Tax Law Archives | Page 19 of 55

24May 2022 by Anthony Diosdi

How the Sale of an NFT May Trigger a Painful Tax Surprise for Some Investors

By Anthony Diosdi The popularity of Non Fungible Tokes (“NFTs”) has become popular in the past year. Just over a year ago, the New York Times published an article entitled “Why Did Someone Pay $560,000 for a Picture of My Column” and sold the article as an NFL. So what is an NFT?The concept of an NFT is to marry the world of digital assets with the security of cryptocurrency. An NFT is a digital asset with a certification of authenticity which is protected by copyright law. When an investor purchases a minted NFT, the investor is acquiring a hacker-resistant, public proof of ownership of the digital asset. Now since we know a little about NFTs, it’s time for us to discuss how they are taxed. There are a number…

24May 2022 by Anthony Diosdi

The Guide to Claiming Cryptocurrency Tax Losses

Tax Law

By Anthony Diosdi Did you lose money trading cryptocurrency this year? If so, you may have the opportunity to reduce your tax bill. This article will discuss the losses associated with cryptocurrency that can and cannot be claimed on a tax return. Claiming Ordinary and Capital Losses Associated With CryptocurrencyA cryptocurrency investor is allowed to utilize losses to the extent of gains from sales up to $3,000 ($1,500 in the case of a married individual filing a separate return) annually against ordinary income such as wages. Any losses exceeding $3,000 can be claimed in future tax years. A cryptocurrency trader may also claim capital loss deductions under Internal Revenue Code Sections 1211 and 1212. When a crypto investor offsets capital gains with losses in cryptocurrency, the investor is permitted to…

19May 2022 by Anthony Diosdi

Planning Options to Increase the Section 1202 Gain Exclusion Far Beyond the $10 Million Cap

Tax Law

By Anthony Diosdi I. Introduction to Internal Revenue Code Section 1202This article is designed to provide an overview of the federal income tax incentives available to non-corporate holders of “qualified small business stock” (“QSB stock”). As discussed below in more detail, Section 1202 of the Internal Revenue Code permits investors in QSB stock to exclude up to $10 million in taxable gains. Despite the Section 1202 tax incentive, in the past, many investors shied away from QSB stock because of the inherent double tax consequence of subchapter C corporations. However, that may soon change, due to the reduction of the corporate marginal tax rate to 21 percent under the Tax Cuts and Jobs Act of 2017. Later in this article we will discuss how a “taxpayer” can increase the gain…

19May 2022 by Anthony Diosdi

Cryptocurrency Tax Accounting Decoded- Using HIFO Tax Accounting to Shield Crypto Gains from the IRS

Tax Law

By Anthony Diosdi Cryptocurrencies are considered property in the United States for income tax purposes. Treating cryptocurrencies as property and not currency for federal income tax purposes is a departure from the rest of the world. Gain or loss is recognized and taxable, every time cryptocurrency is sold or used to purchase other virtual currency. To determine the amount of taxable gain, a cryptocurrency holder must know the basis of the cryptocurrency and the fair market value of the cryptocurrency when sold or exchanged. The fair market value of cryptocurrency is not always easy to determine. If cryptocurrency is obtained through an exchange, the fair market value of the digital asset is the amount recorded by the exchange on the date of the transaction. If a cryptocurrency transaction is not…

17May 2022 by Anthony Diosdi

Got Cryptocurrency? Here is What You Need to Know About Estate Planning, Crypto Memorandums, and RUFADDA

Tax Law

By Anthony Diosdi Cryptocurrency and digital assets present complex challenges for purposes of estate planning. Many traditional estate planning methods are rendered obsolete in the realm of digital assets. This article will discuss both the challenges and importance of estate planning in the context of crypto assets. In particular, this article will talk about the three solid components of estate planning of cryptocurrency which includes custody, planning, and administration. What is Cryptocurrency?Cryptocurrency has grown in popularity and ubiquity in the past few years. Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Virtual currency is a digital representation of value that functions as:1) A medium of exchange;2) A unit of account; and3) A store of value other than a representation of the United States dollar…

17May 2022 by Anthony Diosdi

How to Survive a Cryptocurrency IRS Tax Audit

Tax Law

By Anthony Diosdi Cryptocurrency and blockchain technology have grown in popularity and ubiquity in the past few years. Bitcoin and other forms of cryptocurrency have experienced unprecedented growth in recent years, leaving many investors with unexpected large gains. The growth in the cryptocurrency has also caught the attention of the Internal Revenue Service (“IRS”). As a result, the number of IRS audits of cryptocurrency transactions has been on the increase. This article focuses on how cryptocurrency holders can survive an IRS audit. Introduction Cryptocurrency Technology and the Taxation of CryptocurrencyCryptocurrency relies on blockchain technology for record keeping. A blockchain organizes information added to ledgers known as blocks or groups of data. Each block can hold only a certain amount of information. As a result, new blocks are continuously added to…

17May 2022 by Anthony Diosdi

A Brief Overview of the Estate and Gift Tax Considerations Associated with the Transfer of Cryptocurrency

Tax Law

By Anthony Diosdi Federal law imposes a transfer tax upon the privilege of transferring property by gift, bequest or inheritance. This transfer tax takes the form of a gift tax in the case of completed lifetime gifts and an estate tax in the case of property owned by the decedent at the time of death. Since the Internal Revenue Service (“IRS”) treats cryptocurrency as property for federal tax purposes, the federal estate and gift tax is imposed on any cryptocurrency transferred by gift or bequest. Gift and estate taxes are computed on the progressive unified rate schedule set forth in Section 2001 of the Internal Revenue Code with rates as high as 40 percent. As of 2022, the lifetime estate and gift tax exemption for U.S. domiciled single filers is…

11May 2022 by Anthony Diosdi

How to Survive a Cryptocurrency an IRS Tax Audit

Tax Law

By Anthony Diosdi Cryptocurrency and blockchain technology have grown in popularity and ubiquity in the past few years. Bitcoin and other forms of cryptocurrency have experienced unprecedented growth in recent years, leaving many investors with unexpected large gains. The growth in the cryptocurrency has also caught the attention of the Internal Revenue Service (“IRS”). As a result, the number of IRS audits of cryptocurrency transactions has been on the increase. This article focuses on how cryptocurrency holders can survive an IRS. Introduction Cryptocurrency Technology and the Taxation of CryptocurrencyCryptocurrency relies on blockchain technology for record keeping. A blockchain organizes information added to ledgers known as blocks or groups of data. Each block can hold only a certain amount of information. As a result, new blocks are continuously added to the…

11May 2022 by Anthony Diosdi

Navigating the Maze of the Complex Money Transmitter Laws of Cryptocurrency

Tax Law

By Anthony Diosdi On January 1, 2021, the Anti-Money Laundering Act of 2020 was enacted into law. Under the Anti-Money Laundering Act of 2020, the Department of Treasury has the power to declare that cryptocurrency is a monetary instrument. As a result, certain cryptocurrency transactions must be reported to the Financial Crimes Enforcement Network or FinCEN (The Financial Crimes Enforcement Network is a bureau of the Department of the Treasury) as part of a financial institution’s anti-money laundering (“AML”) program. This article will discuss cryptocurrency trader’s obligation under the Anti-Money Laundering Act of 2020. Money Transmitter Laws- What Cryptocurrency Traders Need to KnowIf you are in the business of trading cryptocurrency, it is imperative that you understand the money transmitter laws. There are federal and state money transmitting laws. We…

06May 2022 by Anthony Diosdi

Unraveling the Mystery of Reporting Foreign Retirement Plans to the IRS

Tax Law

By Anthony Diosdi In an increasingly global economy, U.S. workers are experiencing unprecedented mobility. As such, U.S. citizens or residents (hereinafter U.S. persons) living in a foreign country, even for a limited time, often participate in a pension or retirement plan; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. beneficiaries of foreign pension plans will likely need to report these plans on one or more information reporting forms with their U.S. tax returns. Foreign retirement accounts may also trigger unusual income tax consequences on the beneficiary of such a plan. This article will discuss the special U.S. reporting and tax consequences of foreign retirement plans. FBAR - Duty to Report Foreign Financial AccountsIn 1970, Congress enacted…