{"id":6882,"date":"2020-03-13T19:20:43","date_gmt":"2020-03-13T23:20:43","guid":{"rendered":"http:\/\/privacyfight.io\/?page_id=6882&#038;preview_id=6882"},"modified":"2023-06-23T10:40:33","modified_gmt":"2023-06-23T14:40:33","slug":"crypto-profit-taxes-part-3","status":"publish","type":"post","link":"https:\/\/privacyfight.io\/crypto-profit-taxes-part-3\/","title":{"rendered":"U5 &#8211; Crypto Profit &#038; Taxes &#8211; Part 3"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-page\" data-elementor-id=\"6882\" class=\"elementor elementor-6882\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-561d64b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"561d64b\" 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-8014745\" data-id=\"8014745\" 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-326e07c elementor-widget elementor-widget-text-editor\" data-id=\"326e07c\" 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\/716010637\/?\" 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            U5 \u2013 Crypto Profits &#038; Taxes \u2013 Part 3\r\n0:02\r\nHey everybody, this is the mythical Bill Smith here with the legendary John Singleton, Whodunnit. Amen.\r\n0:09\r\nGood, thanks Greg. How\u2019s the weather in your? your wonderful paradise that you live in a really nice.\r\n0:15\r\nIt\u2019s like 70 and suddenly, i&#8230;        <\/div>\r\n        <div class=\"vidseo_collapse_content\" style=\"\">\r\n            <p>U5 \u2013 Crypto Profits &#038; Taxes \u2013 Part 3<br \/>\n0:02<br \/>\nHey everybody, this is the mythical Bill Smith here with the legendary John Singleton, Whodunnit. Amen.<br \/>\n0:09<br \/>\nGood, thanks Greg. How\u2019s the weather in your? your wonderful paradise that you live in a really nice.<br \/>\n0:15<br \/>\nIt\u2019s like 70 and suddenly, it\u2019s Uncharacterized sickly warm here up in the north-east 60 I was getting ready to look out, and I looked at my Apple Watch. So 60 degrees. I was like, what?<br \/>\n0:24<br \/>\nSo it\u2019s actually really nice.<br \/>\n0:26<br \/>\nSo this has been an exciting series, This is crypto crypto taxi\u2019s, crypto profit in taxes part three, and we\u2019ve gone over some basic stuff. Of course. All of this builds on everything you have in your membership dashboard. So this builds upon the previous lessons about LLCs and different things that you have built up. And today we\u2019re gonna look very specifically at some of the changes that you personally make to an LLC operating agreement and how that could help somebody who wants to protect their crypto profits. So, that\u2019s what we\u2019re gonna get into, there\u2019s a link on the page where this video is, posted, it, says example operating agreement, you can click on that.<br \/>\n1:10<br \/>\nand we\u2019re going to be looking at that together. Of course, any questions that you have, if you\u2019re not live on the broadcast with us right now, you can ask us in our, our members only, Privacy Fight Club. Slack chat, you can ask in the discussion section or send a direct message to John and we\u2019ll help you out.<br \/>\n1:27<br \/>\nSo, take it away, John State. Take a look at all right, and how to approach it. Alright, thanks. Where we got this link is while we were just discussing this before the video, you want me to pull that up now?<br \/>\n1:39<br \/>\nYeah, if you pull the link up, I just, I literally searched for it. I use \u2026, by the way. I don\u2019t use Google, but anyways, it doesn\u2019t matter. You can search for an example, LLC operating agreement.<br \/>\n1:50<br \/>\nAnd so we found this website, FIT, smet, Mall, Bus, Business, whatever.<br \/>\n1:56<br \/>\nI\u2019ve never been the Small Fit Small Business. Yeah, I just pulled it up. OK, so if you go to that link, at the very beginning, it\u2019ll say fit small business, and then it\u2019ll scroll down. There\u2019s a link in there for visit Rocket Lawyer. Obviously, this must be a promo site for Rocket Lawyer and Rocket Lawyer is a pretty good service. It has lots and lots of good documents. I use them once in awhile, You don\u2019t need to.<br \/>\n2:19<br \/>\nEspecially if you want to do something specific for and you already know what you\u2019re doing, Rocket Lawyer is going to have just generic documents. But this is great for what we\u2019re talking about.<br \/>\n2:27<br \/>\nSo, if you scroll down just a little bit past that little button for visit Rocket Lawyer, it\u2019ll say Free LLC, Operating Agreement templates, And then scroll down a bit further, and you\u2019ll see the very first item here. The bullet point is Single Member, LLC Operating Agreement.<br \/>\n2:42<br \/>\nIf I click on the PDF, Thank you. Like you lost me, man. So, I\u2019m looking for free.<br \/>\n2:50<br \/>\nYeah, this is my screen, right?<br \/>\n2:52<br \/>\nYeah.<br \/>\n2:53<br \/>\nYeah. Yeah, Yeah.<br \/>\n2:54<br \/>\nSee, we go up to the to the top \u2026 OK Oh, I see it says That. See that right below that paragraph under Free LLC? Operating agreement. Millimeter, right. There\u2019s a single member. Yeah.<br \/>\n3:06<br \/>\nOh, I see I see. So if you click on one of those formats, like PDF or a DO, see the PDF, it will open it up. There you go, there, there\u2019s a generic operating agreement, and this is what I\u2019m going to be working from now. I\u2019m not gonna go through line by line. And this one because I\u2019ve never seen this before. I\u2019m just, saying, I just pulled this up 15 minutes ago, OK. And I don\u2019t care what\u2019s on there, but they\u2019re almost all, they\u2019re so similar, but what, I wanted to show you, the different changes I\u2019ve made, and the ones that I use for different members.<br \/>\n3:37<br \/>\nI start out with a core set of them, and then I modify them based on what the member wants to use it for.<br \/>\n3:43<br \/>\nYou got the idea, the first thing I want to, I want to focus on, and you can follow along on the example operating agreement. You may not find the exact article.<br \/>\n3:52<br \/>\nOh, part by part. Like I\u2019m gonna walk you through but you\u2019re gonna see generally, what I\u2019m talking about. You\u2019ll be able to find it in this example one.<br \/>\n3:59<br \/>\nThe first part now, OK though the important thing of using a limited liability company this is so important is that you\u2019re divesting your exclusive rights, I\u2019m gonna say that again.<br \/>\n4:09<br \/>\nYou\u2019re going to take rights that you have, let\u2019s say for a bank account or property rights that are held in a third party like a bank or recorded in the County Recorder\u2019s office.<br \/>\n4:21<br \/>\nYou take those property rights and move them over to a limited liability company, and what you\u2019re doing is moving those rights over to a group.<br \/>\n4:30<br \/>\nEven if it\u2019s a single member LLC.<br \/>\n4:32<br \/>\nI say it\u2019s moving it to a group, because all I have to do is change the articles. And I can put 27 members. I can put two members. I can put whatever I want, and I can write up a contract that says, who has what interests.<br \/>\n4:44<br \/>\nSo my 100% interest today, it can be 57% tomorrow, it can be 23% the next day. Doesn\u2019t matter.<br \/>\n4:49<br \/>\nSo, when I\u2019m using a limited liability company, the most important thing is how I\u2019m using it.<br \/>\n4:54<br \/>\nNot the fact that I have some document, but I want you to understand the things that I\u2019ve changed over the years and that, that are change. That\u2019s changing the way people are using it. I want people to use it a certain way.<br \/>\n5:06<br \/>\nSo the first thing is, notice in the document, it\u2019s always referring to Treasury regulations, and accounting, and bookkeeping is done in accordance with and compliance with Treasury regulations. And they even put legal references in there. And this also applies to other countries, not just the US.<br \/>\n5:24<br \/>\nYou\u2019ll see this as well.<br \/>\n5:26<br \/>\nSo it\u2019s like when you, when you form an LLC.<br \/>\n5:30<br \/>\nThese standard agreements are written by attorneys and attorneys want you in their association. They want that structure to be within the taxing jurisdiction.<br \/>\n5:40<br \/>\nAnd within all these government organizations they\u2019ve created, they don\u2019t have to be a limited liability company can be just what you see there.<br \/>\n5:48<br \/>\nIt can be that contract, By itself, it doesn\u2019t have to be registered somewhere in a, in a jurisdiction, like a state or a county or province.<br \/>\n5:56<br \/>\nUm, but what we\u2019re going to show you is the, the different provisions that establish, let\u2019s say, create tax situations or create regulatory situations can be removed.<br \/>\n6:12<br \/>\nYou have a right to contract and so, this is what I\u2019ve shown people over the years. Let\u2019s look at capital contributions.<br \/>\n6:18<br \/>\nNow, it says in there, there\u2019s a provision for war, how capitols is contributed and how maybe interest might be paid on the capital.<br \/>\n6:28<br \/>\nAlright, so if you had, let\u2019s say you had a professional, like an attorney or somebody write this up, He\u2019s gonna put in there, this guy is going to get this percent, this guy is going to get interests. This member is going to put up so much money. He\u2019s gonna put up so much money every quarter, He\u2019s gonna put it down and he\u2019s going to write it in dollars or whatever your currency is going to be, because that\u2019s going to create a taxable obligation. You will see how this plays out later.<br \/>\n6:50<br \/>\nThere\u2019s no need to do that, So, what I\u2019ve done is, under Capital Contributions, I just took out any obligation for a member, he doesn\u2019t have to contribute more money. So if he puts in a dollar to form it, fine.<br \/>\n7:02<br \/>\nIf he puts in a million dollars fine, he\u2019s not obligated to keep on doing it.<br \/>\n7:06<br \/>\nNow, if he is, let\u2019s say, the, the people, the members in the agreement continue, and at some point, there\u2019s a need to contribute more capital. Well, then, that can be done with a phone call, right? Or, you guys can make a handshake, or someone can deposit money and give you a receipt, there\u2019s no need to put it in the operating agreement.<br \/>\n7:23<br \/>\nSo I removed specific obligations regarding capital contributions from the opening agreement. And basically, I make it to where there\u2019s no obligation for any member to supplement the contributions. Excuse me. So is there a specific part here that you would just delete?<br \/>\n7:39<br \/>\nYou can see this, right.<br \/>\n7:41<br \/>\nWell, OK, I\u2019m going to talk about this. Let\u2019s see. Oh, here, article two capital contributions.<br \/>\n7:49<br \/>\nYes. I guess. it\u2019s probably article two? Yeah, so let\u2019s say I\u2019m looking at the example here. Here we go, initial contributions. Remember initially, shall contribute to the company capitalized, describe an exhibit one.<br \/>\n8:02<br \/>\nAnd yeah, you can have that, that I wouldn\u2019t, you don\u2019t have to really change it, but you can make it to where no supplemental contributions are required mm.<br \/>\n8:11<br \/>\nNow, notice how it says the total value of such property and cash is, and it assumes it\u2019s cash.<br \/>\n8:20<br \/>\nThis is not a big deal, but just just keep this in mind, it\u2019s not going to make or break everything. But what I like to do is eliminate cash, eliminate dollars from the agreement.<br \/>\n8:31<br \/>\nI only use gold.<br \/>\n8:33<br \/>\nHmm, hmm, it sounds superfluous.<br \/>\n8:34<br \/>\nBut if I\u2019m using gold, that\u2019s not a taxable thing.<br \/>\n8:40<br \/>\nUnless I sell it for dollars, OK, yeah, so if my contract is formed with gold, or kryptos for that matter, then I\u2019m I\u2019m not. I\u2019m out of that.<br \/>\n8:49<br \/>\nThat association with fiat That\u2019s just one more thing.<br \/>\n8:54<br \/>\nSo the total value would be measured, and let\u2019s call it gold here. It says cash.<br \/>\n8:58<br \/>\nI would take that out and put gold Then additional contributions, no member shall be obligated to make additional contributions.<br \/>\n9:05<br \/>\nI would leave it like that see in section 2.2 Yep, All right. And The value of the goal that you put an ounce of gold, but what would you put? Yeah. Would here\u2019s the value of the gold. one gram of gold is valued at one gram of gold.<br \/>\n9:20<br \/>\nYeah.<br \/>\n9:22<br \/>\nSee, the traffic \u2026 you mean? To? My mind, if you want to, you can say, one gram of gold equals one Bitcoin as of this day. You know, something like that.<br \/>\n9:36<br \/>\nUse data dollars, and then the other thing I would add into this capital contributions is no interest will be paid for any contribution.<br \/>\n9:44<br \/>\nThat would be the next thing.<br \/>\n9:46<br \/>\nAll right, then for allocation of profits and losses, yeah, there will be, We\u2019re gonna allocate some profits and we\u2019re gonna allocate some losses and we\u2019re gonna, we\u2019re gonna pay each other based on what we net, But we\u2019re not going to write that in this agreement E, because we don\u2019t have to.<br \/>\n10:02<br \/>\nSo, the idea is, and I\u2019m gonna read my note here, They\u2019re not allocated and shall shall be determined for each member as needed.<br \/>\n10:14<br \/>\nThat way, someone can\u2019t subpoena your operating agreement and say, aha, you\u2019re supposed to get paid on Friday therefore, right? Right?<br \/>\n10:22<br \/>\nThat\u2019s why I tell everybody, and I know, I know when I tell people that they like, OK, I don\u2019t understand it, but I trust you. Because if someone were to subpoena your operating agreement, the one I did for you, it\u2019s going to protect you.<br \/>\n10:32<br \/>\nYou don\u2019t have to talk, it\u2019s going to cover it because I\u2019ve done all this. So members, here\u2019s, here\u2019s the, really, this is the killer thing right here, In the allocation of profits and losses, you also want to consider that members have an undivided interest.<br \/>\n10:49<br \/>\nSo, think of this concept.<br \/>\n10:53<br \/>\nIf you have property rights, and you put it into a pool with other people that put their property rights into a pool, and then nobody really knows who has what property rights, but somewhere down the line, we\u2019ll figure that out, But it\u2019s not today calculated, then no value can be assessed, right?<br \/>\n11:10<br \/>\nSo, if no value can be assessed, there can\u2019t be a fair market value and it can\u2019t be determined in dollars and I can\u2019t sell my interests if I can\u2019t sell my interests I can\u2019t be taxed on my interests.<br \/>\n11:21<br \/>\nI can\u2019t be levied on my interests because my interests are not established.<br \/>\n11:26<br \/>\nSo that\u2019s the key thing, is that members don\u2019t have an.<br \/>\n11:29<br \/>\nOr they have an interest.<br \/>\n11:32<br \/>\nThat\u2019s undivided, as of today.<br \/>\n11:36<br \/>\nAll right, I had a question, if you don\u2019t mind, in the beginning.<br \/>\n11:41<br \/>\nIt says it\u2019s a single member, do you want to do a multi-member each time? How do you approach that?<br \/>\n11:47<br \/>\nOK, I, I set all this up as single members.<br \/>\n11:51<br \/>\nWith the idea that it\u2019s very simple to just amend the articles and make it a multi-member.<br \/>\n11:55<br \/>\nSo, let\u2019s presume that what we\u2019re talking about here is a multiple member, LLC, even though I mentioned the single member, but it\u2019s really a multiple member LLC, and it\u2019s a multiple member, not because I say it is it is because that\u2019s how the membership interest is expressed here in the agreement, It\u2019s like it\u2019s a single woman, That\u2019s why when I send you that, yeah, when I send you to the bank, I give you that abstract. It\u2019s the version of the Operating Agreement. It\u2019s the fake operating agreement, and it says single member.<br \/>\n12:26<br \/>\nAnd we know it\u2019s a multi-member, actually, it says multi-member.<br \/>\n12:30<br \/>\nIt says if it says multi-member, it\u2019s because I want the bank\u2019s records to show that it\u2019s multi-member.<br \/>\n12:35<br \/>\nBut if I look at the articles, it usually shows single member, that\u2019s how I set everybody up as a single member. But I\u2019m telling the bank, it\u2019s multi member.<br \/>\n12:42<br \/>\nBut telling the bank anything, or telling the SSA, anything to get your tax number, the EIN doesn\u2019t change the legal rights of the company. It doesn\u2019t amend the articles. So the articles control what the company really is.<br \/>\n12:57<br \/>\nSo you could tell anybody anything, if they don\u2019t look at the articles that are recorded with the Secretary of State\u2019s office, that doesn\u2019t matter. It\u2019s their problem.<br \/>\n13:06<br \/>\nSo I just say whatever I need to say to protect the client.<br \/>\n13:11<br \/>\nThat\u2019s why when some of you asked me, Why is this a single member? And I\u2019m telling the bank, it\u2019s a multi-member, That\u2019s the reason.<br \/>\n13:18<br \/>\nAnd also, if you amend the articles later to add a member, you don\u2019t have to tell the bank. Because if you tell the bank, you amended the articles of Bank of Duke, some crazy thing. Like, it\u2019ll tell you, OK, open a new account, or we want your new members ID, and he has to come in and sign-up it\u2019s. just crazy. So, we don\u2019t need to go there.<br \/>\n13:34<br \/>\nAt, one of the most frustrating things I\u2019ve ever done in my entire life is, set up multi member bank accounts. Yeah. It\u2019s a nightmare.<br \/>\n13:43<br \/>\nYeah, exactly. What, I think, three times now. I had one recently, where they just, They just shut off the, They, Just, they just completely close the account, and didn\u2019t tell us why.<br \/>\n13:55<br \/>\nTook our money, and then said, We owed them, that money. That way, for us this was a there was some. There was some KYC glitch where you take your money. Yeah, no, we gotta call them and find out what what they\u2019re smoking, because there\u2019s a little bit, and there was a little bit of money in the account, and when, and this is all their fault. We didn\u2019t do anything illegal or wrong or unethical. They just were confused. At every level. Every level of the of their their organization was confused about what we were doing. Very simple thing opening a bank account but if you guys Yeah what a nightmare. So anyway, because they\u2019re trying to be police that\u2019s what the problem is You start trying to be policed is up my account. I know, there you go the other thing is great way to put it there, trying to it\u2019s like, yeah, and you feel they are along the way. Do you hire you have that and you\u2019re like, Why do I need that? What is that? When did I become a suspect in a money laundering or tax evasion scheme?<br \/>\n14:48<br \/>\nWhen I walked in the door to open a business account with you essentially and who made you the police? Yeah.<br \/>\n14:54<br \/>\nYeah, so, the other thing is under allocation, we\u2019re allocating profits and losses.<br \/>\n15:00<br \/>\nI don T section here, I think you should have, Yeah, I don\u2019t think you should have distributions established in writing in the Operating Agreement, I think distribution should be determined as needed.<br \/>\n15:10<br \/>\nThat way beta.<br \/>\n15:13<br \/>\nYeah, I would even I would deleted, or I would say something like distribution shall be determined, but not expressed in writing within the agreement, or distributions shall be determined as needed by the members mm.<br \/>\n15:25<br \/>\nPretty simple, Same thing for salaries, salaries, reimbursement, and expenses, it\u2019s common language, an LLC agreements.<br \/>\n15:33<br \/>\nThey\u2019re not allocated I\u2019m sorry, go back salary\u2019s reimbursements and expenses, OK?<br \/>\n15:38<br \/>\nThere\u2019s no salary, schedule, no one\u2019s getting paid every two weeks.<br \/>\n15:42<br \/>\nNow, maybe someone\u2019s getting paid every two weeks, but we\u2019re not going to put that in writing.<br \/>\n15:47<br \/>\nIf someone were to discover that, let\u2019s say, someone pulls bank records for the LLC and sees that someone\u2019s getting paid every two weeks, OK? That is actually an agreement.<br \/>\n15:57<br \/>\nSo, because it\u2019s not written in the Operating Agreement, is an agreement on which they can act. Most attorneys, and I\u2019ve never seen this, in like over one thousand, I\u2019ve never ever seen this, and I\u2019ve done over a thousand of these in 26 years.<br \/>\n16:09<br \/>\nThey don\u2019t care, It\u2019s too much money to get that information. They\u2019re not going to do that. So I don\u2019t put disbursement schedules in the operating agreement.<br \/>\n16:19<br \/>\nSame for reimbursements.<br \/>\n16:21<br \/>\nThose are decided case by case.<br \/>\n16:23<br \/>\nSo, reimbursement would be something like, if I bought office furniture, and then I get paid back for that, If I bought office furniture, probably in deals that I do, I\u2019m going to tell everybody, don\u2019t pay me for it, just throw that in there as my contribution, Right?<br \/>\n16:39<br \/>\nThen the company pays expenses, Standard stuff, that means the thing that makes the company liable for everything right soon.<br \/>\n16:45<br \/>\nSo that way, it\u2019s truly a company and it\u2019s not an alter ego, if you\u2019re paying expenses. Well, then, maybe it\u2019s just your alter ego, right? But if the agreement says, no, no, company is going to pay your expenses, that makes it a real company mm.<br \/>\n17:00<br \/>\nFor accounting methods, I don\u2019t know. Most people use cash basis accounting. Most people I work with usually has been under $5 million, annual income and below.<br \/>\n17:07<br \/>\nSmall business and individuals, they\u2019re using cash basis accounting, and so whether or not it\u2019s cash basis, I don\u2019t care.<br \/>\n17:15<br \/>\nI would just not put that in writing so that way again, there\u2019s different accounting for different types of methods.<br \/>\n17:21<br \/>\nThere\u2019s accrual basis and cash basis generally, most of us are not gonna be using accrual basis.<br \/>\n17:27<br \/>\nAnd then I would say that accounting is to be determined for the best use of capital.<br \/>\n17:33<br \/>\nSo, I will do accounting, and I\u2019m going to do it so that I can figure out how my asset is performing. I\u2019m not going to do accounting, just so I can file tax returns.<br \/>\n17:43<br \/>\nI want to find out, based on these two cash flows, which one is gonna give me the best net present value? Or what\u2019s the best discount rate for these two assets? I\u2019m going to buy mm, that\u2019s why I want to do accounting.<br \/>\n17:55<br \/>\nAlright. Which everybody knows this has return on investment. Y\u2019all are familiar with that, OK? Cash in, cash out. All right.<br \/>\n18:02<br \/>\nThen, OK, so the other aspect is now I like to document the way I\u2019m going to handle certain assets. So specifically we\u2019re talking about cryptographic assets.<br \/>\n18:09<br \/>\nAnd I want to have a provision in the operating agreement that specific, not just for bank accounts, but that identifies a trust when I\u2019m dealing with the LLC is dealing with third parties like exchanges, like Coinbase and the states and the trust already exists. So what I wanna do is I want to declare the trust, but I want to identify the trust.<br \/>\n18:33<br \/>\nBut we all understand it already exist. But that\u2019s not enough, you have to say it.<br \/>\n18:38<br \/>\nYou can\u2019t, just like, for example, if if you\u2019re going to go on vacation and expect your neighbor to watch your dog, you can\u2019t just leave your dog on his doorstep. Or maybe you can\u2019t.<br \/>\n18:46<br \/>\nI don\u2019t know your neighbor, but to be polite, you got a knock on the door and say, hey, could you watch my dog? Oh, yeah, sure. We talked about this last week. Yeah, sure, I\u2019ll bring them in. OK, That\u2019s a trust because we have expressed that, so when I\u2019m talking about handling assets for the LLC, Let\u2019s write about what that involves.<br \/>\n19:03<br \/>\nSo the first thing we want to do is we want to talk about the asset we\u2019re handling, the LLC it\u2019s going to be handling and the definitions relating to that asset. So when we talk about cryptographic currency, we\u2019re talking about things like the blockchain, we\u2019re talking about private keys. Public keys are talking about smart contracts, OK.<br \/>\n19:23<br \/>\nSo what you want to do is to make your life easy, as you except the common industry definitions for these terms. Now, I didn\u2019t even list the terms here.<br \/>\n19:32<br \/>\nBut basically you want to adopt special terms that are used for this asset that are normally accepted by the industry of cryptographic currency and tokens and assets.<br \/>\n19:43<br \/>\nSo that brings in everything. So that\u2019s the first part of your trust is to accept the commonly use definitions for these assets.<br \/>\n19:51<br \/>\nThat way, someone can\u2019t read into it. Something else and, and change what you\u2019re trying to do.<br \/>\n19:55<br \/>\nRight? and it\u2019s in it. The other thing is, it\u2019s an objective standard.<br \/>\n20:00<br \/>\nI don\u2019t have to go to too much work to do it, I don\u2019t have to be the guy that writes the definition. Because someone could say, Well, you can\u2019t define this. Smart contracts are defined by over there, right? Wikipedia or whatever, right?<br \/>\n20:10<br \/>\nThen you want to identify the parties to the trust. Now trust consist of a grantor or a trust or someone who contributes the value. The money, the property. The property rights to the trust.<br \/>\n20:20<br \/>\nAnd then you have the trustee, who owns it, and then you have the beneficiary who has the right to use it under certain terms, and some variation of that.<br \/>\n20:28<br \/>\nSo in the case of an LLC, an LLC being the account holder at an exchange, the LLC becomes the beneficiary.<br \/>\n20:37<br \/>\nThe exchange is the trustee.<br \/>\n20:41<br \/>\nIn fact, why is it the trustee, because the exchange owes the money to the account holder?<br \/>\n20:47<br \/>\nThat\u2019s it, And can I tell the trustee what the terms are going to be?<br \/>\n20:52<br \/>\nNo, I cannot, because I cannot tell the trustee what the terms are going to be.<br \/>\n20:56<br \/>\nBy default, I have an adhesion contract, a contract, that I cannot change that makes it irrevocable.<br \/>\n21:06<br \/>\nSo I can move money into it and move it back and forth, but I cannot change the terms of how that trustee is going to own that property. We just know that he owns it.<br \/>\n21:15<br \/>\nAnd then that basically those are your players, the trustee, the beneficiary, and the grantor.<br \/>\n21:22<br \/>\nAnd then what\u2019s the property? Well, the property is the the token, the cryptographic currency, the token coin asset, and let\u2019s be specific here. All right?<br \/>\n21:33<br \/>\nThe language we\u2019re using, OK, so when we talk about blockchain tax, immunity trust, remember this is just a marketing term. this is not legal language.<br \/>\n21:40<br \/>\nThis is the name that identifies a business trust.<br \/>\n21:44<br \/>\nAnd this business trust has been specifically written to handle relationships with cryptographic currency exchanges.<br \/>\n21:51<br \/>\nRight? That\u2019s why you can\u2019t use it with stock or gold or your private vault. That\u2019s irrelevant to use the trust for that because you own it. It\u2019s in your possession. There\u2019s no trust, right?<br \/>\n22:02<br \/>\nIt\u2019s not titled. It\u2019s like we said last time.<br \/>\n22:05<br \/>\nThis has to do with when you\u2019re going in and out of dollars, essentially is what matters. It\u2019s in your wallet. It\u2019s in your possession. That\u2019s the beauty of crypto. You control it. It\u2019s anonymous. Yeah, yeah, I can\u2019t be anonymous, right. And so this is the trust itself. This blockchain trust is going to exclude.<br \/>\n22:24<br \/>\nPaper wallets, private wallets, gold, stock, cars. Everybody wants to know, can I use this for my business? No, it\u2019s only written for cryptographic currency. Because there\u2019s a special relationship there. Have you ever bought gold that has private keys?<br \/>\n22:39<br \/>\nNo.<br \/>\n22:41<br \/>\nYou buy the Gold and put it in your hand, right? Although, it will be kinda. Cool. So this tape thing goes with, and I didn\u2019t exclude our friends in the UK and Canada, OK, you guys are using a limited partnership. Now, I believe we can use an LLC there, but I don\u2019t think it\u2019s necessary. The limited partnership, same idea, you don\u2019t want to make established criteria for the use of the money and the obligations and the rights of the parties. I think you can avoid all that.<br \/>\n23:08<br \/>\nI mean, I know you can avoid all that, because those decisions, as to who gets paid when, can be decided on the fly. Can be site, decided every month and can change every month and I would recommend you do it that way.<br \/>\n23:20<br \/>\nBecause what\u2019s being taxed is the fair market value of the thing, and if you can\u2019t access a fair market value, it can\u2019t be taxed moreover, if you\u2019re using a limited partnership.<br \/>\n23:30<br \/>\nEven if you\u2019re using an LLC in Australia and New Zealand, you\u2019re using it the same way we do here. We\u2019re just diminishing your interest in it.<br \/>\n23:37<br \/>\nSo, I\u2019m assuming in those countries, Canada, UK, Australia, New Zealand, I\u2019m assuming that you have to file a tax return and report something.<br \/>\n23:45<br \/>\nWhen I do it here in the states, I know that no return, it has to be filed for that thing. We\u2019re doing the account holder, OK, I don\u2019t know that yet for those other countries, But I do know that I can diminish the value, and I know that a reasonable number is 80%, and what we do is we just, We set up a foreign company and it\u2019s just as easy to do it. Here in the States. You can do it pretty much anywhere.<br \/>\n24:05<br \/>\nWe just set up a foreign company, which is a legal person, and make that the majority owner, shareholder member of your structure, whether it\u2019s an LP or an LLC.<br \/>\n24:15<br \/>\nIn the case of a limited partnership, and I\u2019m not saying limited liability partnership, I\u2019m not saying limited liability company, I\u2019m saying limited partnership and also LLC\u2019s in Australia, New Zealand.<br \/>\n24:27<br \/>\nWe\u2019re making the company here and like New Mexico. We set up an LLC in New Mexico.<br \/>\n24:32<br \/>\nWe make that the 80% owner So we\u2019ve created a legal person That\u2019s a foreign person under the foreign tax Treaty that doesn\u2019t have a tax obligation.<br \/>\n24:40<br \/>\nNow, I know, um, I\u2019m seeing here in Canada, where we have to register the LLC, that\u2019s foreign to get a license in Canada, and that\u2019s fine, I don\u2019t know how that\u2019s going to play out yet, but I still see that we\u2019re able to diminish your interest in it.<br \/>\n24:55<br \/>\nSo at the very least, we can diminish the canadiens interest in the, in the UK.<br \/>\n24:59<br \/>\nresident interest to 20%.<br \/>\n25:02<br \/>\nAt the best, I think we can eliminate all of it. And I\u2019ll show you more later as we go, but we have to do this step by step.<br \/>\n25:07<br \/>\nOK, So I only want to do things that I know I can do to start out with?<br \/>\n25:12<br \/>\nAnd again, The limited partnership, and still, the LLC, those can, and should be operated as pass throughs. Now I know there are people have different ideas of what pass throughs are pass through the here\u2019s the way I use it and evidence for 26 years. I put cash into an LLC, I can put anything in there, I could put a dividend, but profit, I could put the title of the real estate, It doesn\u2019t matter.<br \/>\n25:33<br \/>\nIt\u2019s not a taxed thing.<br \/>\n25:35<br \/>\nIt\u2019s not a disbursed thing, I\u2019m not going to take a profit now, if I take some money out for myself that\u2019s different, I\u2019m going to report that it\u2019s taxable.<br \/>\n25:43<br \/>\nBut the rest of it, the core of it, I\u2019m going to move it into another asset.<br \/>\n25:47<br \/>\nThat\u2019s the whole idea. That\u2019s all we really care about for most of us.<br \/>\n25:51<br \/>\nThen, here\u2019s a couple of general ideas and you can ask me some questions, I guess, if you want to, if we have any questions, but, the, in the end here, I want you to understand this.<br \/>\n26:00<br \/>\nThe tax cannot be paid in the thing being taxed.<br \/>\n26:05<br \/>\nIt\u2019s not taxable.<br \/>\n26:07<br \/>\nIf I can\u2019t pay the tax in Bitcoin, Bitcoin is not taxable and I can tell you right now, Bitcoin is not taxable anywhere on earth.<br \/>\n26:14<br \/>\nWhat\u2019s being taxed is the unit of currency you\u2019re dealing in.<br \/>\n26:18<br \/>\nSo if I sell bitcoin for dollars, yeah, that should be taxable, especially if it\u2019s in my name.<br \/>\n26:25<br \/>\nIf, if I sell it into an LLC, it\u2019s at least reportable. It doesn\u2019t mean it\u2019s taxable, Depends on my tax treatment because I have 12 ways of treating the tax in an LLC, so until I choose what that is, it\u2019s not subject to the tax, right?<br \/>\n26:43<br \/>\nI know that\u2019s like, circular. Like, oh my gosh, are you going in circles here? But if the thing, if they cannot tax bitcoin, if they can\u2019t, if you can\u2019t pay the tax and bitcoin is not taxable, I mean the same thing for gold. I mean, imagine if gold is taxable, fine. I don\u2019t have a problem with that. Can I pay the tax and gold?<br \/>\n27:01<br \/>\nWell, No, I have to spend dollars.<br \/>\n27:04<br \/>\nBut if they said, yeah, you can pay the tax and gold, what do I have to do? Do I have to like, shave off a bit of my gold coin and send it to you? Or do I have to go buy some other gold with Fiat, and then pay you that? I mean, it it doesn\u2019t make any sense.<br \/>\n27:18<br \/>\nThe thing being taxed is the government banking fiat? Yeah.<br \/>\n27:24<br \/>\nThen of course going for coin to coin again, it\u2019s not subject to the tax for the same reason because there\u2019s no disposition of assets going from coin to coin, But if I file a report under penalty of perjury, and I say it is well then they\u2019re gonna agree with me. They\u2019re gonna say find your litecoin go into bitcoin then back to litecoin, where you made more litecoin.<br \/>\n27:43<br \/>\nThat\u2019s taxable. Great. And then how is it taxable? Not in litecoin is taxable in Fiat?<br \/>\n27:51<br \/>\nThat\u2019s the general idea. You have determined the value. I mean, it\u2019s obviously just doesn\u2019t work.<br \/>\n27:57<br \/>\nIf I had a, let\u2019s, like I said before, if I had a gain in kryptos, am I required to go get Fiat currency to pay the tax? No, I\u2019m not.<br \/>\n28:05<br \/>\nBecause what if I don\u2019t have any, just have kryptos, well, then it went one day when I get it, then fine.<br \/>\n28:11<br \/>\nWell, then, what does that tell you? It\u2019s not taxable until you pay it till you say it is. Right? So, anyways, but this, this is the basic structure. So you wanna go through a general operating agreement, get rid of all these preset obligations that, you know, the system put in there and just make it a pure contract between you and the members. The sole benefit of is for the members to make a profit and move on. It\u2019s not to serve the tax agencies. Great. Which is how these things are written. Yeah, that\u2019s actually a great way to summarize everything you\u2019ve been saying, which is, Get rid of the unnecessary obligations in the contract mm.<br \/>\n28:45<br \/>\nThat\u2019s crazy, and, operate that way.<br \/>\n28:46<br \/>\nYeah, That\u2019s very cool. All right, anything else you want to add to that before we wrap it up for today? Know, that should do it, we\u2019ve got one more session for crypto profit and taxes. that we know we can add forever. since we got a. Lot more to talk about. Talk about, we got one more session next week. Make sure, if there\u2019s something you want us to cover. Get it in, that Slack room, let us know. Tag John, tag me, especially John, and we\u2019ll get it in there.<br \/>\n29:14<br \/>\nAlso do want to, say, trying to help you understand how this stuff works, and how to do it on your own. If you do want to have a consultation with John, you can get that from our site.<br \/>\n29:28<br \/>\nJust as consultations here, I\u2019ll share my screen again, consultations right there in the upper right hand corner.<br \/>\n29:36<br \/>\nAnd click on that.<br \/>\n29:37<br \/>\nIt\u2019ll take you to this page, or I\u2019m in the process of updating this page, so it might look different, But you get the idea, and you can book that anytime and John can help you directly with with?<br \/>\n29:48<br \/>\nWith, your, your issue, so let you know about that. Alright. This is great, very helpful stuff, thanks, John. Alright, and hey, Happy Thanksgiving everybody! We\u2019re bad Thanksgiving. Yeah. All right, great. Awesome. All right. Take care, everybody.<\/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-6dee7c1 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"6dee7c1\" 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-567ac74\" data-id=\"567ac74\" 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-6afd96a elementor-widget elementor-widget-spacer\" data-id=\"6afd96a\" 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-258e72e elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"258e72e\" 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-1682566\" data-id=\"1682566\" 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-01ce72e elementor-widget elementor-widget-text-editor\" data-id=\"01ce72e\" 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. Bill Smith and John Singleton host a series on Cryptocurrency Profits and Taxes, focusing on protecting crypto profits through changes in LLC operating agreements. <br \/>2. They use an example LLC operating agreement available on the FIT Small Business website and guide viewers on how to adjust it for their needs.<br \/>3. They emphasize the importance of an LLC in divesting exclusive rights, which transfers property rights to the LLC, providing asset protection.<br \/>4. Singleton recommends removing any obligations for members to contribute additional capital in the LLC operating agreement.<br \/>5. He suggests changing the currency in the agreement from cash to gold, a non-taxable commodity, unless it is sold for cash.<br \/>6. In the agreement, it is advised not to specify member profit shares or salaries, keeping the agreement flexible and less prone to legal scrutiny.<br \/>7. Singleton encourages setting up LLCs as single-member entities initially, as it&#8217;s simple to amend the articles to multi-member later, if required.<br \/>8. For accounting methods, the advice is not to specify any particular method, allowing flexibility for different accounting situations.<br \/>9. They introduce the concept of a &#8220;Blockchain Tax Immunity Trust&#8221; which can be part of an LLC or a Limited Partnership, and can be a trustee, beneficiary, or grantor.<br \/>10. In a unique approach to prevent tax obligations, they suggest setting up a foreign company as the majority owner of the LLC, thus diverting taxable profits to the foreign entity.<\/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-ce19b82 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"ce19b82\" 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-a82406a\" data-id=\"a82406a\" 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>U5 &#8211; Crypto Profit &#038; Taxes &#8211; Part 3<\/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\/6882"}],"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=6882"}],"version-history":[{"count":7,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/posts\/6882\/revisions"}],"predecessor-version":[{"id":25140,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/posts\/6882\/revisions\/25140"}],"wp:attachment":[{"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/media?parent=6882"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/categories?post=6882"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/privacyfight.io\/wp-json\/wp\/v2\/tags?post=6882"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}