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IRS Releases Tax Guidance on Hard Forks and Airdrops

The U.S. Internal Revenue Service (IRS) has taken a significant step to provide much-needed clarity for crypto users. On October 9, 2019, the tax authority published an announcement of Revenue Ruling 2019-24, which addresses an array of questions concerning tax compliance related to cryptocurrency airdrops and blockchain hard forks.  The issue of how to tax forked digital currencies has caused quite a stir, even in Capitol Hill. In July 2019, U.S. Congressman Tom Emmer introduced the “Safe Harbor for Taxpayers with Forked Assets” bill, which sought to bring tax clarity to the cryptocurrencies that are generated as the result of hard forks and shield holders from tax penalties pending a guidance review from the IRS. That guidance is now here, but cryptocurrency users might be left with more questions than answers. “The new guidance will help taxpayers and tax professionals better understand how longstanding tax principles apply in this rapidly changing environment,” IRS Commissioner Chuck Rettig explained in the announcement. “We want to help taxpayers understand the reporting requirements as well as take steps to ensure fair enforcement of the tax laws for those who don’t follow the rules.” Clarity on Forks and Taxable Activities On the issue of forks, the guidance states that assets created from existing blockchains are to be treated as “an ordinary income equal to the fair market value of the new cryptocurrency when it is received.”  “If your cryptocurrency went through a hard fork, but you did not receive any new cryptocurrency, whether through an airdrop (a distribution of cryptocurrency to multiple taxpayers’ distributed ledger addresses) or some other kind of transfer, you don’t have taxable income,” the document reads. However, a trader would be liable to pay taxes on forked assets if they have control over the assets and can use them. This raises questions over what constitutes “control” or claiming an asset; for example, are forked coins that are credited to a user’s exchange account “claimed” if they don’t have access to the private keys? For airdrops, the tax liability occurs when the new owner receives the coins and can “transfer, sell, exchange, or otherwise dispose of it.” As cryptocurrency users who operate ERC-20 wallets know, during the ICO boom and beyond, multiple tokens may be airdropped into wallets without users necessarily knowing about it or approving of it, and often without any effort on their part to claim these assets. Under this guidance, it appears as though these assets would be subject to taxation as well. This directive naturally raises concerns. Rob Odell, vice president of product at cryptocurrency lending service SALT, noted that the new rule puts it under the tax burden of holding these newly created assets as a result of holding the original assets on behalf of clients.  “Hard forks already create numerous challenges for us as a lending company; additional stress on infrastructure, keeping nodes running, administrative work and more,” Odell said in a statement sent to Bitcoin Magazine. “Supporting a new asset with little knowledge into its long term viability and liquidity is problematic.” For instance, this rule would add confusion around one of the space’s best-known hard forks, which saw the Bitcoin blockchain forked into the Bitcoin Cash blockchain. “When BCH forked from BTC, we took over a year before deciding to add BCH as collateral,” Odell said. “This ruling muddies the water on how we hold and recognize assets on behalf of borrowers. We hope for further clarity and a deeper understanding from the IRS on how this translates to our business and more importantly, our customers assets.” The guidance also orders that cost bases should be calculated by taking into account how much money was spent in acquiring the cryptocurrencies, “including fees, commissions and other acquisition costs in U.S. dollars.” The IRS touches on the cost basis of each cryptocurrency unit spent in a taxable transaction as well, noting that the value of cryptocurrency purchased on an exchange should be calculated based on its selling price (in dollars) on the exchange.  If the purchase is made on a decentralized exchange or a peer-to-peer platform, the guidance recommends the use of a cryptocurrency price index. Per the document, this could be “a cryptocurrency or blockchain explorer that analyzes worldwide indices of a cryptocurrency and calculates the value of the cryptocurrency at an exact date and time.” A Valiant, Incomplete Effort The new cryptocurrency tax guidance serves as a follow-up to Notice 2014-21, which sets “general principles of tax law to determine that virtual currency is property for federal tax purposes.” While the previous notice did leave plenty of questions unanswered, many had high hopes that this latest one was going to help clear things up. However, this document also left some loose ends untied.  The IRS finds it hard to differentiate between airdrops and hard forks, which is a bit awkward considering its desire to regulate the industry. The guidance seems to suggest that there are hard forks which include airdrops, while in truth both are independent and mutually exclusive.  Bitcoin engineer and professional cypherpunk Jameson Lopp is among those who believe the new guidance created more questions than it answered. Questioning the IRS’s new rule to tax holders who receive forked coins and airdrops even if they didn’t request them, Lopp asked the IRS about possible scenarios where holders “have keys but no software from which to spend the asset,” keep an asset and then see it drop 90 percent in value or have an asset that wasn’t trading pre-fork. The idea that a taxable event can be created once a hard fork occurs for every holder of the coins on the old blockchain is disturbing. Once the asset is in your possession — with or without your knowledge — you’ll owe income tax. The post IRS Releases Tax Guidance on Hard Forks and Airdrops appeared first on Bitcoin Magazine.
Bitcoin Magazine

IRS Asks Bitcoin and Crypto Investors to Pay Taxes for BCH and other Hard Forks

The Internal Revenue System (IRS) in the US released its new guidelines on crypto taxation. The tax laws applicable to crypto investments confine under capital gains tax. It means that crypto is to be taxed like any other property investment. All in all, the guidelines were consistent with property investment in the US. While other aspects did not raise any significant concerns, the rules on ‘airdrops’ and ‘hard forks’ created a lot of stir. According to the laws, “If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency.” This echoes with numerous hard forks carried out on Bitcoin itself. Bitcoin Cash and Bitcoin SV being the most popular ones. The added accountability clause aggravates some crypto investors. They argue that they did not vote for the hard-fork or might not even have knowledge of it. Furthermore, the accessibility of the funds on different exchanges and calculating their Fair Market Value becomes a highly cumbersome job. Moreover, the IRS affirms that the airdrops must be taxed completely in the same year. James Lopp, the CTO of CasaHodl called the guideless a ‘hot mess.’ He tweeted, Today's IRS guidance is a hot mess. 1. What if you have keys but no software from which to spend the asset?2. What if you never sell or transfer the asset and it drops 90% in value?3. What's the value if the asset isn't even trading at the time of fork?https://t.co/jJ5SdXU72i pic.twitter.com/SpTOIOKqg0 — Jameson Lopp (@lopp) October 9, 2019 According to the IRS, when the investor acquires the ability to sell or transfer the airdrop, it must be recorded as a receipt. However, the fluctuation in price and the lack of knowledge in some participants about the fork itself raise heaps of ambiguity for the taxpayer. Fair Market Value and 1099-K Moreover, investors are required to keep records of their investment and the P/L for a given year. To account for the volatility in the price of cryptocurrencies, their FMV would be determined at an exact time and date, using a reliable explorer recording ‘worldwide crypto indices.’ On a brighter note for investors receiving 1099-K from the IRS on self transfers, Crypto Tax Girl tweeted, Important to note – transferring coins between your own wallets/exchanges/accounts is not taxable, even if you receive a 1099-K, or other documents from an exchange showing that these were taxable events Apart from the rule on the hard fork and their disposition, no other alarms were raised. Moreover, while it potentially creates pandemonium now, the added accountability does seem necessary for space. Do you think exchanges would refrain from supporting airdrops and hard forks due to the proposed rule? Please share your views with us.  The post IRS Asks Bitcoin and Crypto Investors to Pay Taxes for BCH and other Hard Forks appeared first on Coingape.
CoinGape

IRS Releases Guide on Crypto Taxation, with Confusion on Hard Forks

The Internal Revenue Service released its newest FAQ and guidelines on taxing US nationals for crypto transactions. The updated guidelines may come as a surprise to those that once rejoiced because of hard forks and the “free” coins that came with them. Is a Hard Fork Really Income? Outside of the already established rules for declaring short-term or long-term capital gains, the IRS believes coins originating in a hard fork created taxable income for the year in which the coins were received. IRS cryptocurrency guidance! "If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency.” More to come as we digest — Neeraj K. Agrawal (@NeerajKA) October 9, 2019 Twitter commenters immediately noted that the IRS misinterpreted hard forks, which do not lead to an airdrop. Instead, the owner is immediately in control of assets on a new chain. The IRS, however, has put up a condition for recognizing income from airdropped coins. The taxable event only happens when the owner “receives” the coins, and can “transfer, sell, exchange, or otherwise dispose of it.” So unless a crypto holder goes on to do a “coin split” operation, they are still not the owner and are not taxed. This detail may assuage concerns that malicious entities can go on and fork multiple coins, just to make their owners indebted. In the case of Bitcoin (BTC), earlier forks like Bitcoin Cash (BCH) and a few others were more widely adopted, but there are dozens of small forks where no one has taken the pains to split their wallet. IRS Calls for Stricter Record Keeping The IRS also called on crypto traders to keep a stricter record of their transactions. And more often, a taxable gain occurs only after liquidating the assets for cash. When selling digital coins, to recognize the right capital gain or loss, the IRS may want to see records on how each unit or batch of units was acquired, to determine the asset basis. If the person does not provide a record on which coins were traded, then the sale is assumed on a first-in-first-out (FIFO) basis. The IRS offers even more curious approaches to taxing crypto assets. If one receives pay in a currency that is currently worthless and untraded, the IRS calculates the basis of this currency as the fair value of the goods or services. Such a treatment of “fair value” could actually turn into a tool for recognizing a capital loss. Fortunately, moving coins and tokens between one’s own wallets does not trigger a taxable event. But receiving any payment is accounted as income based on the fair value of the crypto asset at the day of receipt. A possible loophole is the receipt of cryptocurrency as a bona fide gift, in which case no income is immediately recognized, but a taxable event occurs once the coins are sold. What do you think about the approach of the US IRS on taxing cryptocurrency? Share your thoughts in the comments section below! Images via Bitcoinist Media Library, Twitter: @NeerajKA The post IRS Releases Guide on Crypto Taxation, with Confusion on Hard Forks appeared first on Bitcoinist.com.
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Opera Brings BTC to Android; Now Looking to Add TRON

Who would have known Opera and bitcoin could go so well together? We’re not necessarily talking about classically trained singers that wear Viking horns and hit high notes, but rather the Norwegian financial platform that’s been touting the addition of bitcoin to its Android app since July of 2018. Opera and BTC: A Perfect Match? The app was launched privately and was later available to the public in December. Opera inherently became one of the first browsers to support bitcoin directly, and customers did not need any extensions or follow-up downloads to engage in crypto transactions. From there, bitcoin support came to the Opera iPhone app. Opera presently has about 350 million users, and many enthusiasts see this as a prime movement in the fight to make bitcoin mainstream. In a blog post, the company writes: With this release, Opera opens its crypto wallet to the world’s most popular blockchain, making it possible to send and receive BTC directly from the browser the way one would with an image or a music file. This means anyone can now not only send bitcoin and Ethereum to another person but can also use it while interacting with websites to pay for goods or services. Up to this stage, Opera only provided support for Ethereum, the world’s second-largest cryptocurrency and a primary competitor to bitcoin. However, the company is also introducing plans to support Tron in the coming months. The last few weeks have marked by a whole new list of platforms or companies showing support for cryptocurrencies they otherwise were ignoring. One such example comes in the form of the new HTC smartphone known as Exodus 1s, which can allegedly support a full bitcoin node. This means that the phone can hold the entire blockchain ledger. Other examples include Electrum, a new bitcoin wallet which has recently added the Lightning Network to its platform. The Lightning Network is designed to assist with scalability on the bitcoin blockchain. While bitcoin is the oldest, largest and arguably the most popular of the world’s cryptocurrencies, it often lacks the up-to-date technology of its newer altcoin counterparts. Thus, it suffers from slow transaction times and smaller blocks. How Lightning Is Making Things Simpler The Lightning Network initiates micropayments that occur off-chain to ensure that they are pushed through quickly. Electrum’s addition of Lightning is likely to enable faster speeds for customers and ensure that payments are pushed through with ease. We’ve also received word of a new startup called Moon, which allows Amazon customers to purchase goods and services from the online retailer with crypto. The application also works through Lightning-based technology and appears to recognize the Amazon page once you log in. When you’re ready to check out, it provides you with a crypto pay option that shows how many available funds you can spend. The post Opera Brings BTC to Android; Now Looking to Add TRON appeared first on Live Bitcoin News.
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Opera Continues Bullish Crypto Mainstream Drive With Bitcoin Payments

Browser minnow Opera is ramping up cryptocurrency support for Android users in version 54, which has just been released on Tuesday. Among a host of other cosmetic improvements and a new UI, this latest release improves upon the current crypto wallet with support for both Bitcoin and Tron payments. Ethereum has been the staple payment […] The post Opera Continues Bullish Crypto Mainstream Drive With Bitcoin Payments appeared first on CCN.com
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Carson Wentz Gossip Turns Eagles Into Daytime Soap Opera

After the beating the Dallas Cowboys gave the Philadelphia Eagles Sunday night, fans were probably wondering how things could get worse. When they woke up Monday morning, they found out. It appears that at least one fool decided to burn his Carson Wentz jersey following the loss, and – more significantly – Alshon Jeffery is […] The post Carson Wentz Gossip Turns Eagles Into Daytime Soap Opera appeared first on CCN.com
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The Ethereum Ecosystem: Still Relevant After All These Years

Ethereum first went live in 2015, and since then, it’s become one of the market’s top coins. And while four years may not be a lot in most markets, in crypto it’s a lifetime. For Ethereum, it has been quite a ride. With a market cap of $19 billion, Ethereum is the second largest cryptocurrency in existence, and recent reports show that it provides a benchmark for the market. Of course, there’s much more to its success: the Ethereum ecosystem is thriving in its own right. In short, Ethereum is one of the most extensible blockchains. It offers developers the opportunity to create tokens, dApps, collectibles, financial applications, and more. Plus, Ethereum itself will soon be better than ever. Here’s what the Ethereum community is up to right now—and what the Ethereum ecosystem has to offer. Dominance Over dApps and Tokens Ethereum currently leads the dApp market with its sheer number of listings. Right now, it has a total of 2000 dApps—four times more than TRON or EOS, its closest competitors. Ethereum also closely matches those blockchains in terms of dApp volume—each platform handles about $10 million of crypto through its apps in a typical day.   Daily dApp transaction volumes in dollars, via DAppReview   To be fair, EOS and TRON dominate in terms of dApp users and transactions (although many of these are simple gambling apps). Still, Ethereum has a few notable apps in those measures: MakerDAO attracted 2200 users on Monday, making it the third largest dApp by user count. Meanwhile, dYdX, a derivatives platform, handled $371,000 on Monday—making it the 9th largest app by that metric. Ethereum’s token standards are also incredibly influential. Of the top 50 cryptocurrencies by market cap, at least 20 are based on Ethereum’s ERC-20 token standard—including big names like BAT and LINK. Plus, Ethereum’s non-fungible ERC-721 standard has begat collectible items like Decentraland properties and CryptoKitties. New Opportunities For Investment As Ethereum matures, there might be new ways to invest. Recently, the CFTC declared that Ethereum is a commodity, meaning that ETH futures may become an option for institutional investors in the future. It’s conceivable that Bakkt might add ETH futures alongside its BTC futures—though it hasn’t said so explicitly. Additionally, there are some retail platforms that already trade Ethereum futures, such as BitMEX and Kraken. These options attract speculative investors who might not trade on the crypto market itself. Even though futures don’t affect Ethereum’s value directly, they bring value into the crypto ecosystem and facilitate price discovery. There are other investment opportunities as well. MakerDAO, for example, allows you to lock up your Ether as collateral and create Dai stablecoins in return. Meanwhile, peer lending platforms like ETHLend allow you to earn interest by lending out Ether. Suffice to say, there’s a lot you can do with your Ether holdings. Preparing For Ethereum 2.0 Ethereum’s next big milestone will be Ethereum 2.0, which will introduce staking, which allows coinholders to earn rewards. It will also improve scalability through features like sharding, which will allow the blockchain to handle many more transactions. Though Ethereum 2.0 is a multi-year effort, staking should be available in the next few months. At the moment, different Ethereum development groups are running separate testnets. These became interoperable in early September, and according to Ethereum’s creator, Vitalik Buterin, a public network is rapidly approaching. This will be the “last major milestone [before] the network,” Buterin stated during a recent event in Hong Kong. Buterin has also suggested that the upgrade will be seamless. In a post on Ethresear.ch, Buterin suggested that app developers will need to migrate, but coinholders won’t need to do anything at all: “You may want to move your funds into [an ETH2] wallet eventually, but you do not strictly have to and there is no time limit,” he wrote. Can Ethereum Stay Relevant? Of course, not everyone is happy with Ethereum. Some dApps, such as Ethermon, have moved to blockchains like Zilliqa due to the promise of faster transaction speeds. Meanwhile, some projects with ERC-20 tokens have migrated to other platforms like Binance Chain. Finally, some critics believe that sharding is not secure. But despite criticism, Ethereum probably won’t go away. Its brand, market standing, its dominance over dApps, and its ability to drive hype for version 2.0 seem to be a winning combination. Though it has many competitors, Ethereum has first mover advantage and the biggest developer community in crypto —giving it a head start and making it the favorite to continue to tower over the competition.     The post The Ethereum Ecosystem: Still Relevant After All These Years appeared first on Crypto Briefing.
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