#and arguably when i was swapped to salary got paid less | Explore Tumblr Posts and Blogs

cryptochurp · 6 years

Text

Tax Attorney: Blockchain Immutability ‘Does Make The IRS Smile’ (Interview)

Bitcoinist spoke with Alexander Stern, legal attorney and founder of Attorney IO, to unpack the complexities related to Bitcoin and cryptocurrencies taxes, potential loopholes for users, and how the IRS can easily track individuals using Bitcoin compared to fiat currencies.

The fact that a lot of this is on a blockchain (and cannot be tampered with) does make the IRS smile.

– Alexander Stern

Bitcoinist: First, how and for how long has your law firm been involved with Bitcoin and cryptocurrencies? Are you seeing increasing interest from clients?

Alexander Stern: I’m an attorney and the founder of Attorney IO. Attorney IO is a startup that provides legal AI to other lawyers to give them an AI’s perspective on the law. We proudly support lawyers working on the latest cryptocurrency issues, spanning from taxes to securities. I believe smart contract technology and legal AI are the future of the legal profession.

Bitcoinist: So do you see the legal profession also facing disruption? In other words, will many legal experts be replaced by AI and smart contracts in the future?

Alexander Stern: Yes, I think a huge number of lawyers will be replaced by AI and smart contracts. However, the best lawyers will embrace this techno-legal future rather than fight it. It is now common to get a joint degree in law and business.

With the rise of AI and smart contracts, I think we’ll start seeing a lot more people getting joint degrees in law and computer science.

Bitcoinist: Is trading crypto-to-crypto on an exchange like Binance or Poloniex, for example, a taxable event? Is it retroactive? If so, from what date did this go into effect?

Alexander Stern: We asked some of the top tax law professors in the country this question. The Attorney IO Panel Report generally found that starting January 1st, 2018, all crypto-to-crypto exchanges are taxable events.

This is the case whether you use an exchange such as Poloniex or even if you make a private swap without using an exchange. The only exception I’m aware of may be to use non-taxable retirement accounts. However, the panel said that, prior to 2018, a great deal of crypto-to-crypto exchanges are taxable events and have been since before the Bitcoin whitepaper was published. The question is whether the two crypto assets being exchanged are highly similar to each other in how they function.

For example, it is arguable that Bitcoin and Litecoin are sufficiently similar to suggest swapping one for the other may be a non-taxable “like-kind exchange.”

On the other hand, one panelist said, “I don’t think a swap of cloud storage for a car is LK [like-kind]. So why should a digital asset that allowed you only to get cloud storage be LK [like-kind] with a digital asset that could be redeemed only for a car?” In other words, all exchanges going back to Bitcoin’s release are potentially taxable events, especially when the two coins are meaningfully different in function.

Bitcoinist: Is it possible to have taxable gains despite never having been converted into dollars? Moreover, what if the gains were wiped out by later unrealized losses?

Alexander Stern: Yes, this is the single biggest news of the panel report. The blockchain ecosystem could move into a second generation of coins and leave the first generation in the dust. If that happens and most of this first wave of tokens drop to levels seen only a few years ago, thousands of families could owe tens of billions of dollars in taxes, despite receiving much less than that in dollars. This could haunt people for the rest of their lives.

One panelist, Prof. Ainsworth, answered this question as follows: “Absolutely. The same happens in any real estate bubble where people are flipping homes. Some people flip every month, and if they end up flipping a $1 million home at the top of the market, and the value of all real estate ‘tanks,’ it is possible to have [taxable] gains that exceed the current market value of real estate.”

Another panelist, Prof. Kane, said, “I could exchange an appreciated, valuable painting for a farm. Not like kind (even before 2017 changes), so I recognize gain. But then the land market crashes, and I take a big loss. Was it wrong for the system to tax me given I did not really end up with any gain at the end of the day?”

Bitcoinist: The CFTC considers crypto to be commodities while the SEC believes some are securities. Is there any clarity at this point?

Alexander Stern: Cryptocurrencies are a completely new technology and paradigm. Regulators could decide they have features of both securities and commodities. It will also likely depend on the token itself rather than the asset class as a whole.

Bitcoin looks a lot more like a commodity. The latest ICO often looks a lot more like a security.

Ultimately, one token could be regulated as both a security and a commodity. This could mean at least two federal agencies would have simultaneous authority over one token.

Bitcoinist: Many people in the crypto space get paid salaries in Bitcoin, for example. Would this be taxable the same as income in dollars?

Alexander Stern: Yes. If you get paid in Bitcoin or any other digital asset, you generally have the same tax responsibilities as payment in dollars.

Bitcoinist: We’ve seen instances where people claim they got “hacked” and that the funds are no longer theirs. How can the IRS technically prove that an individual has control of their funds?

Alexander Stern: In my opinion, this seems very similar to losses due to theft outside of the blockchain. If you keep half of your salary as cash under your mattress, it is vulnerable to theft too. In some cases, the IRS does allow you to deduct for theft, but it is a very case-specific process. If you have a substantial theft from a cryptocurrency hack, you should get a tax attorney to guide you.

Documentation, such as police reports or news articles on a major hack, can be crucial to demonstrate to the IRS that you did indeed lose money due to theft. Nobody should consider claiming a hack that is not genuine. That may lead to serious consequences that could include jail and fines.

Bitcoinist: Are there any legal loopholes that Bitcoin users can use to avoid taxation? For example, sending bitcoin to another person as a “gift”?

Alexander Stern: Generally speaking, no. A good rule of thumb in the tax world is to ask whether something would be effective if you use dollars instead of cryptocurrencies. If you get a salary in dollars or cryptocurrencies, you cannot avoid income tax by saying you gifted it all away.

Bitcoinist: The IRS is increasingly forcing third-party intermediaries to turn over records such as we’ve seen with Coinbase. However, since technological innovation is always one step ahead, could new tech, such as anonymizing features, decentralized exchanges, cross-chain atomic swaps, etc., make it even harder for authorities to track individuals? Who do you see winning this game of cat-and-mouse?

Alexander Stern: These new technologies could make it harder for the IRS but certainly not impossible. The Bitcoin blockchain is particularly susceptible to scrutiny. Panelist Prof. Ainsworth notes that “all the IRS needs to do is get a good computer out and draft assessment notices once they have the account numbers.

The fact that a lot of this is on a blockchain (and cannot be tampered with) does make the IRS smile. Assessments could not be easier. The metaphor of ‘fish in a barrel’ comes to mind.”

However, the IRS is a very capable agency. People try to dodge taxes outside of blockchain investments all of the time. When you start driving around in a Lamborghini but report only a small income, that raises some serious red flags. If the IRS can catch tax evaders using cash, it can do so with even the most sophisticated anonymous blockchain assets.

Bitcoinist: Given that 2017 was a record year in terms of price gains across the board for cryptocurrencies, do you believe we’ll see more people file taxes on the crypto returns this year or less?

Alexander Stern: All sorts of federal and state government agencies have seen the dramatic price appreciation of cryptocurrencies. They all want to increase their authority and get a piece of the pie. The panel report notes that only a few months ago we saw a ramp up in IRS scrutiny of Coinbase.

I think we’ll start seeing significant legal action taken against cryptocurrency tax dodgers, and this enforcement will spark a community-wide increase in paying taxes.

Bitcoinist: Do you think tax service companies like Turbo Tax or H&R Block will start offering cryptocurrency tax services as it becomes more popular?

Alexander Stern: Yes, I think that’s a great idea. Turbo Tax and H&R Block could make a ton of money by tapping into this burgeoning market. Most people want to comply with the law and that means paying taxes. These companies can make a few small additions to their systems and capture this market.

Bitcoinist: What’s your advice for cryptocurrency users moving forward? Should they keep track of every single transaction and trade?

Alexander Stern: The panel report does find people should track every single trade. Panelist Prof. Chodorow says, “To comply with the tax laws, keep track of how much you paid for each coin. Further, keep track of which coin you sell or spend as well as the value of the coin at the time you dispose of it. You will also need to determine how long you have held the coin. If you hold your coins at one of the exchange companies, those companies should be able to provide you that information.”

He adds, “Any time that you sell or spend a virtual coin, you will have a tax gain or loss if the value of the coin at the time you sold or spent it differs from the value when you acquired it.”

In other words, even if you buy a small item such as a cup of coffee, you are technically incurring a tax obligation.

It is no different than if you sold $5 in Bitcoin and took that $5 to the coffee shop. Both events are taxable. While this could limit the practical use of these assets as currencies, it may not be so onerous if you are with an exchange that automatically records all of the necessary information each time you make a trade.

Bitcoinist: Finally, where can people find more information on this topic?

Alexander Stern: I suggest that people read the entire Attorney IO panel report on cryptocurrency taxes and adjust their bookkeeping and tax strategies accordingly. Some of the best law professors in the world took the time to educate the cryptocurrency community about their obligations. It’s worth looking into what they have to say.

Did you pay your cryptocurrency taxes this year? Share your comments below!

Images courtesy of Shutterstock, Attorney IO

The post Tax Attorney: Blockchain Immutability ‘Does Make The IRS Smile’ (Interview) appeared first on Bitcoinist.com.

from WordPress https://ift.tt/2HzBhAz via IFTTT

#BTC #HODL #ETH #CryptoChurp.com

0 notes

1nebest · 6 years

Text

Coinbase buys Earn.com and makes CEO Balaji Srinivasan its first CTO

Coinbase, the prominent cryptocurrency exchange, has announced its most significant piece of M&A to date after it agreed to buy Earn.com, the U.S. startup that uses the blockchain for its paid-email service, in a deal worth over $120 million. In additional, Coinbase has appointed Earn.com co-founder and CEO Balaji Srinivasan as its first CTO, while the rest of the team will transition over, too.

The deal doesn’t come as a complete surprise since Coindesk reported last month that Coinbase and Earn.com were in talks over a deal.

This is Coinbase’s fifth acquisition to date — its most recent was a deal to buy Cipher Browser last week — and its largest outlay so far. Neither party is saying exactly how much Coinbase is paying, but Srinivasan told TechCrunch in an interview that the deal represents a positive return on investment for those who backed Earn.com, which was formerly known as 21. The company had raised more than $120 million from investors, according to Crunchbase data, which gives some idea of the total deal package.

All of Coinbase’s previous acquisitions have centered around talent, for example, last week’s Cipher deal sees highly-rated developed Peter Kim join the Coinbase ranks. That seems to be a major motivator for landing Earn.com, despite a high price and a product that both Srinivasan and Coinbase CEO Brian Armstrong intend to “double down” on post-acquisition.

A Stanford graduate who holds a BS, MS, and PhD in Electrical Engineering and an MS in Chemical Engineering, Srinivasan is highly-prized in Silicon Valley. He sits on the board at power investor firm Andreessen Horowitz and is known for being an early evangelist of cryptocurrencies and blockchain technology. (He once told me that he tipped Uber drivers in bitcoin in its early days, going so far as to set up Coinbase wallets for them while in their back of their car as they took him to his destination.)

It’s not a secret that Coinbase has struggled to fill its vacancies with talent, and that has extended to the CTO role. Bringing in a name as big as Srinivasan is a major coup for the company and, with the startup said to be paying some of its talent more than $1 million per year in salary, it doesn’t make you wonder how big a factor landing Srinivasan is in making this deal happen.

More importantly for Andreessen Horowitz, Qualcomm Ventures, Khosla Ventures and other backers of Earn.com, this deal with Coinbase — which includes cash, stock and crypto — represents a turnaround in fortunes for the startup.

Founded as secretive bitcoin mining operation ’21E6′ in 2013, the company quickly raised over $100 million but struggled as the price of bitcoin fell and expensive operational costs weighed it down.

Srinivasan was an initial co-founder but he stepped back from daily operations to take a full-time role with Andreessen Horowitz as the startup got going. He returned to the fold as CEO role in 2015 when, he explained, the company had less than a year in runway having wracked up large capital commitments that it couldn’t pay back, even with millions of dollars of mining profit each month.

Alongside CFO Lily Liu, Srinivasan refocused the company to offer a service that rewards users financially for answering emails and completing tasks. Today, he said, the company — which was renamed to Earn.com last year — is profitable with revenue at an eight-digital annual rate run with “hundreds of thousands” of users.

“With Coinbase’s user base and distribution muscle, I think it could hit $100 million in ARR in a few months,” Srinivasan told TechCrunch. “I’m proud of the fact that we turned what could have been a disaster into a successful product and I’m excited about the road ahead.”

Coinbase CEO Brian Armstrong on stage at TechCrunch DIsrupt San Francesco in 2014

It is fairly easy to dismiss Earn.com as Silicon Valley hyperbole — the fact that Mark Andreesen will answer your email in return for a $100 donation to Black Girls Code may be neat but it is not game-changer — but the company’s product gets interesting when you consider it at scale.

Srinivasan explained how the ability to reach hundreds of domain experts with questions — for example AI engineers about their next career move, or expectations for how the industry matures — starts to become a powerful tool, particularly when the surveyor pays based on results. That’s a very different proposal to existing intelligence services, and it has found success among some tech industry verticals.

Lately, Earn.com has branched out into token-based incentives for tasks, and it launched a platform that allows companies preparing to hold an ICO to airdrop tokens to Earn.com users in exchange for answers, opinions and other feedback.

Writing in a blog post for Coinbase — which interestingly focuses heavily on Srinivasan’s arrival at the company — CEO Armstrong called Earn.com “arguably one of the earliest practical blockchain applications to achieve meaningful scale.”

It’ll be interesting to see what Coinbase does with it, particularly around product integrations.

Perhaps of more significance is what Srinivasan does in his new role.

Acknowledging what many perceive as Coinbase’s conservative approach to cryptocurrencies — it offers users the chance to buy only four — Srinivasan said a large part of his role is to look at emerging technologies.

“There’s a lot of amazing stuff happening,” he told TechCrunch. “Atomic swaps, sharding, plasma, proof of stake, etc, and a big part of my job will be to take all of that stuff, and rank it based on whether we can use it to create new products for our users.”

Another part, he mentioned, will be evangelizing the concept of blockchain itself beyond just the cryptocurrencies as investments. So you can expect him to pop up at events and generally have a wider presence in the media as Coinbase looks to cement its position as a blockchain and crypto leader.

Srinivasan will also continue to be involved with Andreessen Horowitz, and at Coinbase he’ll be part of the company’s recently announced investment arm, Coinbase Ventures.

“Every once in a while, a company comes along that is the start button for a technology,” Srinivasan said, citing companies like Microsoft (Windows) and Facebook and their roles in igniting the next phases of technology development.

“If you control and build that onboarding process, then you can build everything else downstream. If you do it right, then Coinbase goes from the place people build cryptocurrency to the place where blockchain technology is built.”

Coinbase is certainly trying to move in that direction with the fund — which follows the wider trend of crypto companies getting into investment — while the recent hiring of former LinkedIn M&A head Emilie Choi has advanced the M&A piece with three deals announced in 2018 alone.

Note: The author a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

0 notes

1nebest · 6 years

Link

The deal doesn’t come as a complete surprise since Coindesk reported last month that Coinbase and Earn.com were in talks over a deal.

Coinbase CEO Brian Armstrong on stage at TechCrunch DIsrupt San Francesco in 2014

It’ll be interesting to see what Coinbase does with it, particularly around product integrations.

Perhaps of more significance is what Srinivasan does in his new role.

Srinivasan will also continue to be involved with Andreessen Horowitz, and at Coinbase he’ll be part of the company’s recently announced investment arm, Coinbase Ventures.

Note: The author a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

0 notes