U28 – Form 1040, Answering Yes or No on Crypto-Purchases — Part I of II
Hi, everybody. This is John Jay, just wanted to go over a very brief message regarding this 10 40 reporting, where you disclose crypto purchases.
And I just wanted to switch over here, I’m gonna do a screen share, and I’m just gonna go to the IRS website.
And I’m going to show you what I’m talking about here.
All right, good, OK.
What we’re looking at here, OK, this URL is at the bottom of this video.
So you can click on it. You can also Google this, I’m sure you’ll find it.
But, um, we’re going to look at some of the questions here.
Questions and answers the irises given regarding reporting with kryptos.
Going back, you can see my cursor here going back to the notice from 20 14, OK, 2014, 21. This is where the IRS defined cryptographic currency as property. So it made it basically it made it just like gold.
So how are you used to treating gold? That’s how you should treat cryptographic currency.
And then, if we scroll down, you’ll see, and I’ve done videos on versions of this information, um, especially publication 544, that’s really useful, but you need to understand the terms, OK?
Nothing on this is inaccurate, OK, the irises correct.
What we’re going to run into problems is the sales pitches that you hear on Forbes and all these other websites and whatnot. So just stick to the facts, OK. I don’t have any problem here. There’s, there’s no, I’m not challenging Anything, I’m just going to share this with you guys.
If you look down, you know, it’s going to talk about what’s virtual currency. Well, the IRS has already solved that question.
With its publication, it said, we’re going to treat it like property everywhere around the world. It’s tree like property.
And then, you know, we can talk about this.
I’ve addressed this many times, we know what that is.
Will I have a gain or loss when I sell my currency? Yeah, you can are.
Strategy has been to avoid that gain, right?
Don’t create a gain for yourself. Easy enough. But this is what I want to talk about.
Question five: And it’s nice, the IRS gives you the answer.
On the 2000, 201040, on the tax form for year 20 20, it asked, you know, if you’ve exchanged Purchase, sold, whatever, coin’s, virtual currency, it’s telling you, if I the question is, If I purchase currency with real money, like dollars US dollars and had no other virtual currency transactions during the year, must I answer? Yes, OK, it’s telling you the IRS says No.
If you’re only transaction involving virtual currency during 2020, where purchases of virtual currency with real currency, OK, they call that the US Dollar Real Currency?
You are not required to answer yes to the form 1040 question.
This is talking about a purchase a virtual currency with dollars from a person who owns virtual currency not yourself It does not pertain to using litecoin to buy Bitcoin, because you’re not actually buying. There’s no purchase. And there’s no sale, because, like I’ve said, many times before, the beneficial interests have not changed.
You can use Dollars to buy coins and say no.
This is what question five is telling us, and this comes right from the irises website If you’re using coins to buy coins from someone else besides yourself, That is what they want to know. This is what it is telling you right here.
So, just be aware of that, OK? Now, of course, you can structure this in many ways. I mean, you can do these transactions, we do them all the time.
So, no one can see, I mean, you’ve done this for years.
I mean, I remember my grandfather would come visit us and then when he leave, he would shake my hand and give me a silver dollar, OK?
so, no one knows about that transaction, right? Well, this is what human beings do.
I’m not saying go out of your way to do transactions like that, and I’m not saying focus your energy on defeating attacks.
But just realize that you don’t have to create a situation where you have a gain.
But understand what language the irises using, Understand the principle of beneficial interests. If those do not change, there’s no sale and those no purchase.
And there’s no disposition of an asset.
So if I put some coins on, let’s say I put some Bitcoin on one of those, you know, it’s kopra one ounce coins.
It has a private public key on there, right, That the private key is hidden. So if, I just deposit some Bitcoin on there, and I’ve got my copper coin, that can hold in my hand.
What I really have is a paper wallet, OK?
I can, I can hand that to somebody.
In fact, I can hand that some to someone in bitcoin and someone can handmaid the same type of coin for litecoin.
The IRS wants to know about that, but are they going to find out? No.
Isn’t this something that’s done all the time? I mean, don’t you hire a babysitter and then don’t send her a W to, I mean, come on.
So, you know, it’s up to what you guys want to do. Of course. And again, the rule is: don’t organize all your affairs to simply avoid attacks.
Sometimes it makes sense. But, gosh, you know, you can miss out on some opportunities and get yourself in trouble. So just realize the language is very strict here.
If you’re purchasing cryptographic currency that’s currently not yours and you’re using dollars, that’s fine.
If you’re using coins to purchase the cryptographic currency, that’s not yours.
If you’re using cryptographic currency like litecoin that you own to buy somebody else’s bitcoin that’s considered an item to be disclosed on your 1040 that alone this is all we’re talking About Here.
I’m not going to go the other ones, because we’ve already already covered this, I just want to do the short video to give you guys this information, OK?
All right. I’m going to stop that.
Thanks again for paying attention, guys. Have a good day.
1. The speaker, John Jay, is discussing the Form 1040 and how to report crypto purchases.
2. The speaker refers to the IRS’ classification of cryptocurrency as property, similar to gold.
3. Cryptocurrency needs to be treated like property when reporting for tax purposes, as per the IRS.
4. Jay emphasizes that the information provided by the IRS is accurate and should not be distorted by sales pitches from various websites.
5. The speaker highlights that if the only transaction involving virtual currency during the year is the purchase of virtual currency with real currency, the IRS doesn’t require you to answer ‘yes’ on the Form 1040.
6. If cryptocurrency is being used to buy other cryptocurrency from another person (not yourself), the IRS considers that a transaction that needs to be reported.
7. The speaker advises that while certain transactions can be structured in a way to avoid tax, it should not be the primary focus.
8. He mentions the principle of “beneficial interests,” arguing that if they don’t change, there’s no sale or purchase.
9. The speaker suggests that there are ways of transferring cryptocurrency that the IRS wouldn’t necessarily know about, but urges caution and the understanding of IRS language.
10. In summary, the speaker focuses on how to understand and appropriately report cryptocurrency transactions on the IRS Form 1040.