{"id":15763,"date":"2021-07-28T09:43:27","date_gmt":"2021-07-28T13:43:27","guid":{"rendered":"http:\/\/privacyfight.io\/?p=15763"},"modified":"2023-06-25T07:20:55","modified_gmt":"2023-06-25T11:20:55","slug":"u37-how-to-calculate-crypto-taxes","status":"publish","type":"post","link":"https:\/\/privacyfight.io\/u37-how-to-calculate-crypto-taxes\/","title":{"rendered":"U37 &#8211; How to Calculate Crypto-Taxes"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"15763\" class=\"elementor elementor-15763\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-bda1820 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"bda1820\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-a04a149\" data-id=\"a04a149\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-f63ec5d elementor-widget elementor-widget-text-editor\" data-id=\"f63ec5d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"vidseo_wrapper\" style=\"width: 100%;\">\r\n\r\n    \r\n    \r\n        <div class=\"vidseo_vimeo\">\r\n\r\n            <iframe title=\"vimeo-player\" src=\"https:\/\/player.vimeo.com\/video\/725265169\/?\" width=\"100%\" frameborder=\"0\" allowfullscreen><\/iframe>\r\n\r\n        <\/div>\r\n\r\n    \r\n    \r\n    <div class=\"vidseo_collapse\" style=\"\">\r\n        <div class=\"vidseo_btn\" style=\"\">\r\n            U37 \u2013 How to Calculate Crypto-Taxes\r\n0:04\r\nHi everybody, this is John Jay, and I\u2019m going to do my best to summarize and give you the Cliff Notes version of my discussion with Uncle vigilante from Friday, May 21st.\r\n0:14\r\nYeah, I have some my notes here.\r\n0:17\r\nI just watched that and super fast &#8230;        <\/div>\r\n        <div class=\"vidseo_collapse_content\" style=\"\">\r\n            <p>U37 \u2013 How to Calculate Crypto-Taxes<br \/>\n0:04<br \/>\nHi everybody, this is John Jay, and I\u2019m going to do my best to summarize and give you the Cliff Notes version of my discussion with Uncle vigilante from Friday, May 21st.<br \/>\n0:14<br \/>\nYeah, I have some my notes here.<br \/>\n0:17<br \/>\nI just watched that and super fast motion, super fast speed to time, so I can, I think I\u2019ve covered all the the points we made in the discussion so what we were talking about, which what precipitated the discussion was a couple of things.<br \/>\n0:30<br \/>\none was the purchase of cryptographic currency and then when it should be reported on your 10, 40, lot of people ask me about that And then how to calculate personal use of the money, the taxes on it? We\u2019re going to talk about that.<br \/>\n0:44<br \/>\nWe could talk about, we\u2019re going to cover the 10 99 K, and what happens if it\u2019s inaccurate and how to get a determination letter.<br \/>\n0:51<br \/>\nAnd then also, the use of the software. It the exchanges, for example, Coin tracker.<br \/>\n0:56<br \/>\nAnd I don\u2019t want to pick on just coin tracker, I\u2019m just saying, let\u2019s just use that as our poster child for software that you should never really be using, and this in this world here, OK, with the crypto world.<br \/>\n1:08<br \/>\nSo starting with purchases, the IRS is very clear about, um, and I, I mentioned in the video.<br \/>\n1:15<br \/>\nYou can go look on the irises website, and there\u2019s a link in my previous video on the privacy bite channel at YouTube Where I\u2019m explaining what constitutes the need for it gives rise to the need to say yes, senior 10 40, when you\u2019re buying coins cryptographic currency.<br \/>\n1:32<br \/>\nAnd the IRS says that: if you purchase cryptographic currency, then you should answer yes, you\u2019re 10, 40, But that actually has a special meaning. It doesn\u2019t mean what you think it does, mostly.<br \/>\n1:42<br \/>\nIt means when you use cryptographic currency to buy a cryptographic currency from someone else, it does not mean using dollars to buy a cryptographic currency.<br \/>\n1:51<br \/>\nThat does not mean you have to say yes, on your 10 40, ironically, If you use dollars to go into Coinbase or some exchange or buy from your friend, then you buy coins from somebody else with your dollars that does not require you to say yes on 10 40 in response to the question. Did you purchase cryptographic currency the only time that you\u2019re required to say yes?<br \/>\n2:14<br \/>\nWhen you purchased cryptographic currency, is if you use the currency the coins to buy coins from someone else a third party or a second party.<br \/>\n2:23<br \/>\nLet\u2019s say Exchanging your coins for your own coins It\u2019s the answer\u2019s no in the 10 40 Exchanging dollars for coins anywhere.<br \/>\n2:34<br \/>\nAgain, the answer is no when you\u2019re 10 40 exchanging your coins for someone else\u2019s coins, cryptographic currency. That\u2019s what I mean by coins.<br \/>\n2:43<br \/>\nThen the answer is yes, on your 10, 40, according to the IRS Q and A Which I referenced in the video, So we did talk about that.<br \/>\n2:52<br \/>\nI also wanted to touch on, and by the way, guys, when we talk about taxes, taxes are required. There\u2019s no such thing as a tax that you don\u2019t know if there\u2019s a tax, that means it has to be paid.<br \/>\n3:02<br \/>\nSo the trick is, don\u2019t have a tax liability, OK, So avoid that situation.<br \/>\n3:07<br \/>\nSo there\u2019s no question there, but when you\u2019re dealing with an IRA in the states or a 401 K, remember that these are not your investments, if it best, their savings accounts.<br \/>\n3:17<br \/>\nAnd there they are truly the investment of the fund manager for the 401 K, the IRA.<br \/>\n3:23<br \/>\nI should probably exclude the self directed IRA and then the, the Roth IRA if it\u2019s self directed, OK. So, those are the exception, because then you get to decide what assets to buy, But if someone else is deciding what assets to buy and you really don\u2019t have control over it, it\u2019s actually not your investment.<br \/>\n3:38<br \/>\nJust the same, you\u2019re not gonna escape the rules so you can\u2019t rollover your IRA into something that doesn\u2019t consider the tax situation.<br \/>\n3:46<br \/>\nSo, if you want to liquidate your IRA, you\u2019re going to pay penalties and taxes because that\u2019s what you agreed to. And that\u2019s why I suggest.<br \/>\n3:56<br \/>\nYou know, if you set it up for a specific purpose, go forward with that purpose.<br \/>\n4:00<br \/>\nIf you feel like there\u2019s too much risk there, meaning you\u2019ve tied up your money only for a tax benefit, when you think you could be making more money on the other way and then have better tax benefits or management, it might be worthwhile to consider liquidating and paying the penalty.<br \/>\n4:15<br \/>\nSo, truly, you could measure the tax and penalty amounts against the lost opportunity amounts you expect, and therefore, look at the lost opportunity as a tax.<br \/>\n4:28<br \/>\nAnd, again, measured against the actual tax you can calculate based upon the rules for withdrawing your money for your IRA.<br \/>\n4:34<br \/>\nSo you have to kind of decide what\u2019s gonna benefit you more financially, but you\u2019re not going to escape the rules. You\u2019re going to have to end up paying taxes if you liquidate your IRA early or your 400 K or something like that.<br \/>\n4:45<br \/>\nNow, um, we did discuss a method that I came up with.<br \/>\n4:51<br \/>\nAnd this is not just I mean anybody can do this, OK.<br \/>\n4:55<br \/>\nSo what we\u2019re trying to do is calculate based upon the original principle invested in cryptographic currency against profits, I\u2019m going to take one I don\u2019t take out the whole new principle.<br \/>\n5:07<br \/>\nOK, so, if I take out a percent of profits later on, when my principal goes way up, I want to measure how much that ratio against my original principle so that when I report a taxable amount, I\u2019m going to be able to deduct my cost basis. I guess is the way you guys would say this. So, I\u2019m gonna give you a real life example, OK? This is where I came up with this.<br \/>\n5:29<br \/>\nIf I have, if I start with five years ago, if I start with $23,000, $22,500, $23,500, I put that in cryptographic currency, and I did it over a period of time. So there\u2019s some long term gains, and there are some short-term gains. So you\u2019re gonna have to divide this out.<br \/>\n5:45<br \/>\nBut basically, it\u2019s the same equation.<br \/>\n5:48<br \/>\nSo let\u2019s say I started with 20 35. I end up with $400,000. I want to take out $20,000 and do something personal with it, in which case it\u2019s going to be taxable, reportable, taxable, gross income.<br \/>\n6:02<br \/>\nWhat is that?<br \/>\n6:03<br \/>\n$20,000, What ratio is that against my new principal. So, I just divide them out, so I take $20,000 divided by $400,000, and I get a ratio, and I multiply that against my original principal.<br \/>\n6:15<br \/>\nSo, my ratio is 5% or 120th, and my original principle is the 5500 when I multiply them together. I get 1175.<br \/>\n6:26<br \/>\nOK, that\u2019s the number I subtract from the $20,000 that I\u2019m spending for my new windfall for personal use.<br \/>\n6:34<br \/>\nI\u2019m going to back out my cost basis, which would be 175 in this case.<br \/>\n6:38<br \/>\nSo, the equation looks like this: the money, I\u2019m taking S profit as a portion of my new gains, $20,000 minus, the ratio of my $20,000 divided by the new principal, $400,000. When I multiply it by the original principal, $23,500.<br \/>\n6:58<br \/>\nI subtract that that amount from the $20,000 and I end up with, like I said, the 175.<br \/>\n7:06<br \/>\nMy new, taxable, reportable income.<br \/>\n7:11<br \/>\nIt\u2019s going to be $18,825.<br \/>\n7:17<br \/>\nSo, that is how I would recommend figuring out the taxable amount if you\u2019re going to take part a part of your new windfall and spend it on something personal. Not re-invested.<br \/>\n7:29<br \/>\nThe other thing we talked about is that there\u2019s a big difference, OK? So look at all the articles that are on the internet that people are are so excited about regarding taxation and reporting and what the IRS can do and all these new powers they have.<br \/>\n7:40<br \/>\nAnd, no, there are no new powers. The rules are the same. No laws have changed.<br \/>\n7:45<br \/>\nBut the drama is created by all these articles to scare people.<br \/>\n7:51<br \/>\nThese articles are based on the presumption that everyone filing a 1040 is going to be using accrual based accounting. This is ridiculous. We\u2019re not going to do that. Accrual based accounting is what Enron did.<br \/>\n8:01<br \/>\nI don\u2019t know if you remember what. What happened with Enron? Enron acquired all these energy producers.<br \/>\n8:06<br \/>\nThen, I don\u2019t know what you want to call it because I\u2019m not in that world.<br \/>\n8:09<br \/>\nBut they took their receivables and claimed him as current income for the current tax periods so they can boost their stock value. I don\u2019t even know. There was an accounting rule for this, and they probably invented some county roads. And so basically, it\u2019s fraud. OK, you\u2019re taking accrual based accounting, and you\u2019re it\u2019s not good enough for you. You just have to make it even worse.<br \/>\n8:28<br \/>\nSo you abuse it and you create a situation where you have inflated, stock valuation, inflated, stock valuation.<br \/>\n8:37<br \/>\nAnd that\u2019s what Enron did, OK?<br \/>\n8:39<br \/>\nThis is they did this from accrual based accounting, Your large corporations that run the planet, OK? These guys are using accrual based accounting.<br \/>\n8:47<br \/>\nThey\u2019re being taxed on the value of their assets and income not upon the realization of the cash from the assets.<br \/>\n8:55<br \/>\nPeople who fell 10 forty\u2019s are using cash basis accounting. They\u2019re not using accrual based accounting.<br \/>\n9:01<br \/>\nSo cash basis. Accounting is like, I explain, it\u2019s what you see is what you get.<br \/>\n9:05<br \/>\nSo when I actually have the dollars in my hand, or when I have the right to spend the dollars, let\u2019s say, If I sold an asset and I now have the right to spend the dollars, that is, That is a gain.<br \/>\n9:15<br \/>\nSo if I can always avoid having the right to spend the dollars, but I can move the asset around without having the right to spend the dollars that I\u2019m going to avoid again, And this is cash basis accounting.<br \/>\n9:26<br \/>\nSo all this stuff you\u2019re hearing on the news is on the presumption that you\u2019re going to do a certain thing. And you don\u2019t have to.<br \/>\n9:32<br \/>\nNow, again, you can\u2019t choose accrual based accounting as I explained in the video, but why? you\u2019re not doing that now. anyways.<br \/>\n9:39<br \/>\nOK, So, it\u2019s cash basis. accounting.<br \/>\n9:42<br \/>\nThen, that brought us into the discussion of coin tracker And I\u2019m, you know, I\u2019m not going to just pick on one software brand, but they\u2019re all the same, OK, so, let\u2019s say coin trackers, the poster child, what you should not be using to do any accounting at all. If you want to do accounting with a kryptos, you can do in terms of dollars, and you can also do it in terms of the actual coin itself. You can have someone create a Balance Sheet and an income statement based upon the number of Bitcoin, OK, in Fractions of Bitcoin and all that.<br \/>\n10:11<br \/>\nOr you can do it in its value in as it Is it calculated out in dollars, or you can even do it in grams of gold? You can do it however you want.<br \/>\n10:18<br \/>\nSo your accounting should be done, you should have someone do an accounting for the value of your portfolio or a portion of it, but you don\u2019t need the coin tracker software.<br \/>\n10:28<br \/>\none, the, I believe, the calculations are incorrect anyways. I believe they\u2019re erroneous because I\u2019ve seen enough cases that I\u2019ve actually had the IRS correct and agree with me on certain cases.<br \/>\n10:38<br \/>\nUm, in fact, I\u2019ve never had the IRS not agree with me, so far.<br \/>\n10:44<br \/>\nI don\u2019t want to go over my limit here, Some probing it, I\u2019m a stay in my lane with this little bit of, if I ever have to go to the IRS, I want to make sure that the request I\u2019m making, I\u2019m clear about this is how it\u2019s correct.<br \/>\n10:56<br \/>\nMany case, don\u2019t use Coin tracker, I\u2019m going to do a screen share with you, I\u2019m gonna show you why.<br \/>\n11:00<br \/>\nthis is what we discussed as, well, and, um, with uncle vigilante.<br \/>\n11:05<br \/>\nYou say, I\u2019m going to switch over here, All right, so look at what I have here. I have Internal Revenue Bulletin.<br \/>\n11:12<br \/>\nUm, this is what, if you want to share with your tax accountant, this is what I used to create.<br \/>\n11:20<br \/>\nI created, let\u2019s see here, one second.<br \/>\n11:24<br \/>\none second.<br \/>\n11:27<br \/>\nYeah.<br \/>\n11:29<br \/>\nAll right.<br \/>\n11:32<br \/>\nLet me go back to screen share. Sorry about the interruption.<br \/>\n11:36<br \/>\nSo what I have here is the internal revenue bulletin. And everybody wants to know, how the heck are you getting the IRS to agree that the 1099 is erroneous. And what\u2019s the procedure? Your accountant, you know, maybe should understand how to do this. Some accounts have been practicing for a long time, should know how to ask for a letter ruling or determination letter, what we\u2019re doing here is asking for a determination letter.<br \/>\n11:57<br \/>\nIt\u2019s a technical distinction between letter rolling.<br \/>\n12:00<br \/>\nYou\u2019ll see in here also that this is a demonstration of how to ask for a letter ruling, but it can be used for the determination letter, so I don\u2019t wanna be too confusing.<br \/>\n12:08<br \/>\nBut I\u2019m showing you, what I used, and I started doing this way back in 2000 way before Kryptos came along, I did this for other reasons and it was effective for people, I was working with my clients.<br \/>\n12:18<br \/>\nSo, you just scroll down, you can see it\u2019s, it\u2019s pretty easy to follow, OK, you can, it tells you how to ask the IRS for an opinion or a legally binding conclusion on a particular transaction, OK, And this is all I did, I just read this thing that I did not reach all 278 pages here.<br \/>\n12:35<br \/>\nBut I just, I went quickly down through here, and I found how to create a request for determination letter. And you can see in here, there\u2019s, there are samples of how to do that.<br \/>\n12:44<br \/>\nIt took a long time, I mean, I think it took me a few weeks to put this, together. It\u2019s, it\u2019s not an easy thing, and I still use that similar form.<br \/>\n12:50<br \/>\nLater, I had to recreate the formula because I had to recreate it in round 2000, 2015, or 16. I think it was, because people started coming to me with the situation. Actually, I was like, 2017.<br \/>\n13:01<br \/>\nBut before that, I had, I\u2019d use this for other purposes. So you get the idea here. So you guys can look this up yourself, OK, no secret. I\u2019m just sharing with you how I do it.<br \/>\n13:12<br \/>\nThis is no nothing magical here.<br \/>\n13:14<br \/>\nI\u2019m gonna get rid of this window and I want to go like it should coin tracker. This is for any other reason.<br \/>\n13:20<br \/>\nIf for no other reason, This is what you should consider.<br \/>\n13:24<br \/>\nWhy would there be disclaimer There should be a disclaimer, But what what does this indicate? If coin tracker who\u2019s supposed to be tracking using software to track where you have a tax liability, OK or the reportable amount of coin value or whatever, and it\u2019s disclaiming all liability. Look at this.<br \/>\n13:40<br \/>\nYou acknowledge and agree information provided is is not protected.<br \/>\n13:44<br \/>\nOK.<br \/>\n13:45<br \/>\nNothing we\u2019re telling you is considered legal or tax advice that right there would tell you that they are not responsible, so they can tell you anything.<br \/>\n13:53<br \/>\nI don\u2019t know, I don\u2019t even think they care about Tanya.<br \/>\n13:57<br \/>\nThe truth or anything that\u2019s going to assist you at all, because they\u2019re not liable.<br \/>\n14:02<br \/>\nThey really shook me anyways.<br \/>\n14:04<br \/>\nBut, look, I mean You are hereby understand and acknowledge that. These acquaint drakkar you\u2019re not being represented by an attorney, or a financial planner, or a broker, or an accountant, or anything like that.<br \/>\n14:15<br \/>\nUse them as your sole exclusive risk.<br \/>\n14:19<br \/>\nAll right? That should tell you all you need to know.<br \/>\n14:21<br \/>\nSo, how the heck do you do accounting?<br \/>\n14:23<br \/>\nWell, I just told you how to use algebra, a basic understanding of calculating the ratio of your new principle against the profit you want to take, measured against your old principle that you originally invested, because you only get take a portion of that out, and you\u2019ll see if you track that equation.<br \/>\n14:39<br \/>\nIf you put in there, instead of the 20,000, you\u2019re putting your whole principle, You will see it works out perfectly, OK, and if you factor in a loss, you\u2019re gonna see how the number comes out to zero, so, you get it right there. And, you can go on \u2026 dot com or find a bookkeeper and you can say, Do accounting for me. You can do accounting. In terms of the rupee dollar pound the euro gold grams coins, litecoin, OK, you dollars. You can do accounting However you want.<br \/>\n15:04<br \/>\nYou should do your own accounting.<br \/>\n15:06<br \/>\nDo not rely on the software.<br \/>\n15:08<br \/>\nAlright, I\u2019m gonna, I\u2019m gonna stop at this screen. share thing I didn\u2019t want to go to for too long ago to that.<br \/>\n15:15<br \/>\nOK, now in here, we\u2019re talking about Escrow.<br \/>\n15:19<br \/>\nEscrow allows us to move money around and not have to take a game.<br \/>\n15:27<br \/>\nSo, I\u2019m going to explain how that works, just one second here.<br \/>\n15:33<br \/>\nAlright, so anytime that you\u2019re able to use escrow you can do this, you can actually put your property that you want to dispose up, you can put it under escrow.<br \/>\n15:42<br \/>\nSo, it\u2019s, it has to be qualified esker, that means it\u2019s a third party that\u2019s neutral, it\u2019s only doing escrow. It\u2019s not your Uncle Bob or something like that that you trust, OK?<br \/>\n15:51<br \/>\nSo, use it, a real escrow agent, usually this is done with real estate. You can do this with large purchases, too, you can buy a boat this way, but typically it\u2019s done with real estate.<br \/>\n15:59<br \/>\nSo, if your agent can\u2019t do this, we can do this. I have a partner where we can actually purchase your coins for your agent and put the money into escrow the dollars or whatever you want and then you can complete your transaction.<br \/>\n16:12<br \/>\nSo, this is pretty amazing. Now, for our members where they actually have a setup using a limited liability company and the way we\u2019ve set this up for that purpose, they actually have the same benefit without using escrow.<br \/>\n16:24<br \/>\nIt\u2019s just the same that you can use esque or just understand that you can use escrow.<br \/>\n16:28<br \/>\nEscrow allows a person with personal holdings in Kryptos or any like Gold or something like that to put that value into escrow, to liquidate it under escrow terms then close on a purchase or the transfer conveyance of that valued asset into a new type of asset without having gains in dollars.<br \/>\n16:47<br \/>\nAll right.<br \/>\n16:48<br \/>\nUm, now, the end side of that is that you take the possession not in your name, use a trust, or a company, or use debt.<br \/>\n16:58<br \/>\nTo encumber it legitimate debt.<br \/>\n17:00<br \/>\nSo, you can\u2019t do this in the process.<br \/>\n17:04<br \/>\nWithout a company, you can use escrow. There\u2019s a fee for that.<br \/>\n17:08<br \/>\nIt\u2019s way less than that you\u2019d pay in taxes and it legally avoids the tax situation reporting.<br \/>\n17:14<br \/>\nYou if you have an LLC or you have the proper setup, you could do a similar transaction and or use escrow and avoid the need for our fee or service. OK, just say no, I mean, I\u2019ll just tell you guys, so you can, you can figure out what you want to do. I think our service is just a way to help people that don\u2019t already have a correct setup.<br \/>\n17:35<br \/>\nSo, but, yeah, so we talked about how to buy a car, and I was making fun of Uncle \u2026.<br \/>\n17:41<br \/>\nJaunty on, Didn\u2019t get cheapskate, and only spending $50,000 on his wife\u2019s car, So I said, What, about a quarter million dollars?<br \/>\n17:48<br \/>\nAnd so what we\u2019re talking about is, you would simply sell the asset, using your LLC, you would put the cash in the LLC, and you would move that money to the seller of the vehicle, to the dealer, let\u2019s say. So let\u2019s say you\u2019re buying a car from a dealer, and you would let\u2019s say you wanna pay cash for the car, you can do that.<br \/>\n18:04<br \/>\nI would not put the card my name at that point, I would put it in the name of a trust, I can use an LLC that way, an LLC or a trust or other company.<br \/>\n18:12<br \/>\nThat way, it would not be considered as a purchase for something personal or myself, because the car pretty much for most of us, is going to be a personal liability. It\u2019s going to be, it\u2019s going to demonstrate that you acquired something in dollars and it\u2019s worth dollars and therefore it\u2019s your personal income.<br \/>\n18:29<br \/>\nSo you want that\u2019s why you want a title and a company name or if you want to put it in your name, you would want to structure it with a loan on there.<br \/>\n18:36<br \/>\nSo what you want to do is move your cash from your LLC after you sold the coins and put it into sending it to the dealer and then explain to the dealer that XYZ is the lender and the dealer will write up all the documents, and send the title work, and the lien documents to the lender which could be your company OK.<br \/>\n18:54<br \/>\nAnd then you want to make sure that you have a record of paying the them, the payments on the loan, and make sure the interest rate is legitimate.<br \/>\n19:02<br \/>\nFair Market value.<br \/>\n19:03<br \/>\nLet\u2019s say, OK, basically, you\u2019re paying yourself, but really, it\u2019s set up in a way where it\u2019s a third party, OK. You control it, but still, it\u2019s a third party, and do the right thing, and it\u2019ll be a good transaction.<br \/>\n19:13<br \/>\nSo, that\u2019s how you would buy a car.<br \/>\n19:15<br \/>\nIt\u2019s a simple version, You could, pretty much, by any liability, That way, you could buy a house that way, where I caution people as being eager to pay off consumer debt.<br \/>\n19:23<br \/>\nSo what we\u2019re talking about also is, I mean, we can certainly go into more detail, and I\u2019ve mentioned this before in other videos, but If I have a lot of cash, and I wanna just get rid of my mortgage, and I paid off and advance one lump sum, first of all, I\u2019m probably gonna have a huge tax liability, because anywhere.<br \/>\n19:39<br \/>\nI pay anywhere that a personal debt is paid off, it doesn\u2019t matter who\u2019s paying for the personal data, it\u2019s my personal debt. Then it\u2019s considered my income, which whoever paid for it. OK, So that\u2019s something to consider.<br \/>\n19:49<br \/>\nAnd the other thing is, there\u2019s a better use of capital than paying off consumer debt in one lump sum, because what happens is, you take your cash that can be used for something to generate more money for yourself, and you put it into a liability that actually cost you money.<br \/>\n20:04<br \/>\nSo your cache will actually be the opposite of an investment, It starts costing you money if you want to do something like that. So I just recommend against it, it\u2019s a bad use of capital.<br \/>\n20:12<br \/>\nInstead, if, let\u2019s say, for example, this is what we talked about on the on the interview, If I had $150,000 to pay off my $130,000 balance on my mortgage, instead, I could take $15,000 of that and I can buy an asset that doesn\u2019t take a lot of work to manage and I can offset my mortgage payments with that money.<br \/>\n20:29<br \/>\nAnd then when my mortgage is paid off and let\u2019s say 17 more years, my asset is offsetting that debt on my personal balance sheet.<br \/>\n20:37<br \/>\nSo, I still have the debt, but I also have an offset in an asset and when the debt is paid for over the life of the loan, I\u2019m still going to have the asset presumably, OK, so I think that\u2019s a better use of capital.<br \/>\n20:51<br \/>\nWe also talked about Yeah, OK.<br \/>\n20:56<br \/>\nA couple of things here, I don\u2019t know what I don\u2019t want to get bounced around too much, but, um, passing off valuable investments to heirs. So there\u2019s a couple things I\u2019d recommend.<br \/>\n21:07<br \/>\nSo if you want your children or family to benefit from the thing you\u2019re creating right now, your treasure as I call it, you should you should help them understand what it is. And they should have some financial intelligence. So they understand a few basic principles. Like, for example, don\u2019t make financial decisions based upon how it affects your personal credit. Don\u2019t make financial decisions based upon what you believe to be equity.<br \/>\n21:27<br \/>\nThis is like counting your chickens before they hatch, as you\u2019ve heard before.<br \/>\n21:31<br \/>\nUm, don\u2019t make financial decisions solely upon mmm hmm.<br \/>\n21:35<br \/>\nWhat you believe to be a tax benefit or to obtain a tax benefit? And for no other reason, sometimes you even get in trouble doing that.<br \/>\n21:43<br \/>\nMake financial decisions for the merit of the financial decision so that you can increase your internal rate of return. your capitalization rate, increase your net present value, increase your cash flow, return on principal. Now, those are the things you want to look for.<br \/>\n22:00<br \/>\nMake your decisions based on that.<br \/>\n22:02<br \/>\nExplain that to your heirs because it\u2019s one thing.<br \/>\n22:04<br \/>\nIf your children inherit something from you and they don\u2019t know how to use it, it\u2019s actually dangerous.<br \/>\n22:09<br \/>\nSo you can easily allow them access to the thing once you\u2019re gone, OK?<br \/>\n22:15<br \/>\nUm, or don\u2019t need it anymore?<br \/>\n22:17<br \/>\nBut it\u2019s another thing, as to whether or not they know how to use it.<br \/>\n22:20<br \/>\nSo you want to kind of bring them on board about how to do these things, and how to get how to gain some financial intelligence.<br \/>\n22:27<br \/>\nAnd then we talked a little bit about securing the credentials that access those assets.<br \/>\n22:34<br \/>\nSo one way to do it is to keep, like uncle vigilante was explaining, he actually has instructions in a location that, if he were to disappear or not, be around anymore his wife, or family whoever\u2019s leftover could find that, and then know who to contact for assistance on accessing his.<br \/>\n22:52<br \/>\nCredentials.<br \/>\n22:53<br \/>\nFor the asset\u2019s, he has that he built up, OK. And that would not risk any disclosure of that access to anyone else.<br \/>\n23:02<br \/>\nIt\u2019s just that he would trust those people to work with his wife or family on gaining access and they would just, you know, they, they know how to do all the things anyways, so that way, there\u2019s, no, you\u2019re not, you\u2019re not giving someone the secret password.<br \/>\n23:16<br \/>\nYou\u2019re just giving someone access to the secret password that you would want to have access to the password, OK? So, we talked about how to pass on credentials.<br \/>\n23:25<br \/>\nWe talked about this a lot in our calls, and I discuss this with the, you know, each of you. And we can actually put a plan together. Some of some of the things I appeal to you, some don\u2019t.<br \/>\n23:35<br \/>\nSome are better for others and than other methods, The other one we\u2019ve talked about is using third party custody.<br \/>\n23:42<br \/>\nAnd we\u2019re making the joke of, we don\u2019t mind using attorneys for attorney client privilege status in protecting the privacy of the thing you\u2019re doing.<br \/>\n23:51<br \/>\nLike, for example, if I put access to my credentials, let\u2019s say, in a black box or a sealed envelope with a security seal on it and delivered under a contract to a law firm where there\u2019s a specific attorney that\u2019s assigned custody of that. And there\u2019s a succession of attorneys appear, no longer available, then the next one would be responsible, attorneys are bonded.<br \/>\n24:12<br \/>\nSo you can use a law firm to take custody of things that they don\u2019t even know what they are. They just know that it\u2019s a black box.<br \/>\n24:19<br \/>\nAnd that at some point in the future, someone may come to them and give the secret password, so to speak, in which case, under the contract, they\u2019d be required to turn over this black box to the individual.<br \/>\n24:29<br \/>\nMaybe it\u2019s your family member, and then that person wouldn\u2019t know what to do and then I would give him access to the the wealth or whatever the treasure that you created.<br \/>\n24:37<br \/>\nSo you gotta give this, these things. Some thought. You got it. You got to really plan this out. I don\u2019t believe we can rely on our banking system for these things anymore.<br \/>\n24:45<br \/>\nSo we just have to think this through.<br \/>\n24:47<br \/>\nGenerally, what we\u2019re talking about, what I like to say is, it\u2019s better to have more debt on assets and less debt on personal things like houses, cars. Yeah, have some debt, but not too much, What does that mean?<br \/>\n25:01<br \/>\nI don\u2019t know. 20 or 30% on personal things houses cars.<br \/>\n25:05<br \/>\n80%, 50 to 80% on an asset.<br \/>\n25:08<br \/>\nSo if I bought an apartment complex, maybe borrow against it, up to 80%, 50 to 80%, OK. Something like that.<br \/>\n25:17<br \/>\nBecause the asset is presumably going to be servicing the debt and you\u2019re still going to have your cash flow. Cash flow out of it.<br \/>\n25:23<br \/>\nSo, hopefully, that\u2019s the case.<br \/>\n25:27<br \/>\nAnd then, the 1099 duty.<br \/>\n25:30<br \/>\nOK, there\u2019s no duty created for 1099, so as long as the thing, getting 2009, doesn\u2019t file a tax return, At least in the States, I believe it\u2019s the same in other countries. I haven\u2019t tested that yet. As long as there\u2019s no tax return, then there\u2019s no tax treatment.<br \/>\n25:43<br \/>\nThere\u2019s no, What do you call it?<br \/>\n25:46<br \/>\nDuty to reconcile against 1099 will then, nobody cares literally, nobody cares and there\u2019s, no, it\u2019s no, there\u2019s no cheating there. It\u2019s not a trick. It just doesn\u2019t work that way.<br \/>\n25:58<br \/>\nFinancial Crimes Network and FinCEN Reporting or Reporting, comes from irregular transactions. And the example I gave was, Let\u2019s say you made $185 a weekend from your paycheck. And then some Christmas Uncle Bob gives you a thousand dollars and you put it in your account, while the financial crimes report may get sent to the Financial Crimes Network on your account. You\u2019ll probably never know about it. It\u2019s all electronic.<br \/>\n26:21<br \/>\nAnd I think almost every transaction is being reported to the Financial Crimes Network, or it\u2019s get access has been given to that data to FinCEN, as we call it, to see all that.<br \/>\n26:31<br \/>\nNow, at some point, if there\u2019s a really unique situation that does fit the let\u2019s call it fingerprint of money laundering. Then FinCEN.<br \/>\n26:39<br \/>\nWe get involved and start communicating with the bank. There would be personnel from FinCEN contacting the bank and they\u2019d be collecting documents and they would look at the account documents that open the account and find out who\u2019s involved. And they had probably do some background investigation and see if there is really a possibility. There\u2019s money laundering, I\u2019m sure that happens all the time. In fact, it\u2019s probably happened to many of us without us even knowing, so don\u2019t think that.<br \/>\n27:00<br \/>\nIt\u2019s like in the movies where only $10000 or $3000 thresholds are gonna get investigated.<br \/>\n27:06<br \/>\nIf it\u2019s just really irregular or unusual transaction\u2019s, OK, no big deal, just don\u2019t don\u2019t try to get involved in money laundering. And I think I I hit all the items. I hope that was a good Cliff Notes version. Certainly, I can answer questions. You will find a lot of this discussed in other videos. But like I promised. I did want to summarize what we just talked about, we talked about. So I hope that helps, See you guys, on the next call.<\/p>\n        <\/div>\r\n    <\/div>\r\n\r\n    \r\n<\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-9794045 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"9794045\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-fdd47a9\" data-id=\"fdd47a9\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-690a4e0 elementor-widget elementor-widget-spacer\" data-id=\"690a4e0\" data-element_type=\"widget\" data-widget_type=\"spacer.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-spacer\">\n\t\t\t<div class=\"elementor-spacer-inner\"><\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-26c206f elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"26c206f\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-9e8cc75\" data-id=\"9e8cc75\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-fc7fce9 elementor-widget elementor-widget-text-editor\" data-id=\"fc7fce9\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><strong>Summary<\/strong><\/p><p style=\"padding-left: 40px;\">1. The talk discussed the intricacies of calculating crypto taxes, with John Jay providing a summary of his conversation with Uncle Vigilante.<br \/>2. Purchasing cryptocurrencies needs to be reported on the IRS 1040 form but only when using one cryptocurrency to buy another, not when using fiat currencies like USD.<br \/>3. The tax implications of liquidating retirement accounts like IRAs or 401Ks were explained; any liquidation will trigger penalties and taxes, hence, careful consideration should be given before doing so.<br \/>4. John Jay suggested a method to calculate taxes on crypto profits, using the ratio of the new principal against the profit intended to be taken, measured against the original principal invested.<br \/>5. They discussed the incorrect assumption that everyone filing a 1040 form uses accrual basis accounting. In reality, most individuals use cash basis accounting, taxing on the realization of cash from assets, not their value.<br \/>6. The discussion argued against the need for software like Coin Tracker, with a belief that these tools provide incorrect calculations.<br \/>7. The method to get a determination letter from the IRS confirming a 1099 is erroneous was touched on. This is relevant in cases where individuals believe their crypto earnings have been incorrectly reported.<br \/>8. Using escrow for large transactions was explained as a way to handle large transactions while potentially avoiding tax implications.<br \/>9. The podcast also delved into purchasing high-value items like cars or property with cryptocurrencies, with recommendations to do so under a company name to avoid it being considered personal income.<br \/>10. Finally, the importance of educating heirs on how to manage and secure digital assets was emphasized. This included potentially using law firms for the custody of sensitive access credentials for security and continuity.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-1503d6b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"1503d6b\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5bf5207\" data-id=\"5bf5207\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>U37 &#8211; How to Calculate Crypto-Taxes<\/p>\n","protected":false},"author":131,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[124],"tags":[],"_links":{"self":[{"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/posts\/15763"}],"collection":[{"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/users\/131"}],"replies":[{"embeddable":true,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/comments?post=15763"}],"version-history":[{"count":7,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/posts\/15763\/revisions"}],"predecessor-version":[{"id":25361,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/posts\/15763\/revisions\/25361"}],"wp:attachment":[{"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/media?parent=15763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/categories?post=15763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/tags?post=15763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}