dealer fails, customer securities and cash should be readily available to be returned to customers.11 In the event the broker-dealer were to be liquidated under SIPA, the SIPA trustee would be expected to step into the shoes of the broker-dealer and expected to be able to transfer, sell, or otherwise dispose of assets in accordance with SIPA.12
Among its core protections for customers, Rule 15c3-3 requires a broker-dealer to physically hold customers’ fully paid and excess margin securities or maintain them free of lien at a good control location.13 Generally, a broker-dealer may custody customer securities with a third-party custodian (e.g., the Depository Trust Company or a clearing bank),14 and uncertificated securities, such as mutual funds, may be held at the issuer or at the issuer’s transfer agent.15 In either case, there is a third party that controls the transfer of the securities. This traditional securities infrastructure (including, for example, related laws of property and security) also has processes to reverse or cancel mistaken or unauthorized transactions.
Considerations for Digital Asset Securities
There are many significant differences in the mechanics and risks associated with custodying traditional securities and digital asset securities. For instance, the manner in which digital asset securities are issued, held, and transferred may create greater risk that a broker-dealer maintaining custody of them could be victimized by fraud or theft, could lose a “private key” necessary to transfer a client’s digital asset securities, or could transfer a client’s digital asset securities to an unknown or unintended address without meaningful recourse to invalidate fraudulent transactions, recover or replace lost property, or correct errors. Consequently, a broker-dealer must consider how it can, in conformance with Rule 15c3-3, hold in possession or control digital asset securities.
In particular, a broker-dealer may face challenges in determining that it, or its third-party custodian, maintains custody of digital asset securities.16 If, for example, the broker-dealer holds a private key, it may be able to transfer such securities reflected on the blockchain or distributed ledger. However, the fact that a broker-dealer (or its third party custodian) maintains the private key may not be sufficient evidence by itself that the broker-dealer has exclusive control of the digital asset security (e.g., it may not be able to demonstrate that no other party has a copy of the private key and could transfer the digital asset security without the broker-dealer’s consent).17 In addition, the fact that the broker-dealer (or custodian) holds the private key may not be sufficient to allow it to reverse or cancel mistaken or unauthorized transactions. These risks could cause securities customers to suffer losses, with corresponding liabilities for the broker-dealer, imperiling the firm, its customers, and other creditors.
The Books and Records and Financial Reporting Rules
Overview
The broker-dealer recordkeeping and reporting rules18 require a broker-dealer, among other things, to make and keep current ledgers reflecting all assets and liabilities,19 as well as a securities record reflecting each security carried by the broker-dealer for its customers and all differences determined by the count of customer securities in the broker-dealer’s possession or control compared to the result of the count with the broker-dealer’s existing books and records.20 The financial responsibility rules also require that broker-dealers routinely prepare financial statements,21 including various supporting schedules particular to broker-dealers, such as Computation of Net Capital under Rule 15c3-1 and Information Relating to the Possession or Control Requirements under Rule 15c3-3 under the Exchange Act.22
The books, records, and financial reporting requirements are designed to ensure that a broker-dealer makes and maintains certain business records to assist the firm in accounting for its activities. These rules also assist securities regulators in examining for compliance with the federal securities laws and as such are an integral part of the financial responsibility program for broker-dealers.
Considerations for Digital Asset Securities
The nature of distributed ledger technology, as well as the characteristics associated with digital asset securities, may make it difficult for a broker-dealer to evidence the existence of digital asset securities for the purposes of the broker-dealer’s regulatory books, records, and financial statements, including supporting schedules. The broker-dealer’s difficulties in evidencing the existence of these digital asset securities may in turn create challenges for the broker-dealer’s independent auditor seeking to obtain sufficient appropriate audit evidence when testing management’s assertions in the financial statements during the annual broker-dealer audit.23 We understand that some firms are considering the use of distributed ledger technology with features designed to enable firms to meet recordkeeping obligations and facilitate prompt verification of digital asset security positions (e.g., regulatory nodes or permissioned distributed ledger technologies). Broker-dealers should consider how the nature of the technology may impact their ability to comply with the broker-dealer recordkeeping and reporting rules.
Securities Investor Protection Act of 1970
Overview
Generally, a broker-dealer that fails and is unable to return the customer property that it holds would be liquidated in accordance with SIPA. Under SIPA, securities customers have a first priority claim to cash and securities held by the firm for securities customers. Customers also are eligible for up to $500,000 in protection (of which up to $250,000 can be used for cash claims) if the broker-dealer is missing customer assets. These SIPA protections apply to a “security” as defined in SIPA and cash deposited with the broker-dealer for the purpose of purchasing securities.24 They do not apply to other types of assets, including, importantly, assets that are securities under the federal securities laws but are excluded from the definition of “security” under SIPA.25
Considerations for Digital Asset Securities
In the case of a digital asset security that does not meet the definition of “security” under SIPA, and in the event of the failure of a carrying broker-dealer, SIPA protection likely would not apply and holders of those digital asset securities would have only unsecured general creditor claims against the broker-dealer’s estate.26 Further, uncertainty regarding when and whether a broker-dealer holds a digital asset security in its possession or control creates greater risk for customers that their securities will not be able to be returned in the event of a broker-dealer failure.27 The Staffs believe that such potential outcomes are likely to be inconsistent with the expectations of persons who would use a broker-dealer to custody their digital asset securities.
Control Location Applications
As a related matter, the Staffs have received inquiries from broker-dealers, including ATSs, wishing to utilize an issuer or transfer agent as a proposed “control location” for purposes of the possession or control requirements under the Customer Protection Rule. As described to the Staffs, this would involve uncertificated securities where the issuer or a transfer agent maintains a traditional single master security holder list, but also publishes as a courtesy the ownership record using distributed ledger technology. While the issuer or transfer agent may publish the distributed ledger, in these examples, the broker-dealers have asserted that the distributed ledger is not the authoritative record of share ownership. To the extent a broker-dealer contemplates an arrangement of this type, the Division will consider whether the issuer or the transfer agent can be considered a satisfactory control location pursuant to an application under paragraph (c)(7) of Rule 15c3-3.28
As noted, the Staffs encourage and support innovation in the securities markets and look forward to continuing to engage with investors and industry participants as the marketplace for digital asset securities develops. To contact Commission staff for assistance, please visit the Commission’s FinHub webpage or contact Thomas K. McGowan, Associate Director, at (202) 551-5521 or Raymond Lombardo, Assistant Director, at (202) 551-5755. To contact FINRA staff for assistance, please visit FINRA’s FinTech webpage or contact Kosha Dalal, Associate Vice President and Associate General Counsel, FINRA, (202) 728-6903.
1 For the purposes of this statement, the term “digital asset” refers to an asset that is issued and transferred using distributed ledger or blockchain technology, including, but not limited to, so-called “virtual currencies,” “coins,” and “tokens.” A digital asset may or may not meet the definition of a “security” under the federal securities laws. For the purposes of this statement, a digital asset that is a security is referred to as a “digital asset security.”
2 This statement represents staff views of the Division of Trading and Markets and FINRA. This statement is not a rule, regulation, guidance, or statement of the U.S. Securities and Exchange Commission (“SEC” or “Commission”) or FINRA, and the Commission and FINRA’s Board have neither approved nor disapproved its content. This statement does not alter or amend applicable law and has no legal force or effect.
3 For purposes of this statement, the Staffs use the term “entities” to refer to both firms and individuals.
4 The financial responsibility rules include Rule 15c3-1 (the net capital rule), Rule 15c3-3 (the customer protection rule), Rule 17a-3 (the record making rule), Rule 17a-4 (the record retention rule), Rule 17a-5 (the financial reporting rule), and Rule 17a-13 (the quarterly securities count rule) under the Securities Exchange Act of 1934 (“Exchange Act”). This statement does not address all federal securities laws that may be implicated by a broker-dealer seeking to maintain custody of digital asset securities. Further, this statement does not address other securities laws or rules that may apply to digital asset securities.
5 Rule 15c3-3 was adopted by the Commission in 1972. See Broker-Dealers; Maintenance of Certain Basic Reserves, Exchange Act Release No. 9856 (Nov. 10, 1972), 37 Fed. Reg. 25224 (Nov. 29, 1972).
6 For example, one blockchain forensic analysis firm estimated that approximately $1.7 billion worth of bitcoin and other digital assets had been stolen in 2018, of which approximately $950 million resulted from cyberattacks on bitcoin trading platforms. The estimate of total losses in 2018 is 3.6 times higher than the estimate of such losses in 2017. See CipherTrace, Cryptocurrency Anti-Money Laundering Report, 2018 Q4, at 3 (Jan. 2019) (available at: https://ciphertrace.com/crypto-aml-report-2018q4/).
7 Firms can discuss with FINRA whether a contemplated change in business operations such as engaging in digital asset securities activities may require the filing of a CMA through the materiality consultation process.
8 These business models and transactions must comply with other provisions of the securities laws or regulations. The Staffs offer no views about whether such business models would be in compliance with other securities laws or regulations.
9 Entities that perform functions to facilitate the clearance and settlement of transactions in digital asset securities may be required to register as a clearing agency under Section 17A of the Exchange Act. See 15 U.S.C. 78q-1.
10 See, e.g., Statement on Digital Asset Securities Issuance and Trading, Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets, Commission (Nov. 16, 2018) (available at: https://www.sec.gov/news/public-statement/digital-asset-securites-issuuance-and-trading); see also e.g., Engaging on Non-DVP Custodial Practices and Digital Assets, letter issued by staff, Division of Investment Management, Commission, dated Mar. 12, 2019 (available at: https://www.sec.gov/investment/engaging-non-dvp-custodial-practices-and-digital-assets).
11 See Financial Responsibility Rules for Broker-Dealers, Exchange Act Release No. 70072 (July 30, 2013), 78 Fed. Reg. 51824, 51826 (Aug. 21, 2013). In addition, if the broker-dealer is liquidated in a formal proceeding under the Securities Investor Protection Act of 1970 (“SIPA”), the securities and cash held by the broker-dealer for its customers would be isolated and readily identifiable as “customer property” and, consequently, available to be distributed to customers ahead of other creditors. Id.
12 See 15 U.S.C. 78fff-1 (setting forth the powers and duties of a SIPA trustee).
13 See paragraphs (b) and (c) of Rule 15c3-3. An entity’s designation as a good control location is based, in part, on its ability to maintain exclusive control over customer securities. See, e.g., paragraph (c)(5) of Rule 15c3-3 (deeming a “bank” as defined in Section 3(a)(6) of the Exchange Act to be a good control location so long as, among other things, the bank has acknowledged that customer securities “are not subject to any right, charge, security interest, lien or claim of any kind in favor of a bank or any person claiming through the bank” and the securities are in the custody or control of the bank).
14 See paragraphs (c)(1) and (c)(5) of Rule 15c3-3.
15 The Commission often receives applications under paragraph (c)(7) of Rule 15c3-3 to designate an issuer or the transfer agent of various types of uncertificated securities as a control location. The Division has delegated authority to “find and designate as control locations for purposes of Rule 15c3-3(c)(7) [under the Exchange Act] certain broker-dealer accounts which are adequate for the protection of customer securities.” See 17 CFR 200.30-3(a)(10)(i). The Commission has stated that mutual funds in particular may be held at the issuer or the issuer’s transfer agent. See, e.g., Broker-Dealer Reports, Exchange Act Release No. 70073 (July 30, 2013), 78 Fed. Reg. 51910, 51951 (Aug. 21, 2013) (stating that “[g]enerally, mutual funds issue securities only in book-entry form. This means that the ownership of securities is not reflected on a certificate that can be transferred but rather through a journal entry on the books of the issuer maintained by the issuer’s transfer agent. A broker-dealer that holds mutual funds for customers generally holds them in the broker-dealer’s name on the books of the mutual fund”). See also Form Custody for Broker-Dealers, 17 CFR 249.639 (providing broker-dealers with a field to indicate that they custody mutual fund securities with a transfer agent). The Division has also previously issued no-action letters regarding the maintenance of certain other uncertificated securities at the transfer agent. See, e.g., letter to Fantex Brokerage Services, LLC from Mark M. Attar, Senior Special Counsel, Division of Trading and Markets, Commission, dated Dec. 19, 2014 (providing that the staff would not recommend enforcement action if a broker-dealer treats a transfer agent for uncertificated securities as a good control location, under certain circumstances). These prior no-action letters do not address whether blockchain or distributed ledger technology, in connection with the maintenance of the single master security holder list, establishes control of uncertificated securities by the issuer (or transfer agent).
16 See, e.g., paragraph (d) of Rule 15c3-3 (requiring that, not later than the next business day, a broker-dealer, as of the close of the preceding business day, shall determine the quantity of fully paid securities and excess margin securities in its possession or control and the quantity of such securities not in its possession or control).
17 Cf. supra note 13.
18 See generally Rules 17a-3, 17a-4, and 17a-5.
19 See paragraph (a)(2) of Rule 17a-3.
20 See paragraph (a)(5) of Rule 17a-3.
21 See generally Rule 17a-5.
22 See paragraph (d)(2)(ii) of Rule 17a-5.
23 See generally PCAOB Auditing Standard 1105, Audit Evidence (describing sufficient appropriate audit evidence and stating that audit evidence consists of information that supports and corroborates management’s assertions regarding the financial statements and information that contradicts such assertions).
24 The SIPA definition of “security” is different than the federal securities laws definitions. See 15 U.S.C. 78lll(14) (excluding from the SIPA definition of “security” an investment contract or interest that is not the subject of a registration statement with the Commission pursuant to the provisions of the Securities Act of 1933). This means there may be digital assets that are: (1) securities under the federal securities laws and SIPA, and thus are protected by SIPA; (2) securities under the federal securities laws, but not under SIPA, and thus not protected by SIPA; or (3) not securities under the federal securities laws and therefore not protected by SIPA.
25 If a broker-dealer holds securities that are not protected by SIPA, the broker-dealer must nevertheless comply with the physical possession or control requirements under Rule 15c3-3 with respect to those securities.
26 Generally, in a SIPA liquidation, assets not included in customer property (other than customer name securities) are liquidated and paid out to general creditors on a pro rata basis. See 15 U.S.C. 78fff-2(c); 15 U.S.C. 78fff(b).
27 See supra note 16.
28 See paragraph (c)(7) of Rule 15c3-3.
submitted by godsslave to CryptoCurrency [link] [comments]

Crypto-Currency: A Guide to Common US Tax Situations

Introduction
All,
Based on the rapid increase in popularity and price of bitcoin and other crypto currencies (particularly over the past year), I expect that lots of people have questions about how crypto currency will impact their US taxes. This thread attempts to address several common issues. I posted a similar version yesterday, but it was eaten by the filter and I was told that I could repost today. I've also posted a similar version to personalfinance and several other crypto subs.
Please note that this thread attempts to provide information about your tax obligations as defined by United States law (and interpreted by the IRS under the direction of the Treasury Department). I understand that a certain portion of the crypto community tends to view crypto as "tax free" due to the (actual and perceived) difficulty for the IRS to "know" about the transactions involved. I will not discuss unlawfully concealing crypto gains here nor will I suggest illegal tax avoidance activities.
The Basics
This section is best for people that don't understand much about taxes. It covers some very basic tax principles. It also assumes that all you did during the year was buy/sell a single crypto currency.
Fundamentally, the IRS treats crypto not as money, but as an asset (investment). While there are a few specific "twists" when it comes to crypto, when in doubt replace the word "crypto" with the word "stock" and you will get a pretty good idea how you should report and pay tax on crypto.
The first thing you should know is that the majority of this discussion applies to the taxes you are currently working on (2017 taxes). The tax bill that just passed applies to 2018 taxes (with a few very tiny exceptions), which most people will file in early 2019.
In general, you don't have to report or pay taxes on crypto currency holdings until you "cash out" all or part of your holdings. For now, I'm going to assume that you cash out by selling them for USD; however, other forms of cashing out will be covered later.
When you sell crypto, you report the difference between your basis (purchase price) and proceeds (sale price) on Schedule D. Your purchase price is commonly referred to as your basis; while the two terms don't mean exactly the same thing, they are pretty close to one another (in particular, there are two ways to calculate your basis - a first-in, first-out method, and a "specific identification" method. See more about these here and here). If you sell at a gain, this gain increases your tax liability; if you sell at a loss, this loss decreases your tax liability (in most cases). If you sell multiple times during the year, you report each transaction separately (bad news if you trade often) but get to lump all your gains/losses together when determining how the trades impact your income.
One important thing to remember is that there are two different types of gains/losses from investments - short term gains (if you held an asset for one year or less) and long term gains (over one year; i.e. one year and one day). Short term gains are taxed at your marginal income rate (basically, just like if you had earned that money at a job) while long term gains are taxed at lower rates.
For most people, long term capital gains are taxed at 15%. However, if you are in the 10% or 15% tax bracket, congrats - your gains (up to the maximum amount of "unused space" in your bracket) are tax free! If you are in the 25%, 28%, 33%, or 35% bracket, long term gains are taxed at 15%. If you are in the 39.6% bracket, long term gains are taxed at 20%. Additionally, there is an "extra" 3.8% tax that applies to gains for those above $200,000/$250,000 (single/married). The exact computation of this tax is a little complicated, but if you are close to the $200,000 level, just know that it exists.
Finally, you should know that I'm assuming that you should treat your crypto gains/losses as investment gains/losses. I'm sure some people will try and argue that they are really "day traders" of crypto and trade as a full time job. While this is possible, the vast majority of people don't qualify for this status and you should really think several times before deciding you want to try that approach on the IRS.
"Cashing Out" - Trading Crypto for Goods/Services
I realize that not everyone that "cashes out" of crypto does so by selling it for USD. In fact, I understand that some in the crypto community view the necessity of cashing out itself as a type of myth. In this section, I discuss what happens if you trade your crypto for basically anything that isn't cash (minor sidenote - see next section for a special discussion on trading crypto for crypto; i.e. buying altcoins with crypto).
The IRS views trading crypto for something of value as a type of bartering that must be included in income. From the IRS's perspective, it doesn't matter if you sold crypto for cash and bought a car with that cash or if you just traded crypto directly for the car - in both cases, the IRS views you as having sold your crypto. This approach isn't unique to crypto - it works the same way if you trade stock for something.
This means that if you do trade your crypto for "stuff", you have to report every exchange as a sale of your crypto and calculate the gain/loss on that sale, just as if you had sold the crypto for cash.
Finally, there is one important exception to this rule. If you give your crypto away to charity (one recognized by the IRS; like a 501(c)(3) organization), the IRS doesn't make you report/pay any capital gains on the transaction. Additionally, you still get to deduct the value of your donation on the date it was made. Now, from a "selfish" point of view, you will always end up with more money if you sell the crypto, pay the tax, and keep the rest. But, if you are going to make a donation anyway, especially a large one, giving crypto where you have a big unrealized/untaxed gain is a very efficient way of doing so.
"Alt Coins" - Buying Crypto with Crypto
The previous section discusses what happens when you trade crypto for stuff. However, one thing that surprises many people is that trading crypto for crypto is also a taxable event, just like trading crypto for a car. Whether you agree with this position or not, it makes a lot of sense once you realize that the IRS doesn't view crypto as money, but instead as an asset. So to the IRS, trading bitcoin for ripple isn't like trading dollars for euros, but it is instead like trading shares of Apple stock for shares of Tesla stock.
Practically, what this means is that if you trade one crypto for another crypto (say BTC for XRP just to illustrate the point), the IRS views you as doing the following:
  • Selling for cash the amount of BTC you actually traded for XRP.
  • Owing capital gains/losses on the BTC based on its selling price (the fair market value at the moment of the exchange) and your purchase price (basis).
  • Buying a new investment (XRP) with a cost basis equal to the amount the BTC was worth when you exchanged them.
This means that if you "time" your trade wrong and the value of XRP goes down after you make the exchange, you still owe tax on your BTC gain even though you subsequently lost money. The one good piece of news in this is that when/if you sell your XRP (or change it back to BTC), you will get a capital loss for the value that XRP dropped.
There is one final point worth discussing in this section - the so called "like kind exchange" rules (aka section 1031 exchange). At a high level, these rules say that you can "swap" property with someone else without having to pay taxes on the exchange as long as you get property in return that is "like kind". Typically, these rules are used in real estate transactions. However, they can also apply to other types of transactions as well.
While the idea is simple (and makes it sound like crypto for crypto should qualify), the exact rules/details of this exception are very fact specific. Most experts (including myself, but certainly not calling myself an expert) believe that a crypto for crypto swap is not a like kind exchange. The recently passed tax bill also explicitly clarifies this issue - starting in 2018, only real estate qualifies for like kind exchange treatment. So, basically, the vast majority of evidence suggests that you can't use this "loophole" for 2017; however, there is a small minority view/some small amount of belief that this treatment would work for 2017 taxes and it is worth noting that I'm unaware of any court cases directly testing this approach.
Dealing with "Forks"
Perhaps another unpleasant surprise for crypto holders is that "forks" to create a new crypto also very likely generate a taxable event. The IRS has long (since at least the 1960s) held that "found" money is a taxable event. This approach has been litigated in court and courts have consistently upheld this position; it even has its own cool nerdy tax name - the "treasure trove" doctrine.
Practically, what this means is that if you owned BTC and it "forked" to create BCH, then the fair market value of the BCH you received is considered a "treasure trove" that must be reported as income (ordinary income - no capital gain rates). This is true whether or not you sold your BCH; if you got BCH from a fork, that is a taxable event (note - I'll continue using BTC forking to BCH in this section as an example, but the logic applies to all forks).
While everything I've discussed up to this point is pretty clearly established tax law, forks are really where things get messy with taxes. Thus, the remainder of this section contains more speculation than elsewhere in this post - the truth is that while the idea is simple (fork = free money = taxable), the details are messy and other kinds of tax treatment might apply to forks.
One basic practical problem with forks is that the new currency doesn't necessarily start trading immediately. Thus, you may have received BCH before there was a clear price or market for it. Basically, you owe tax on the value of BCH when you received it, but it isn't completely clear what that value was. There are several ways you can handle this; I'll list them in order from most accurate to least accurate (but note that this is just my personal view and there is ongoing disagreement on this issue with little/no authoritative guidance).
  • Use a futures market to determine the value of the BCH - if reliable sources published realistic estimates of what BCH will trade for in the future once trading begins, use this estimate as the value of your BCH. Pros/cons - futures markets are, in theory, pretty accurate. However, if they are volatile/subject to manipulation, they may provide an incorrect estimate of the true value of BCH. It would suck to use the first futures value published only to have that value plummet shortly thereafter, leaving you to pay ordinary income tax but only have an unrealized capital loss.
  • Wait until an exchange starts trading BCH; use the actual ("spot" price) as the value. Pros/cons - spot prices certainly reflect what you could have sold BCH for; however, it is possible that the true value of the coin was highelower when you received it as compared to when it started trading on the exchange. Thus this method seems less accurate to me than a futures based approach, but it is still certainly fairly reasonable.
  • Assume that the value is $0. This is my least preferred option, but there is still a case to be made for it. If you receive something that you didn't want, can't access, can't sell, and might fail, does it have any value? I believe the answer is yes (maybe not value it perfectly, but value it somewhat accurately), but if you honestly think the answer is no, then the correct tax answer would be to report $0 in income from the fork. The IRS would be most likely to disagree with this approach, especially since it results in the least amount of income reported for the current year (and the most favorable rates going forward). Accordingly, if you go this route, make extra sure you understand what it entails.
Note, once you've decided what to report as taxable income, this amount also becomes your cost basis in the new crypto (BCH). Thus, when you ultimately sell your BCH (or trade it for something else as described above), you calculate your gain/loss based on what you included in taxable income from the fork.
Finally, there is one more approach to dealing with forks worth mentioning. A fork "feels" a lot like a dividend - because you held BTC, you get BCH. In a stock world, if I get a cash dividend because I own the stock, that money is not treated as a "treasure trove" and subject to ordinary income rates - in most cases, it is a qualified dividend and subject to capital gain rates; in some cases, some types of stock dividends are completely non taxable. This article discusses this idea in slightly more detail and generally concludes that forks should not be treated as a dividend. Still, I would note that I'm unaware of any court cases directly testing this theory.
Ultimately, this post is supposed to be practical, so let me make sure to leave you with two key thoughts about the taxation of forks. First, I believe that the majority of evidence suggests that forks should be treated as a "treasure trove" and reported as ordinary income based on their value at creation and that this is certainly the "safest" option. Second, out of everything discussed in this post, I also believe that the correct taxation of forks is the murkiest and most "up for debate" area. If you are interested in a more detailed discussion of forks, see this thread for a previous version of this post discussing it at even more length and the comments for a discussion of this with the tax community.
Mining Crypto
Successfully mining crypto coins is a taxable event. Depending on the amount of effort you put into mining, it is either considered a hobby or a self-employment (business) activity. The IRS provides the following list of questions to help decide the correct classification:
  • The manner in which the taxpayer carries on the activity.
  • The expertise of the taxpayer or his advisors.
  • The time and effort expended by the taxpayer in carrying on the activity.
  • Expectation that assets used in activity may appreciate in value.
  • The success of the taxpayer in carrying on other similar or dissimilar activities.
  • The taxpayer’s history of income or losses with respect to the activity.
  • The amount of occasional profits, if any, which are earned.
If this still sounds complicated, that's because the distinction is subject to some amount of interpretation. As a rule of thumb, randomly mining crypto on an old computer is probably a hobby; mining full time on a custom rig is probably a business.
In either event, you must include in income the fair market value of any coins you successfully mine. These are ordinary income and your basis in these coins is their fair market value on the date they were mined. If your mining is a hobby, they go on line 21 (other income) and any expenses directly associated with mining go on schedule A (miscellaneous subject to 2% of AGI limitation). If your mining is a business, income and expenses go on schedule C.
Both approaches have pros and cons - hobby income isn't subject to the 15.3% self-employment tax, only normal income tax, but you get fewer deductions against your income and the deductions you get are less valuable. Business income has more deductions available, but you have to pay payroll (self-employment) tax of about 15.3% in addition to normal income tax.
What if I didn't keep good records? Do I really have to report every transaction?
One nice thing about the IRS treating crypto as an asset is that we can look at how the IRS treats people that "day trade" stock and often don't keep great records/have lots of transactions. While you need to be as accurate as possible, it is ok to estimate a little bit if you don't have exact records (especially concerning your cost basis). You need to put in some effort (research historical prices, etc...) and be reasonable, but the IRS would much rather you do a little bit of reasonable estimation as opposed to just not reporting anything. Sure, they might decide to audit you/disagree with some specifics, but you earn yourself a lot of credit if you can show that you honestly did the best you reasonably could and are making efforts to improve going forward.
However, concerning reporting every transaction - yes, sorry, it is clear that you have to do this, even if you made hundreds or thousands of them. Stock traders have had to go through this for many decades, and there is absolutely no reason to believe that the IRS would accept anything less from the crypto community. If you have the records or have any reasonable way of obtaining records/estimating them, you must report every transaction.
What if I don't trust you?
Well, first let me say that I can't believe you made it all the way down here to this section. Thanks for giving me an honest hearing. I would strongly encourage you to go read other well-written, honest guides. I'll link to some I like (both more technical IRS type guides and more crypto community driven guides). While a certain portion of the crypto community seems to view one of the benefits of crypto as avoiding all government regulation (including taxes), I've been pleasantly surprised to find that many crypto forums contain well reasoned, accurate tax guides. While I may not agree with 100% of their conclusions, that likely reflects true uncertainty around tax law that is fundamentally complex rather than an attempt on either end to help individuals unlawfully avoid taxes.
IRS guides
Non-IRS guides
submitted by Mrme487 to Bitcoin [link] [comments]

Foolish Tech Show (Bitcoin mining w/ Guest JonG) The Math Behind Bitcoin Bitcoin Q&A: Limited supply and block subsidy Bitcoin Legal Panel - The SEC and You Understanding the Good Faith Estimate (GFE)

Bitcoin mining revenue with the latest generation hardware ranges anywhere from $70/MWh to north of $200/MWh depending on price, global hashrate and difficulty." Suspicious trades on a Bitcoin currency exchange are linked to rises in the exchange rate. ... In early 2014, after the Mt. Gox ... The estimated coefficient on the “dummy” variable for Willy is $21.65, while the “estimate” in Section 4 was $21.85. This again suggests that the USD/BTC exchange rate rose on Mt. Gox by more than 20 dollars a day on average on the days that Willy was ... This paper also describes "how to decrease block mining difficulty by creating an alternative blockchain." The attack described in the paper prohibits bitcoin servers from accepting connections via Tor or other similar services (section 3). This is not very practical, and parties looking to stay anonymous may stop using the system until they have access to such a service. Interestingly, once ... Table 1 reports the summary statistics of key variables. The average weekly return R t in our sample is 4.7 percent with a standard deviation of 18.8 percent, which suggests that Bitcoin price is quite volatile. Difficulty t, the difficulty level of mining Bitcoin, has a mean of 8.832 and a standard deviation of 2.5.Given that the starting difficulty level of the Blockchain begins at 1, the ... Estimate Strategy. Extrapolating bitcoin difficulty or price is pure voodoo. It is much easier to predict the relationship of the two parameters in form of the Mining Factor. The Mining Factor 100 is the value in USD of the bitcoins you can generate if you let a 100MHash/s miner run for 24 hours. If the Mining Factor 100 rises above $2 or so everybody buys mining equipment and thus increases ...

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Bill Gates: Microsoft board, Bitcoin Price, Taxes and Strategy microsoft PROMO 4,236 watching Live now Tips on Understanding Your Home Loan Estimate - Duration: 9:05. http://bitcoinpoet.com Bitcoin is a software-based payment system described by Satoshi Nakamoto in 2008 and introduced as open-source software in 2009. Payme... Why is 21 million bitcoin the maximum supply? Can it be modified? Why will we never actually reach 21 million bitcoin? Estimates of bitcoin lost so far. Miners can give themselves less than the ... Published on Mar 16, 2014 Elliptic curves, SHA256, and RIPEMD160, oh my. Dr. Darren Tapp presents the fundamental mathematics needed for Bitcoin to work as intended, prepared so that people of ... On this episode we talk about bitcoin mining, options and the current state of things. Spondoolie.com Bitcoin Difficulty: https://bitcoinwisdom.com/bitcoin/d...

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