Capital gains on bitcoin Question

Science, Engineering, & Tech Cryptocurrencies
#1

Simplified Question:

  • If i buy 10 stock for $1
  • then stock raises to $2
  • So I Sell 5 Stock for $10
  • is this considered capital gain?

  • Bought 0.15072653 for $1,100 @ 7,000

  • Bought 0.60488432 for $4,800 @ 7,800

  • total= 0.75561085 BTC

sold 0.50000000 for $4,871.98 @ $9,891.34

I gained 10% of a bitcoin and 71 usd in the transaction?
(good idea at the time but then bitcoin didn’t dip at 10k like i was banking on for the last 3 months)

bought 0.40393803 for $4871.95 @ $11,884.12

currently holding 0.6585 BTC = 10536 @16,000

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#2

To your simplified question: Yes. You bought 10 shares for $1. You paid $10 total, but still each share is $1. Then the shares rise to $2, and you sold 5. So even though you only got your $10 back out of that transaction, each share was worth more than you paid for it.

The same is true for crypto currencies, but I don’t know how to factor it for fractions of a share (where share is a Bitcoin, or Ethereum, or LiteCoin, or whathaveyou).

Edit:
Assuming US trading rules.

#3

ok, thanks for the info =)

#4

Yes, cryptocurrencies are treated like stocks as far as capital gains is concerned in that when the value increases above the amount you purchased it and you sell any of it, you have a capital gain on the portion sold.

Now the tax laws around this are a little more complex and I’m not sure if that’s what you’re asking about here so I’ll omit that unless asked.

#5

okay well next question then

I sold .5 BTC for 4871.98 am i going to be taxed on my $4,871.98 or the $1,050 difference

.5 BTC = $3900 @ time of purchase but = $4,950 @ sale = +$1,050 gain

edit
i’m in the 15% tax bracket, its a short term gain so i will owe roughly $150 from the gain to the government weeeeeeeeeeeeeeeeeee taxes

#6

You’ll be taxed on the gain. They subtract your basis as that’s after tax dollars already. If it’s a short term gain (property held less than 1 year) then it will just be taxed at your normal income tax rate. If it’s a long term gain then its not as straightforward.

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#7

A good CPA/tax accountant will help you structure your earnings reporting to minimize your tax liability. Pay a professional for their service, which also shields you from some liability. If you have any amount of wealth, you should have a CPA/tax accountant. They more than pay for themselves.

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#8

If you get audited by IRS I don’t believe a screenshot of this thread will get you out of paying interest+penalties.

3 Likes
#9

You also forgot to mention where you are from, which might be relevant for this discussion.

#10

His profile says Detroit

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#11

you know there’s no actual law that allows the IRS to collect taxes? they’re just thugs

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#12

But they aren’t shares, it’s a currency

#13

Capital gains applies to currency traders as well.

#14

For the purposes of taxes, Cryptocurrency is treated like any other capital property. Therefore it is subject to the same taxation procedures as regular stocks.

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#15

This my change if you are not in the US or are in a different state then me but my Attorney, F.A., and C.P.A. Have all agreed… Any gain that you receive is taxed as normal income and any looses you take can be written off just like if you made any other bad investment. However, if you hold a token for more than 365 days, you can then claim any profits you make as “long term capital gains,” which is taxed at 15% where I am. I do not have any state income taxes here.