all right everybody so with the tax season coming up I've have to bring somebody in here to give you guys the best information you possibly can because quite honestly taxes scare the living hell out of me so David kemer from coin Ledger founder and CEO welcome to the show for like the eenth time I appreciate it it's always good to be back you know thanks for having me back Rob yeah absolutely so everybody if you don't know I've been using this service for this will be our third year straight April 15th is coming up rapidly here in the states and it is the ability for you to pull in all your data to do all your taxes that you need to do and uh you guys have over half a million crypto investors I'm pretty sure you have a lot more of that now you can easily import historical data there's an API integration where it's read only no wrs uh so like they just can pull the information in and that's about it export and file you guys have a looks like an integration with Turbo Tax I don't use Turbo Tax I have a my own CPA but and then also International tax reporting which is pretty cool so any new new things going on with the with the platform before we get into the questions David yeah the big one which we've worked with you a good amount on is starting to really roll out our portfolio tracking product which you
The Voyager Crypto Chronicle Breaking News and Analysis
know if anyone is familiar coin Ledger has been mostly a tax reporting first platform for really the past four and a half five years and now we're bringing more realtime completely free portfolio tracking so you know we're already bringing in a lot of your transaction history and now we're giving you dashboards to understand your Holdings across all of your wallets you know how long you've been holding those assets tax loss harvesting opportunities um and that's going to launch to a more public um beta here in the next week and so if anyone wants access to that just ping me and we can get you right in actually right now perfect so there's gonna be a link in the description and uh we can go from there and you guys can sign up for the portfolio tracker which is again is going to be 100% free which I think is a real winner if you're going to like it'd be great if you can like say what's my profits and loss if I sell right now what's going to happen and also oh all everything's there and then I can kind of roll that into with my CPA or generate reports and then bing bing boom I'm done because time is money let's just like a great top of funnel marketing thing for us because this is a free product we can build trust with people they can interact with our brand for free track their stuff once tax season rolls around if they want to
download their tax reports from us you know they'll pay 50 bucks or whatever to get those and so free portfolio tracking monetize it with tax reporting at the end of the year is you know we've seen is a good formula yeah it's pretty easy and then like as a remind everybody if you've got like five or 10 transactions this really isn't for you I'll be honest with you you can probably figure this out but if you're kind of like us and you've done some djenny type stuff this might be uh something to look into so again it goes from of course free and you can you can generate the reports a 50 bucks to up to $200 which again I gotta tell you it's just time is money and I just would rather do it this way so David let's get into it and let's talk about first things first which is I put this in x and I asked the question like who's got questions for coin Legend we're going to go over all those questions but can we back up for a second and just talk about the basics what is an actual taxable event as determined by uh Tax Services or IRS yes so it's pretty straightforward you know there's a lot of tax language that makes it sound complicated but it really is straightforward so crypto is a form of property just like stocks I'm going to make that comparison because they're treated pretty much identically in that if I purchase Bitcoin for $100 and it
appreciate appreciates to like $500 over the course of some period of time and I sell that same Bitcoin I realize a $400 capital gain which is income on my tax return and the same works with stocks right if you buy a stock for some amount of money you sell it for more that's income now one caveat to crypto is often all in addition to trading crypto people earn cryptocurrencies whether that's staking maybe you're getting paid in cryp CTO from your job maybe you're mining crypto and that's not capital gains that's just ordinary income if I received you know one eth from staking I'm receiving ordinary income for the fair market value of that ethereum when it hit my wallet right right $2,000 and that's really the basics it's property if you realized income by trading or by earning that's a form of income that's taxable income in the United States what about most countries yeah in most countries and it's the same thing also if I want to pay for services right so if I bought Bitcoin for a dollar goes with 100,000 and someone goes hey pay me 100,000 and I'll wash your house or whatever wash your car all right here you go there's a Bitcoin I am gonna have to pay not only that guy but the there is a taxable event correct exactly and to your original question what is a taxable event it's when you dispose of property in this case it's when you
dispose of crypto so whether that's disposing it is trading it for another coin or as you mentioned spending it on Goods or servic you are disposing of property and at that disposal point at that time that's when you realize that capital gain or Capital loss but that taxable event gotcha and so again this isn't about moving between wallets you can move different cryptos between walls as much as you possibly want to but that's not a taxable event you're not disposing of it because you still have the controls just uh to keep that c okay great so that's the basics of crypto let's go into the questions and the first one this is the one that everybody's asking me and I even had this question which was this can we now claim the Voyager Celsius FTX or any hacked wallets that we have as far as last year because this has been an ongoing process but right now Voyer and Celsius have gotten out of the bankruptcy so how does this work dat yes so I can speak very intimately to Voyager obviously we have worked to bring automated tax reporting to their users for a number of years um I'm not as intimately familiar with the details of how Celsius went about about their dis dispos dispersion process of bankruptcy but let me just tackle it from Voyager at a high level and you can jump in with questions that you have so
you know in July of 2022 um or maybe it's June Voyager officially filed for chapter 11 bankruptcy and all users lost access to move or you do anything with crypto on their platform it's locked up yep now you know about a year later they started their in kind distribution process which is you know they're starting to give people um assets back but of course at a much lesser amount um than they had so was about 35% were made available to customers so the details on the Voyager side there were either supported or non-supported Assets in the Voyager bankruptcy process which essentially just meant if it was a supported asset Voyager had the ability to allow you to transfer it off of the platform once you the asset was was available to you again it was a not supported asset that means they just didn't have the blockchain rails to allow you to move it off the platform and so they converted you to the equivalent amount of usdc and so when you got let's say I had one Bitcoin locked up in Voyager who's locked up for about a year you'll see that within coin Ledger or Voyager however you view your transaction history you'll see a withdrawal of that one Bitcoin and right away after a deposit of3 357 roughly Bitcoin and that was the
dispersion that right there is not a taxable event in coin Ledger all that's happening is the cost basis of your one Bitcoin let's say was $110,000 is moving to the now 357 Bitcoin and so now your cost basis is artificially high for a smaller amount of asset which means when you go to dispose of that Bitcoin you will likely inur a very large taxable loss depending on what your basis was yep but keep in mind if it was a supported asset you got access to that 357 Bitcoin in Voyager and if you chose to take that Bitcoin off to your cold storage wallet and hold it or bring it to coinbase and you haven't disposed of it you have not incurred a capital or excuse me a taxable event which I talked about right we haven't disposed of it yet so you can't yet claim that loss if you want to claim the big loss that ENT you lost out a0 s Bitcoin in this example from from the verer Banky you'd have to trade out of that asset that's triggering the taxable event and then you can write off that loss on your taxes now that's the supported asset side on the non-supported asset let's let's come up with just a fake coin XYZ coin let's say I held one of those in Voyager the same thing happened is I I I got withdrawn one XYZ coin and you'll see an immedate immediate deposit of. 35 s XYZ coin in
my Voyager wallet and immediately a conversion to us do usdc right so let's say it was worth uh $100 that's now the usdc I have sitting in my Voyager account that because they disposed of that asset for you you did incur a taxable event so let's say you bought that XYZ coin for $1,000 they converted you out to usdc for a 100 bucks now you have in this tax year or when that transaction happened a 900 $100 Capital loss that can be filed on your taxes um and that's at a high level how it all works of course any assets that were left in Voyager during they allowed a 30-day window for all any of these transferable um assets for customers to move them off the platform if you did not move your assets you were automatically liquidated to the usdc value of all those tokens about in August 2023 September 202 three and then you were mailed a USD check to your address on file with that amount and so those are the mechanics of the dispersion dispersion process um and that's how coin Ledger is handling it from a tax perspective you don't have to do any of this you just click a button and all that gets handled in coin Ledger um but you know that's how it's being handled and we have a bunch of documentation if people want to read up on exactly what's going on behind the scenes perfect so
let's just say great great response great answer let's just say that we know that they're trying to claw back some different mon some some different amounts that they can get back from either 3ac or FTX so let's just say in the future that they're actually able to claw that back now what happens to those individuals such as myself who all of a sudden I got another you know 20% of my portfolio back I'm like oh it's pretty good at that point same same thing happens or can we just WR at this point write everything off and go I don't think it's ever gonna come back so it's really up to the user because let's go back to my Bitcoin case let's say I got 357 Bitcoin back from Voyager and let's say I brought it to my ledger wallet just to hold right I'm not selling again I haven't incurred a taxable event so if at some point I get more Bitcoin back from Voyager that would just add to that same position and remember my basis of spending we we said $10,000 is still true in that amount of Bitcoin so if I add another 0. 1 Bitcoin now I have 0475 Bitcoin but my basis Still Remains the original basis of $10,000 of what I had there so if you want to wipe this slight clean right now and realize what our likely Capital losses because you lost s about um worth of value in the Voyager bankruptcy you need to dispose
and incur taxable events dispos these assets of course you can buy them back if you you still want to hold them right and if you WIP say clean you know you're kind of closing your positions if at some point in the future you do get more income back from Voyager from the bankruptcy process whether that's crypto assets or USD that is a form of taxable income because keep in mind you already wiped the Slate clean you already realized your all of your losses and so by getting income in the future that is just a form of income um gotcha yeah okay well how about this is there and this would come back to to the question about uh the Hacked wallets because I remember this was a couple of years ago maybe last year where there was only so much you could you could claim as a loss because people were like hey I'm in a boating accident and there goes my ledger I just lost $10 million what was me is can you still like is it is it like the maximum amount which is very small every year or have they increased that or how does that work so hacked wallets theft is actually close to Impossible possible to write off from a losses perspective that those kind of that ability got closed in the tax cuts and jobs act under the Trump trump Administration um and it's it's much much more difficult to claim a capital loss logically now you could claim
anything you want right the US is a self-identifying system true but the law has closed a lot of the ability to write off meaning deduct from your income on hacked theft when it comes to property how Okay so so banking on that is there a limit to what we just talked about with say FTX Celsius and Voyager can we say like if we had it I don't know 20,000 50,000 200 200,000 we could all just say that's just a total write off like just give using your example yeah so the FTX and whatnot those cases are different because they did file for bankruptcy um it's the the ones that I'm more referring to in my my prior um dialogue right there is if you yourself right like got your crypto stolen from your Ledger wallet or you somehow got hacked on FTX it's going to follow a similar like bankruptcy process as Voyager and Celsius and those are going to be writeoffs because you had some amount of asset you know by the fault of the company they're going through bankruptcy you got back less and then you dispose of it and you're going to incur Capital losses um gotcha there there's Nuance to this I'm simplifying so if you have very specific use cases problems of course I'd always recommend T talk to someone who's well versed in crypto taxes you know we have a bunch of folks on a directory on coin Ledger that you can go and reach out to they're very
knowledgeable um everyone's situation can be a little bit unique yeah and then just to to piggyback on that uh if you're on coin ledger. links in the description but if you come down here there's a there's a link that says find a crypto tax expert if you click on that they've got a a whole plethora of different people you guys can talk to if you have any questions about that now it's going to be there of course they're going to charge for those services but I got to tell you those services are worth their weight and gold and uh I cannot stress that enough and then and then also before we move on the next question to to Really dive deep into that question of can I write off law St and scam crypto my taxes there's a great article written on coin Ledger by Miles Brooks who has his masters of tax and he's a registered CPA director of tax strategy at coin Ledger I will link that also in the description you guys can uh take a look and go from there so yeah that article is going to cover this in detail so that will be helpful for anyone who's in those situations perfect so we've we've covered the bulk but now let's get into some questions that I asked uh just this morning and people love to ask questions about taxes even though people hate them so let's just go through this wise money du says this not
a question I think you should have them explain why it's so important to take responsibility for your taxes and pay them accordingly uh I'm just gonna say like this I don't like to pay taxes but I don't like jail even more so that's my response David anything to add on this one yeah I I would Echo this similar sentiment um I also am a fan of minimizing taxes but you know if you just choose not to pay taxes you're incurring a large amount of risk and sure maybe you you get away with it no one ever notices but you're incurring a lot of risk and the penalty for tax evasion is steep and so I personally don't want to live with that risk um and so I think it's important to do so yes exactly talk to uh Wesley Snipes and Al Capone so uh we'll go from there muffin ask a question I had a pre-sale where the token staking rewards were harvestable and manageable between wallets in 2023 but launch on Unis swap beginning of January 2024 which is the first time I actually sell is this income for 2023 when I received these Stak rewards even though they weren't available to sell or would it be 2024 we'll bring into next tax season yes so this is good you know it's a little bit more advanced case of what's going on here and I'll break it down um from how I how I interpret this question so actually Rob I don't know if
you can pull up the question again yeah got it here we go so you got a pre-sale for this token so let's say you spent some amount of let's just say ethereum to acquire this new token that's that's often what happens number one you're incurring a taxable event of your ethereum because you just dispose of ethereum for another token and so so you know you're either going to realiz a gain or loss depending on how that amount of ethereum has appreciated or gone down since you originally acquired it second now you hold this token let's call it XYZ coin and it it sounds like it's giving you staking rewards right those staking rewards as mentioned by this user she says or he says they're movable meaning they have as the tax World calls them dominion and control over those staking rewards it's clear in tax law that if you have dominion and control your realizing income at the fair market value of those staking rewards when they're hitting your wallet now the Nuance here is well what if this coin really doesn't yet have a an established Market um which is probably likely right if it's if it's kind of this early token those staking Awards yes their income at the fair market value value of the token as while you're receiving them in 2023 but it's very likely you're
realizing a very small amount of income so I would let the user know you know you have to go find the fair market value for those tokens as they were hitting your wallet and that's how much income you're receiving obviously this is what platforms like coin lger do automatically for you then when you go and swap it on Unis SW swap let's say that whole amount let's say you've been drip staking rewards for six months and now you just lump some that and you trade it for something else in Unis swap now you're you're rece you're incurring another taxable event and you're either realizing a capital gain or Capital loss depending on how the value of your tokens have appreciated and the cost basis in these tokens is the amount you've incurred in income so let's say I received hundred staking drips from buying this token and each drip was worth a penny right 2023 I would realize what $1 of ordinary income right and then when let when I dispose of it let's say I dispose of all 100 drips of those that token for a th000 bucks in 2020 before I am realizing $999 of capital gain in that scenario gotcha very nuanced question but a good question so what we M I'm pretty good how about this one making donations to nonprofits through crypto versus through Fiat because I mean here in Puerto Rico I mean we we have to uh do donations to
nonprofit which is great uh and then some I do in crypto and some I doing Fiat so how does this work yeah so because crypto is property there's a few more nuanced rules but the good thing is you still get the benefit of a tax write off when you're donating to 501c3 organization um we also have a a blog post that discusses the ins and outs but at a high level if you've if you're donating crypto that you've held for more than 12 months similar to the long-term capital gains bracket you get to write off the whole fair market value of that donation if you are uh donating crypto that you've only held for less than 12 months you're only going to be writing off your cost basis in that asset so I would refer people to this blog post it goes into even more depth but the benefit is still you get a tax write off for donating crypto as a form of property yeah and I did this in one of my videos matter of fact and so and so tell me if I'm wrong here which is crazy I have $10,000 worth of of uh of ethereum and then I hold it for less than than than a year and it goes to 20,000 right and I say you know what I'm just going to donate all the all this ethereum is worth $220,000 because that's I'm a charitable guy right if it's less than a year are you saying that I can only write off
$110,000 right you can write off your basis in the asset which is annoying that's insane why can't I well that's the IRS so you're saying that if I hold for more than 12 months what yeah I think what the law is trying to protect against you this is the law is written for property as a catch all there's many types of forms of property and I think what they want to catch is people who saying oh I bought this it's worth a ton of money now Rob I've held this for a month and I want to write off the fair market value of this piece of art right um and so that's what it's protecting against on that side protecting us harder fantastic all right so how about this one can we migrate our imported and compiled tax bit account transaction in the coin Ledger I've used Tax bit for years they're doing a away with their oh I didn't know this away with their consumer facing service and I haven't migrated yet yes you can um we don't have like a direct integration with like transfer your taxit account it creates the same account in coin Ledger um but we have our whole support staff is trained we've been helping a ton of these tax bit users get migrated to coin Ledger and the other good thing is we've completely made the product free for tax bit users who have used Tax bit in years past so if you need to you know get up
Ledger your 2021 reports your 2022 reports we're making those free to tax fit users so just get in touch with our support team and they'll walk you through all of that hey man that's pretty good all right um bgd says does the IRA does the IRS allow a summary of crypto gains losses or does it require every transaction to be reported I think this would be like if you get audited probably every transaction but how does this work out so just technically speaking um yes you have to report all of your taxable events um this is annoying in crypto because there's a lot of them but technically speaking yes you do actually have to all transactions this is why okay so this is why when I send to my CPA it's like just a boatload of information and she's like okay great and then she just sends them over I gotcha yeah what's happening is the 89 49 itself will get Consolidated but you also attach essentially a long file of just like all the transactions alongside have fun with that Felix asks uh will future recovery be treated as new income I think we we asked we answered this actually this was about the L the Voyager Celsius FTX issue right yep exactly okay um Jimmy says some exchanges don't hold reports pass quarterly how can I use coer to verify account for yearly transactions yeah this is a really
frustrating problem some exchanges make it very difficult to get your transaction history for further out than like three months at a time yeah for these exchanges one just start making it a habit to download that three months every month you should just be downloading that um because our hands are tied as well if an exchange is like nope we're not going to give you your transactions for further than a year out first you should email their customer support saying hey I need my full transaction history to do my taxes please give that to me most times they'll give you the the full stuff you just have to go through the extra hoop of hitting their support team which is annoying but to answer his question I would just keep your account fresh if you're using coin Ledger you know every month refresh that data um and then you won't have that problem because we store all of that data forever you'll always have access to it awesome okay and then last question which is do I need to report my S coins I trade on a de because who cares it's on a de nobody cares no one's goingon to catch me yeah it just goes back to what amount of risk do you want to carry with you in life technically speaking that is a taxable event taxable activity you're incurring some amount of income that needs to be reported on your taxes if you choose not
to report that that's on you I can't make you but you're you're inferring some amount of risk that you'll carry forward for some amount of time exactly me and David are not financial advisers or your dad so do whatever you want to do we're just here to give you the best information all right David another fantastic showing I we appreciate it look everybody the links that we just talked about everything we just talked about there's a links in the description you can check those out but again uh make this consideration and because it's a tax season sneaks up on us and it gets very quickly so it's going to help you save a lot of heartache and time and frustration so David thanks so much for stopping by again thanks for having me on we'll see you guys later all right guys see you
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