U4 – Crypto Profits & Taxes – Part 2
0:02
Hey, good morning, John.
0:03
Morning, or, Yeah. All right. Good. Thanks. All. Right. We’re talking about the big topic today. Want to welcome everybody who’s tuning into this webinar, whether you’re live. I don’t know. We’re a little earlier than usual. So I doubt there’s too many people live here, but a lot of people are gonna be watching this later. So thanks for checking this out.
0:21
And I’m here with my main man. Oh, I forgot my title slide. There. We go Crypto taxes with my main man, John Singleton.
0:28
So we did a class on this the other day.
0:32
We’re in the middle of a series, and this is part of our ultimate membership.
0:39
I’m gonna bring that up on the screen really quickly, if people go to pulling it up.
0:47
There it is.
0:47
If people go to privacy, fight club dot com, they’ll find access to this, and this class down here, crypto, profit, and taxes.
0:55
We’re already into our second session on this, and we had a really good one.
1:01
Part two was was excellent, and we got into this idea that came up this became a really big sort of thing in the crypto internet.
1:14
I don’t know about a year ago, I would say where the discussion became, if you’re going to have kryptos at all and trade say, between litecoin, and bitcoin, or litecoin, and Ethereum, or bitcoin, and in XRP. If you’re going to place those trades, you have to report them somehow.
1:33
To the IRS and potentially pay taxes on it but it had everybody just going crazy? I always get, and I was getting messages from people saying oh I do, I want to trade but it’s not worth the tax consequence. And they were talking about trading unlike weren’t even talking about like Coinbase trade. They were talking about the third delta trade that no one like, no one will ever know about, and then they’ll be like, But the CIA knows. It’s like, yeah, that’s right There. So anyway, it became this big sort of legend of the crypto taxes.
2:05
And then you came along and you just started, you know, yelling from the rooftops this is, most of what you’re hearing is just crazy talk.
2:14
We’re not going to give people the full strategy today, that’s for people who are members of Privacy, Fight Club, dot com. But you do want to shed some light on this and and explain this a little bit. Give people some hope that we can provide the resources where they can do. In text encoding.
2:33
Right, exactly. Thanks. Yeah, and it’s not like I just popped up and said, hey everybody, I’m nobody noticed CPA. I’m not an attorney, but guess what, You don’t have to pay tax on crypto. It’s not like that because the kryptos thankfully, you have to thank the IRS kryptos are defined as property.
2:50
So it’s nothing different than the last hundred years of property rights. And I’ve been doing this since the nineties. We’ve had the same conversation with I’ve had it with many people for 20 some years. And it was way back in the day in the nineties was talking about stock and the sale of real estate, commercial, residential, or whatever. And to this day. Now it’s crypto cryptographic currency and nobody cared in the first five years.
3:11
But now they do and I’m here to tell you and we even have a determination letter from the IRS itself agreeing that exchanges between coins are not taxable.
3:23
Because, Wow, yeah. And it’s because of the one reason, really, there is no disposition of assets. You can look that up.
3:32
There’s a publication that’s an IRS Publication, 544 that talks about this, and talks about fair market value and things like that.
3:39
But because the IRS in 20 14 defined kryptos this property, it falls in the category of every other type of property. Pretty much. I mean, it’s almost like the same type of property rights you would have with a copyright or trademark because it’s intangible. Yeah.
3:56
And so there’s there are no laws regarding new taxes on cryptographic currency.
4:00
I know there was a lot of news on the 1031 Exchange, but the 1031 exchange never applied to Kryptos anyways.
4:07
It always apply to real estate. Yeah. You could never do, like, kind exchange with anything, but real estate. So the IRS. When an added the word real into the statute, to make it real property, and everybody said, oh my God, look, it’s new, no, it’s not. That’s not, well, it’s not, yeah.
4:23
You, you kinda brand passed something just now, that, that struck me, that we should pause on, you talked about this yesterday.
4:29
You were doing the Request for determination letter, helping people with that, for awhile. And yesterday, and I was involved with some of that, you, said something that, you, I hadn’t heard you say, which is every single time that you sent the letter, Essentially?
4:46
The, the IRS agreed, is that, the Coinbase tax document, well it wasn’t applicable, it wasn’t, it wasn’t a small event, it was it was a case where each and every case thereby doesn’t.
4:59
And by the way, I did this way back in early 2000 something, on other issues with the IRS. I already knew how to do the procedure. So we just applied it for Kryptos and made the legal argument and the same stuff. Yeah. Yeah. Same, same thing. And so, we asked them in the irises. Very cordial. I mean in that sense they’ll they’ll say. Yeah, I’ll answer you.
5:16
And that’s the Secretary’s office. It’s not some revenue officer, right.
5:19
And it’s like, well, it’s better than a letter ruling, really. But, yeah, every single time we nailed it, I mean, while the Iris just said, OK, so what we asked is, we told the IRS. the 10 99 we got.
5:31
In the personal account at Coinbase or Gemini, or whatever it was.
5:35
Even the mining rigs that are paying us, the Indian Kryptos, That does not constitute a disposition of assets and by its own language. We had to use its own language, which is, which is about backup withholding. Which is kinda complex, and I talk about it in the video.
5:49
We just basically told the IRS, I’m not going to include this 10 99 in the 1040. And by the way, I already filed 1040 and paid my taxes, but I’m not gonna give you guys this 10 99, and the IRS wrote back and said, that’s fine, just keep on doing what you’re doing. And somehow, yeah, So you got the, you’re like the one who has the word from the IRS on this, The IRS said. Oh yeah, yeah. Look, I talked to any CPA, look all over the internet, and you’ll get scared, right. You’re gonna get scared enough to hire them, as is what they’re basically giving. Exactly. And they’re gonna have you run around, chase your tail, use this. All this different types of software to compile Exchange reports is ridiculous.
6:30
And the bottom line is, there was no disposition of assets, and if you don’t understand that, well, then, you’ll end up reporting or you’ll go to a CPA because that’s, you know, you trust them because they’re professional.
6:39
And they’re going to do the thing that they’re trained and threatened to do. You did something great on our episode yesterday, which was, you gave.
6:48
List of things to ask your CPA.
6:50
Yeah, You can ask them, if they know this, ask them this. Ask them what they’re gonna do with that.
6:55
I’d never know, because that’s the thing. It’s like, OK, you’re gonna go to another person. You know. You’re right, You know what you’re talking about.
7:02
They know what they’re talking about, Sort of, are they think they know what you’re talking about. I don’t know what I’m talking about, so now I’m going to them and saying, Well, I heard on the internet. Right, exactly. And they don’t, do, is say, you gave us great, like job interview for how to find somebody who will, Who would understand this stuff. There’s a list of questions you want to ask, and they’re very good questions. I think. I mean, you don’t have to take my word for it, in other words. And they ask those questions, You can make your own conclusion. And you can get your CPA and he’ll give you, sometimes you get a pay him, but he’ll give you like a little legal memo and I’ve had many conversations with CPAs. Like, clients will say, Please talk to my CPA. I can’t have this conversation, because, you know, they don’t have the language for it. Yeah, I get them on the phone. We do a three-way. And five minutes into the conversation the CP is going. Yeah, I guess you could do that. You know? If people thousands. But he’s not going to change is still going to have people do it, but you’re right.
7:52
If you’re watching the video that, And among others will do more.
7:55
But basically, I gave you some specific questions.
7:59
Like, for example, you ask and you can do this in any country, by the way, you can, I mean, I wrote those questions so that you can figure this out in any country you’re in. And so you don’t have to say, Hey, there’s this guy in Florida that says this thing. CP is going to say, Don’t waste my time, you know? Yeah.
8:14
The other thing to keep in mind is you don’t want to have a conversation about the asset itself with your account, and ask his advice or something. Your accountant does a specific thing.
8:23
Accounting he doesn’t care about your investment in jet engines, or real estate, or Net present value, and all that stuff He only cares about? Tax issues, So why would you ever have a conversation with him about the type of math that you’re involved in? And of course, he’s gonna say, Yeah, just, let’s report it.
8:39
Yes, that’s the job. So absolutely, and not to give too much away. You know?
8:43
There’s a lot of complicated aspects to understanding this, understanding it in your Understanding it in the sense that you understand it. You know how to act on it. Most people are never going to dig that deep into it. So we got to something yesterday, essentially.
9:00
You talked about how to avoid so much of the trouble that comes with this, and that really has to do with the big, I’m not sure we even said this clearly on the show. We did yesterday.
9:09
But the big thing is who, who the problem comes in when you’re when you’re going from dollars to crypto crypto to dollars for the most part mm.
9:18
Hmm, and you know, for all of the things that we help people, you’ve helped people set up in the past. That’s where the rubber really meets the road is where when you’re you’re dealing with Coinbase buying crypto, moving it off with Coinbase trading it ongoing. But that’s that’s where you’re really going to run into your problems And for that you, for the most part. You just want to do it as a structure and not as yourself correct. Isn’t that sort of the starting point. Yes, I think that’s the way that I agree.
9:44
I think that using a structure as an account holder instead of yourself personally, that avoids huge problems Yeah, Most of it lies to the Fiat side, right? Absolutely. Yeah. When you buy an asset, it’s not taxable.
9:58
There’s no tax consequence there, right. There’s X, and you buy and you hold it, No one’s gonna come knocking on the door and say, hey, we saw you buy this last year. We looked at the blockchain, and nobody cares. You can buy whole, I don’t care who buys. But it’s when you sell, right. How do you dispose of the acid turning to dollars? Yeah, and you can choose that you have the ability to, you could do whatever however you want.
10:20
You have control over how that, that goes down.
10:23
Let me give you an example. Let’s say just buy, buy, buy, and all of a sudden, I, maybe I get rich, and I have lots of money, and I just want to isolate a million dollars worth of Bitcoin.
10:33
And I don’t have a structure, Maybe it’s in my name. So, I take my million dollars worth of Bitcoin now, it’s not in dollars, and I move it to a paper wallet it trades or whatever, just a cold storage wallet. That I can hand to somebody.
10:47
And then, he can look at the numbers, the private keys, and he can then validate the amount of money in dollars that it’s worth, right? But still in Bitcoin, I can give that, that token or that wallet to an escrow agent.
11:00
And the escrow agent, if it’s the right one, not all of them do this.
11:02
The escrow agent can source the dollars for that Bitcoin under escrow.
11:07
Hmm hmm. So it’s basically in a trust that you don’t have anything to do with, it’s a third party.
11:11
Well, now remember I’m talking about doing this without a structure and you’re using cool. Yeah, all right. So I go, I take my, my Coinbase holding Bitcoin, I put it into a cold storage wallet a paper wallet even. I give it to my escrow agent. I’ve already made an offer and let’s say some real estate. This is a great example, it’s easy to explain.
11:30
So, I made an offer in real estate. The seller said yeah, except your offer, we have a closing date. I take my Bitcoin, give it to my escrow agent. I open escrow with a million dollars and let’s say I’m just gonna pay cash for the property, it’s just easier to talk about. So, he’s going to source, the escrow agent is gonna source that million dollars.
11:44
When the closing comes, that bitcoin will have been disposed of under the escrow contract, it does not give me a tax liability still.
11:54
Then when the closing happens, I’m going to acquire the property now that here’s the key part.
11:58
I can acquire the property in my name, which really defeats the whole purpose of going through escrow that way or how right did it?
12:04
Because if I went from, I, it wasn’t my Bitcoin because that’s how the IRS sees it. It’s just, it wasn’t my dollars, put it that way.
12:12
It’s Bitcoin, who cares who owns it.
12:14
But that bitcoin was moved into an asset worth one million dollars that I now own. So if I took title to the real estate, I would have income of one million dollars mm, that’s easy to understand, but I don’t have to do that. At the closing table.
12:26
The day before, I could set up a company, and I can walk into the closing, and I can hold that title, I can close the deal, in the company name completely mm. So, I go from Bitcoin over here, that’s not dollars, I don’t have a tax situation, and I move it over to real estate. Not in my name, I didn’t get a gain. And now this thing, I’ve just funded, another company has all I’ve done?
12:48
Yeah, wow. That’s a simple version. Here’s another thing to keep in mind.
12:52
If you reduce the time period between when you buy the crypto, then dispose of it. like take it off the exchange, because you’re getting onto the exchange, because it’s convenient. You can move lots of dollars, they’re typically, alright. So if I just go onto Coinbase for example, and then that moment or the next day I move it to a private wallet. Let’s say I really, I really like the bit phi and I like atomic wallet. If I, if I said I have atomic wall on a dedicated computer on a laptop.
13:16
So, if I move it to my atomic wallet address, the minute or the day of now that time period, between buy and sell or dispose of is a small period.
13:26
And again, all you did was buy property and move it.
13:29
Absolutely. And again, there’s, don’t, there’s no disposition of the asset. Yeah, so there’s no tax consequences whatsoever. And even if I did 4000 of those transactions, and I moved it right from Coinbase immediately to my private wallet. And let’s say it gets a 1099, that’s easy to fix.
13:44
But now, all those, all that current, all that coin, that Bitcoin crypto, it’s all in my private wallet, and I can trade, I can use software to go from coin to coin, and no one’s going to report on me, because I’m using software, I’m not using a third party. So it’s just, you know, there are a couple of things like that to keep in mind. You can avoid the tax situation. You actually have to go out of your way to create a tax liability. Oh, yeah, you have to you have to file something. You have to compile numbers and then say, Hey, IRS here, I’m saying under penalty of perjury. That’s my tax, they’re gonna say fine. Great. All right. We’ll take it. I mean, isn’t that so much, John, of how people get in trouble with taxes is they’re just constantly opening their mouth to the IRS and say OK, this, right. I got this thing over here You guys have some money for it. They do just go crazy like oh, I better tell them about this.
14:31
And the funny thing is you see these memes from Libertarian types on Facebook. You know, you know, you’re you’re fake libertarian, when you have a Facebook account, so I’m totally So You’re on CIA book, or what do they call, FBI book? Yeah, right.
14:45
you see these memes where people are saying, the meme was.
14:51
The tell the IRS what, you know, You guys already already know. What I owe in taxes, why don’t you just tell me? And they say, well, we want to see, if you’re going to be honest, that’s sort of the meme. You know, the, that there, to trap you, that’s what people think. that, they already know Everything.
15:05
Well, I’ll tell you, the technical aspect of that is that’s not really what they’re doing. What they do, they need you to file a return under penalty of perjury, because you’re the one that makes the assessment. The IRS cannot make an assessment until you file a return.
15:18
Yeah.
15:19
To which it does that, right There. Grab a hold of that principle, and it might change the way people do a lot of thing. Yeah. I think about that. If you realize what I just said, angry. You should get out. Yeah, I can’t, like the number of times I’ve come back to you and said, you know, from a client or a personal experience, and said, well, this person wants to file this, that, and the other thing, and you’re like, Oh, you don’t need to do any of that stop. Let me tell you. open yourself up the problem.
15:44
That’s right. Like I talked to a guy yesterday, and he was saying, because he had a 1099 issue with a debt collection, and I explained that it wasn’t a tax situation, because he didn’t do a settlement. He didn’t meet the criteria. That’s very common one.
15:56
Yeah, and there are two letter rulings. The IRS has that mean, in his case. Most people, this is true. If you get a 1099 from a debt collector. It’s not taxable, yeah. But just because it’s 1099, doesn’t mean you have to report it.
16:08
So he, he understood, or his account, understood that.
16:12
The problem is, his accountant asked the IRS to analyze the, it’s called an exemption, and he filled out all these forms and documents, and it probably cost me one thousand dollars to do all this stuff. And finally with it, But I’m saying, you go to a tax professional, and that’s what they do. That’s their bread and butter, right? But when he was, He’s, I’m talking to him, and I said, well, you didn’t really have to do all that. All you have to do is tie your 1040, and it’s automatic. They already know, and I said, You could do all that, but then you’re gonna have to give them some more documents. And then, at the end of the conversation, he goes, oh, yeah, I do. You write I have to do this other thing. And so they want to document everything. I’ve said, yeah, exactly.
16:46
Yeah, so do get yourself in trouble, and just keep this in mind every time you file something.
16:51
Under penalty of perjury, you create a liability for yourself.
16:54
So, yeah, the least amount of things you can.
16:59
That’s a great a great place to end the discussion for today. Alright.
17:03
So listen, John, Privacy, Fight Club dot com This is like you know, I’ve known you for a few years, and I feel like Privacy Fight Club dot com is like John Singleton on the internet.
17:18
Had you’ve had great resources out there before, but I mean here you’re sort of putting it all together and saying No, let’s let’s put everything in one place. So we have our memberships This one is skewed and it’s driving me nuts right now.
17:33
I’m going to fix that as soon as we get off.
17:37
But we also have so so here’s here’s what comes with that. You get access to John’s courses. So, for example, in the base, you get your how to set up your LLC. Learn how to do these basic things to set you up. And by the way, not just for Kryptos for people who have collection issues, if you’ve got defaulted debts, most people think those things go away. In our experience, they sue almost everyone for almost anything, whether it’s one thousand dollars or $50,000. And you can learn how to protect yourself, simple ways, simple things that you can do so that you’re able to use a bank account without fear. You’re able to get paid without worrying about it being artist. You’re able to own property without having Liens put against it. So simple. I mean, my goodness, for the Basic, by the way, there’s a coupon, so all these prices are actually half, half off, if you use the coupon code. So, just just divide this by two, and those are the prices right now if you use a coupon.
18:31
And if you go to the ultimate class, we have our Crypto Profit and Taxes and some future courses. We don’t promise anything, but we are very excited about future courses, and so you’re gonna get what’s here, plus what’s coming this year. So make sure you check that out. We also offer consultations with John and everyone who joins Privacy, fight club dot com.
18:52
Gets access to our Slack chat, where you can ask John questions. You can ask people, ask me questions. But I don’t have anything, as I always say. That’s a great question. You should message, John, That’s literally, I welcome everybody. When they come in the group and say, hey, we’re so glad you’re here asked me anything. And then they ask me anything, and I say, That’s awesome, send direct messages, John, So people can’t see. people can see you laughing. They can hear you.
19:14
And so, anyway, but but it, that’s a great part of the service, and then also, if you need further one-on-one consultation, we have that available for a very, very modest fee. So check that out, privacy, fight dot com. Privacy, fight club dot com.
19:30
You really get a lot out of this.
19:33
And the Crypto Profit and Taxes course is ongoing, we’re doing a new one every Tuesday, and they’re about to get very practical. So now’s a good time to start watching those. Of course, the previous episodes have all been recorded, so you’ll get those with your membership. All right now, let’s remember, it’s not just about the taxes, because that gets you started.
19:51
What do you do with the windfall? Or whatever is you’re planning on receiving?
19:55
And that’s really the focus because the tax is the least of your problems. You think it’s the big problem right now, but it’s actually not, it’s having a million dollars in the bank and then not having a plan on what to do with it.
20:06
Excellent, and everybody out there going, oh, I’d love to have that problem, But it is a problem, It is, it’s a big liability, actually. Kryptos now, it’s, that’s it. That’s a problem you just might have. You’re an early adopter crypto, some good things are gonna happen, so. All right, thanks, everybody.
20:22
Thanks so much, John, OK, Thank you.