U6 – Crypto Profits & Taxes – Part 4
0:08
Alright, we’re live, This is part four of Crypto Profit and Taxes.
0:12
This is the fictitious and yet real person, who works with John. I got a major echo.
0:20
Hold on a second here, I know where it’s coming from.
0:25
You love when you start something, and then your voice starts coming out of your own speakers. Nothing better. Nothing more disruptive than that. So anyway, once again, Phil Smith created by John in his writings.
0:37
And now, now, now, we built an AI. That’s a Bill Smith, is just an AI. But anyway, this is crypto profit and tax is part four. We’ve gone through some really cool things, talking about different ways to structure your assets, so that your kryptos are protected and protected from taxation or collection, or things like that. And so this part of what, we’re going to take some questions. If you’re, if you’re with us, and then you throw it over to John. I think we’re gonna do a little bit of a review of some of the things we touched on, and then we’ll take it from there, OK. Appreciate that.
1:12
I think first we talked about how kryptos are defined, and this is true in any jurisdiction, you can check with your tax agency, but they are defined as property, so that’s nice for us, because all the laws and rules that pertain to property and tax on property apply kryptos in, in the same way.
1:29
So there’s nothing new, there is no new legislation for kryptos, and so as long as you’re following those rules, you’re, you’re in good shape.
1:36
So we discussed that crypto is defined as property, Every jurisdiction that I know of.
1:41
And that’s a really big one, because the thing that came out last year, Everybody started trying to read the IRS’s mind about how they should handle they’re kryptos, and it led to a lot of speculation and a lot of panic.
1:57
About how you should treat your kryptos. How you treat your trades at tax time.
2:00
And, as you’ve said many times, and this is, this is, you know, if I had to make a top five things I’ve learned from John, one of them would be, as people get in trouble, Most often, because, they just share too much information, that no one is actually asking for. But once the government has it, they’re happy to act on it, and collect something from you, as a result. They do. Yeah, yeah. That’s the purpose of all this propaganda that you read, and make a comment on that, too, Because there’s a lot of propaganda and most of the articles people read, if you Google the subject on the internet, you’re gonna get basically everything that’s telling you that you should file the opposite of what I’m telling you. And I’m not some genius that I’m I’m the only one that understands This Is just that.
2:41
what you’re reading is, from the same source is from all the tax professionals and the IRS agents who want people to to file and do a thing a certain way so that they have the greatest tax liability.
2:52
Yes, I mean, you can probably figure that out for yourself.
2:55
So this is nothing new. I mean, I’ve been doing this for 20 some years and it’s just like if you if you tell the IRS or your tax authority, something under penalty of perjury, and it results in you having to pay tax where you wouldn’t have had to, they’re not going to object.
3:11
This is where we are right now.
3:13
Yeah. So, yeah, so, what’s being taxed is your government’s currency, it’s the fiat currency. It’s the dollar. It’s, you know the pound, whatever you’re using.
3:22
So avoid a situation where you’re getting a gain and that fayyad It’s that simple and and we’ve discussed before trades between coins if you’re on an exchange in a third party.
3:33
Those trades from, let’s say, bitcoin or litecoin that’s not taxable.
3:38
In you can valued however you want. You can. You can evaluate or appraise the value of a of a cryptographic currency in another currency, or in gold. So, if you appraise its value in dollars, and then you report it, then of course is going to be possibly taxable, are reportable. So just like if you were to put, we discussed, if you put coins on a third party exchange and the third party exchange reports at a certain way.
4:03
And it’s incorrect, that can be fixed. That can be corrected.
4:08
If you’re trading your coins on a wallet, like what’s the one, the kind of the cold storage wallets you use off the internet like?
4:18
Um, Atomic wallet, OK, that’s a great example, Exodus. These are wallets that no one’s gonna report on you with, right?
4:25
And yeah, that data’s on the blockchain and maybe your IP address is connected to it, but there’s no reporting system that’s connected that way.
4:31
So again, trading between those coins, it’s not taxable unless you report it that way, so it’s that way in every jurisdiction.
4:38
And then when you talked about, mean, we can like an in the states. I know that I can ask the IRS for determination letter and we’ve done that.
4:45
And you’ll see on the website, it’s on, you know, it’s been published, that the IRS would agree that trading between coins is not taxable.
4:54
However, if you file a report in 10 40, they’re going to agree with you, they’re going to take your, they’re going to take your money.
4:59
And it will be taxable. Yeah.
5:02
Oh. Yeah, it’s funny, you actually got them in writing to say, yeah, it’s basically the opposite of everything you’re reading on the Internet. So incredible began writing. There’s not speculation. Yeah, it comes right from the Secretary of the Treasury.
5:15
That’s the party, that’s the office that writes all the rules that imposes the tax, not the Congress mm arc. Our legislative body writes the statute and then our agency writes the rule to collect the tax. You see, you know, so the regulation controls the regulation, as long as it’s within the scope of the statute. It’s imposing the tax well there isn’t one.
5:36
Yeah, there isn’t. There isn’t a new one.
5:39
You see, you’ve got something hard there from the IRS and saying, or from the Treasury saying specifically, that the 1099 Buster was right. The … as a letter you were helping people with around tax time last year, and I’m sure you’ll be writing plenty of them again this year, and they essentially agreed with your assessment, which is having crypto on an exchange and trading it is not a taxable event. Exactly. And you can buy as many cryptos As you want, I don’t care if you’re using a company, a trust at your personal account, You can keep on buying kryptos however you want, It’s when you dispose of them. It’s called, Disposition of the Asset, when you sell them for dollars.
6:16
Then you create a taxable situation, if, If it’s called for. So, if I have a personal account, and I’m filing tax returns every year, and now I just got dollars or Fiat currency in my name, I’ll sure it’s at least reportable. It’s probably taxable Maybe I have losses or whatever, I don’t know, Maybe I have huge gains.
6:34
It would be taxable if it’s in my name.
6:36
So like we discussed, we can avoid that whole situation by using a third party by using a company, and all that company does is manage the cash flow, the sale, the asset, the property, rights, the property, It just manages that for you, and it precludes you from having a gain It, keeps it out of your name, until you pay yourself, basically.
6:59
And so we’ve covered all this, and just one note, um, I was talking with someone today and it just, I just remembered it, mentioned this.
7:07
In the States, OK, the IRS does not, is not allowed to look at credit card receipts and credit card statements anymore.
7:16
To determine a tax liability, because they’re not, In other words, they’re not subject to audit, because the IRS wanted to prevent people or preclude people from using credit card statements for tax deductions. So, they succeeded. They got that.
7:31
But in the legislation, the Congress said, Fine, if you’re going to do that, then you cannot subpoena or summons credit card statements to establish the tax liability. So, what that tells you is, this answers a lot of questions where people want to ask me aside from, We can handle transactions, and we’ll talk about this in a second. We can do large transactions like buying a house and a car, and you know, $100,000, million dollars, $10 million transactions? We can do that easily without a tax situation, but what about $5000? Yeah. I’m not gonna go through an escrow agent for $5000, I mean I really probably shouldn’t.
8:04
I probably could, but that’s not reasonable. So what would I do?
8:09
Well, I would just pay my credit card bill with my limited liability company account or my LP account, are my trust account. I would just pay my bill with that structure.
8:18
That’s tax deferred And that’s off the radar, so to speak. Just keep in mind.
8:24
Technically, if you’re filing tax returns, it is income, even though because you did pay off a personal debt, so just keep that in mind, but it is invisible.
8:35
So unless you’re gonna file a bankruptcy in the future or be involved in a criminal investigation for some reason, There’s reason to ever file bankruptcy. Exactly. Yeah, there’s that, too. So I’m going to remember hearing that from here. And let’s see from the guy who 2000 people. There’s no reason about Quebec.
8:53
Yeah, so you wouldn’t be subject to having to disclose that information. So just keep that in mind.
8:58
Just just a little Nice little secret there. Just, Yeah.
9:03
So, people ask me how so going forward, I mean, I don’t think we’ve covered this in detail, but unless there are other other questions, we have a couple, I think.
9:12
Yeah, we have a couple there, little off topic, but we could start there, see if it sparks some, some crypto stuff. So, this is from inside our chat room.
9:22
Millimeter, Nattily says, I’ve been trained that LLC is only protected for from a stupid lawsuit if you know how to run it, right?
9:31
So, you don’t blow the protection of having an LLC. That is a common refrain.
9:35
In fact, there’s a, there’s a commercial I see all the time, where they talk about how if you make a mistake, the IRS will pierce the corporate veil. They say that in the commercial over and over again.
9:46
I always sure do have the IRS piercer. She continues, meaning, don’t commingle funds, so that’s a simple one yet.
9:55
Is that really a problem with an LLC that’s never filed?
9:59
Even if we get a lawsuit from personal creditor, trying to attach the LLC, OK, it’s tax returns and asset protection for two different things. So, a tax liability is just not really considered when you’re talking about.
10:14
The charging order protection, meaning, the corporation will protect you personally.
10:18
Let’s call it the LLC. Let’s start by LLC. So, the whole idea is that you want to sever your personal liability from your asset. Use an LLC to do that. And the best way to do that is with more than one owner, and I know many of these are single member and that’s fine for your immediate situation if you ever needed to.
10:35
You can just add another member by amending the articles, and the same with separating out the business use or investment purpose with a personal use, possibly, if you’re going to do it that way. Yeah. Keep those separate. But what you’re talking about and you’re reading, that’s a lot on if you Google this subject. Again, you look at lawyer websites and tax websites. They’re correct.
10:56
This is the issue of attaching your personal interests, if you abuse the charter, if you used improperly like, of course, if you use your corporation to launder money, then you don’t have corporate protection. So if someone wants to challenge it, you know, it’s not going to survive, But for the most part, you can just, you can even let your charter expire, and you still have corporate protection.
11:17
You’re protected, you’re severed your personal liability severed. But and this is where the the actual agreement or the legal relationship that you have with the asset in the company is tested in a courtroom.
11:30
And some attorneys picking it apart. And he’s already gone through the discovery process. And he subpoenaed the documents. And that’s now a test in the Court.
11:38
And that takes a lot of money to get to. It’s not, it’s not like watching TV. And you know, it’s a great point.
11:45
Yes, someone’s arrested in the next day. He said, A trial. That’s not how it works. So, right? To get to a point where that’s even going to be a test is it literally takes years and $100,000 or more. And I’ve been there, I know, and I’d like to write these things in the things I create for people to structures.
12:02
However, whatever it is I’m doing, I’m making it to wear, if you’re ever gonna be in that situation, that’s, like, a path, a path you’re on. You can get out of that well, before you’re ever going to have to cough up some document to have it tested to see if it’s written properly, you’ll be able to dispose of the asset in a way, and not be a fraudulent conveyance or something.
12:22
But you’ll make it to where you’ll never have to pay for litigation to defend your property rights.
12:31
Because of the way we’re using it, That’s the key. Yeah, That is really the key. It’s not that you need a really brilliantly written contract.
12:40
That’s impenetrable because it’s not. It’s everything’s just like any computer device is hackable.
12:45
Everything’s hackable.
12:47
Been in a contract, you can tear it apart. There’s all kinds of things you can do. So you want to be in a situation. I always use this as a good example. Here’s, here’s an example of how you want to think. It’s a true story. Person called me. She was getting sued, or company was getting sued. She didn’t really care about the company, but even if she did, even if it was running a business, I could have done the same thing for her, but in her case, it was very easy.
13:08
She was getting sued. Her company was getting sued. She was not being sued. She was not a party to the case.
13:14
And it was she had even answered the case yet. The company hadn’t answered the case. And in her, in her situation, she would have had to hire an attorney to respond in behalf of the company. So I said, Well, why don’t you just make it simple. If you don’t care about the company, we can just set up another company.
13:28
In one hour, five minute, I said, Just Go and I walked with her on the internet. I walked her through the website. I said, Let’s go through there and we’ll go to the Secretary of State’s website and will amend your articles and will replace your CEO status and your membership status with the actual attorney who’s representing the plaintiff. And we’ll put his name in there as the owner, and we added like three of the attorneys in there.
13:52
Yeah. And I said, don’t do anything else.
13:56
And sure enough, within two months, it was dismissed. It was gone.
13:59
Certainly, the attorneys were suing their own interests.
14:03
That’s how you use these things. That’s the right way to use them. You don’t want to go like that. That’s amazing. Yes, yes. So, so many of the things I’ve seen you come up with to help people are just going around it in such a simple, quick, easy way where people would be pulling their hair out for years trying to deal with it.
14:20
Yeah, Yeah. So, avoid the fight. It’s costly. And that’s the whole idea between LLC. That’s why I like them. I mean, if you really, really like a trusted, for some reason, somebody sold yana trust, keep it, It’s good, But use an LLC to do business with your banks and your partners and everything. And make your trust the owner of the LLC.
14:39
Excellent!
14:41
And so, when we get into the tax issue, so, you want to avoid problems down the road, anticipating an audit and so forth.
14:49
You want to be able to answer questions like, explain this transaction, right? If you have to, if it ever comes up. And so, you want to make it look like a regular transaction, it has to be a real transaction, no self dealing.
15:00
So, you want to be able to explain that. It’s not self dealing and there’s ways to do that. So, I like to, when I explain things over the phone to people, usually on the first call, it’s the same as on the last call.
15:10
I never create a situation where you’re going to accidentally be self dealing so don’t worry about that. So, here’s an example. Let’s say I get a nice windfall from kryptos and I want to buy a house or I want to pay my mortgage. Fine do that.
15:21
You can just take the money from Europe, LLC account, and just buy the house, and you can put it in your name.
15:28
And if you stop there, you could have a tax situation, because you just got income, because you paid for something that’s yours.
15:34
On the other hand, you can you can create a lien a mortgage, in about five minutes you can create a mortgage and just go record it in the county, and I would do it within 30 days.
15:45
That’s just a good rule of thumb, 30 days.
15:48
So, if you pay off your mortgage with a windfall from kryptos from your LLC, which is not taxable, right, and you pay off the, you pay off the debt, the personal debt, the mortgage, it wouldn’t be taxable unless you’ve just, um, created a new debt with a new lender. And then that would be a refinance mm.
16:06
So that’s what you’re doing with yourself, using your own LLC. Yeah. You could do it that way and you could be the single member, LLC, and now that’s the simple version of it. Um, I would recommend you look into and we can talk about this more, we’ll get into it.
16:20
But you could use a whole life insurance policy and borrow the money out and there’s a couple of ways to do this. It’s really slick.
16:28
and that is truly a third party, no question. And you can just borrowed out tax free and you can buy a house, a car. Or whatever else you want, you can buy assets.
16:38
All right, There’s all kinds of ways to do that.
16:40
So, you can use a whole life policy, or you can just structure it as a loan, You would just record a new mortgage and you would name your LLC as the lender or another new LLC as a lender.
16:52
You can name your brother Bill as a lender, if you want.
16:53
I wouldn’t recommend that, but as long as is the third party, you can, you can have a new lender Now, that’s just buying a house for buying a car.
17:02
Let’s go back to the house for a SEC For a second. I can take the money that’s my windfall. And the LLC at the Exchange account and I can move it to another LLC bank account with a completely different LLC and I can have that LLC by the, by the property, my house.
17:16
I’m gonna live in or pay off the mortgage.
17:19
If I pay off a mortgage through a third party, then, I still want to structure a debt, but I can, I can take the money from my LLC at the crypto exchange, and I can move it to another LLC, and I can spend it mm, whatever I want.
17:33
So now, that LLC becomes the owner of that new thing, whatever, a car house or whatever, Nancy, and that’s not necessarily not necessarily a taxable event, No, not necessarily now. So what you’re doing is, you’re just funding another. You’re just going from one asset to another. You, just funding another company.
17:50
It’s, just, it’s just like almost like the same as buying crypto is in your name, you’re just buying the kryptos, you’re not, you know, getting a gain out of it.
17:59
I don’t, I wouldn’t do it that way, but another way to do it is, OK, So let’s say, let’s, I want to buy a car, a vehicle, I would go to the dealer and just walk and just like always just go in there and make my deal. And the dealers, of course, going to try to get me to, he’s gonna qualify me.
18:14
It’s gonna ask me all these sales questions, but I’m just gonna answers questions by saying I’ve already got a lender as if it’s my uncle Bob, because I’m sure he has heard this before. So, I’ve already got a lender, I’m already qualified, So, I just want to get my, my price, and then I’ll come back with the funds. And, So, I could, I can wire the money when I get my, my bottom dollar for the contract on the car. I can wire the money for my LLC account.
18:36
I can go to the bank, I can drive over there and I can get certified funds and make it make it out to the dealer from the LLC.
18:46
I can use the same LLC I’m using with my Crypto Exchange account.
18:50
Or my limited partnership, for that matter. And the dealer will be happy to write up the contract, and he will, he will name your LLC as the lender on the Certificate of Title, and he’ll mail it to your LLC and it doesn’t matter what address you’re using.
19:05
It could be your home address, He will do exactly what he always does, except now your LLC is the lender, and all you did was just tell him that.
19:13
Hmm, hmm, hmm, hmm, it’s that simple.
19:15
Nice.
19:15
And so now technically your LLC has lent you the money for the for the car. That is correct on paper, and I would just keep a payment history where I’m paying the LLC on a regular basis, monthly or quarterly, the amount for the car.
19:31
So, I’m just moving money around, it could be the same payment every month, but I just wanna have a paper record, or digital record, that I’m making payments on this loan.
19:40
So, if anyone ever asks, if I’m audited and that comes up, then I could just say, Well, yeah, I borrow the money from my company.
19:46
Nice. mm. Awesome! All right. Cool.
19:50
Excellent. Again, any of the topics you want to cover, before we wrap it up and aren’t any other questions have come in? Well, let’s see. Try to think of things people asked me. You can use your, you can use one LLC for the all these transactions.
20:06
At some point, you want to consider separating them out. Like, if I’m gonna buy a hotel, I’m definitely gonna separate it if I’m going to buy an apartment complex. I want to set up a new, limited liability company.
20:16
If I like using a trust organization, I prefer making the trust the owner of the LLC, and I’m starting to do this now when I’m writing the operating agreements, and in the abstracts that I’m giving you for the bank accounts, I’m making those a trust ownership. And I’m the type of trust I’m using as a private membership association, and I’m not really explaining that yet to everyone. I’m going to get into that later. But just so you know, I’m already doing that.
20:43
And, there’s going to be some really cool things we can do with that type of ownership on your LLC.
20:47
Not that we’re not getting the benefits as we were before, but it’s just an interesting way of structuring the ownership, and I’ll explain all that as we go forward in these videos.
20:58
But, Yeah, so, um, you could, you could use a now.
21:02
I’m gonna, one of the things I’m setting up right now is it’s a, it’s an agreement or an arrangement with an escrow company that can handle dollars and kryptos and disburse funds for purchases.
21:16
So that allows you, are, our relationship will allow you to go from your crypto account through escrow, to whatever it is you want to buy. Maybe you want to buy a yacht, maybe you want to buy a hotel to, do you want to buy? Yeah, yeah, you gotta have a yeah maybe. You just want a Vault full of Gold. All, right?
21:34
So, we can use an escrow agent to go from Bitcoin, through escrow, to the asset, gold, whatever yacht and pay for it, and let the escrow agents source the currency that’s needed for that transaction.
21:49
That way it’s still you’re not dealing in that currency yet.
21:53
It’s a private contract.
21:57
That’s excellent pretty soon, yeah, we’ll have plenty of time to cover that.
22:00
And I’ll probably get some of the people in involved in that on the on the video so we can, we can. But when there’s more, people would be easy. That’s what’s awesome about this new platform, is you could just keep adding stuff.
22:11
And then, if you missed this live and you have questions, just give them to us right in, that slack chat and, and we’re happy to, to interact there. All right. Cool.
22:21
Right. All right. So, that’s hopefully covers many of the questions.
22:25
Yeah, no, that’s very helpful at that’s actually, I feel like some of the things you talk about today, sort of bringing it all together. So you can see how it works on an article in terms of how you’re going to approach real, You know, real-world situations.
22:37
When you’re dealing with Kryptos in your company analysis stuff, and remind people, in part three, You took a pretty detailed look at how you set up companies had a, you know, things that you would change about the operating agreement, what you give to the bank, what you don’t. So people should refer to that in terms of some stuff. And then we always have the ability, if you need some document preparation, you just set yourself up, privacy, fight club dot com, just click on Consultations. And you can see what’s available there. And John is always extremely helpful with that. So. All right, that’s it for us today. Thanks so much, John. Always. Always a pleasure. Always helpful. We’ll be back with more content very, very soon.
23:16
All right. All right. Thanks, Rob. Let’s see.