The tax code of the USA is on the verge of major amendments over the last three decades. Although neither version of the house of representatives nor the Senate version of the tax bill (both passed in their respective chambers in the process of negotiating the final bill), do not specifically address cryptocurrency, several changes to existing regulations can potentially affect owners of bitcoin is receiving unprecedented profits from their investments this year.
One of the versions of the bill suggests the replacement of «equal value» exchange mechanism, which many owners of cryptocurrency used in the past. The version of the bill from the Senate offers accounting structure «in order of receipt» (FIFO), which can complicate the filing of tax returns for the tokens.
Supporters of reform, including President Donald trump, and the majority of Republicans in the U.S. Congress, argue that the goal of the project is to make the payments in favor of the U.S. government are much less complicated and painful process. Representative David Schweikert (David Schweikert), a Republican from Arizona who co-chairs the Congressional Future Caucus and Budget Committee, which oversees taxation, said:
«With more simplified tax code people will be able to cope with the challenges posed by cryptocurrency and bitcoin».
Unfortunately for owners of cryptocurrencies, the Law of equitable taxation of cryptocurrency, which one of the authors was Schweikert were removed from both versions of the bill. None of the versions does not change existing tax rates on capital gains, which are subject to cryptocurrency in accordance with the guidance from the IRS 2014.
The final bill will almost certainly end the loophole for owners of cryptocurrencies is the ability to defer taxes on capital gains in property by exchanging one asset for the same through the so-called equivalent exchange. The use of such exchanges were common practice in cryptocurrency circles in past years. However, the new bills and the house and Senate to limit this provision solely to the transaction of real estate.
«Many people believe that when they change one type of token to another, or one cryptocurrency to another, it is equivalent exchange,» said Lisa Zarlenga (Lisa Zarlenga), partner at Steptoe & Johnson.
In the exchange between crypto assets, their owners bypass the short-term tax on capital gains — as well as the rates of ordinary income tax, and then pay a lower long-term tax on capital gains in the amount of 20% upon selling the asset.
According to Kelsey Lemaster (Kelsey Lemaster), partner Goodwin Procter, while in the current legislation it is unclear whether the mechanism of equivalent exchange apply to the cryptocurrency, it may make sense in the case of a swap of assets that come from the same blockchain, such as bitcoin and Bitcoin to Cash.
«However, if these changes are adopted, they will eliminate the possibility of such operations on any of the cryptocurrency exchanges,» says Lemaster.
In order of receipt
The mechanism for recording FIFO to «certain securities» may have the greatest potential impact on holders of the cryptocurrency. This measure applies to the determination of base price of the sold asset will be sold the old assets from the inventory owner.
«Typically, you’d offer your broker first to sell the most expensive assets. What does the Senate – you won’t be able to do it, because you will have to follow the scheme «in order of receipt». That is the first you will be able to sell the asset first bought,» said Jim Calvin (Jim Calvin), tax partner at Deloitte.
For instance, if you bought one bitcoin for $ 1,000 in 2013, and another $ 10,000 last month, and then wants to sell it at a price of 15 000 dollars, the man needs to sell one that was bought first for $ 1,000, and to realize taxable profit in the amount of $ 14,000 (most likely, people would prefer to sell bitcoin, bought for $ 10,000, realized only $ 5,000 of taxable profits).
While the Commission on trade commodity futures (CFTC) has classified bitcoin as a commodity, many wonder whether it is provision, as it applies only to securities. According to Calvin, bitcoin is likely to fall under the new provisions, as this week launched futures trading on bitcoin. However, even if bitcoin can avoid this, according to Zarlenga, some issuers of IPOs tokens (ICO), which created the tokens-the shares would be subject to FIFO.
«You can have tokens that have sufficient qualities of securities to be treated as securities for tax purposes,» she said.
A ray of hope
However, it is highly likely that the position of the FIFO will not be included in the final version of the bill. Because the House and Senate currently coordinate their respective projects, and the FIFO is only in the version of the Senate, it is possible that this proposal will not pass. Moreover, many major market participants, such as the investment company Institute, to demand its withdrawal.
However, even if the position will be in the final bill, there is good news in relation to FIFO, according to Calvin. First, this provision applies only for each account. This means that if the old bitcoins belonging to the owner are stored in a separate account from bitcoins he wants to sell or better yet – even outside of the exchange, this rule does not work.
«If you sell bitcoin (in 2018), this sale will be treated as a sale of the first bitcoins that you have bought,» said Calvin. «Now, bring it from the stock exchange, store, and when you want to sell it, you can transfer to your bitcoin wallet is needed».
Confirming his words, Calvin added that he personally before the end of the year plans to withdraw all your cryptocurrency with the exchanges. Lemaster also notes that traders may want to consider selling most of their cryptocurrency assets to the end of the year to minimize capital gains. He concluded:
«If people are planning to sell bitcoins in the near future, possibly cost them to sell their before the start of the year.»
If many Americans follow this advice, we may see a significant correction of prices in the last days of 2017.