The Blockchain and Real Estate Investing

[Lori]

Open discussion regarding the December 17th REIA Now Call - The Blockchain and Real Estate Investing

[Adam Koehler]

Thanks for starting this @Lori. Happy to contribute.

[George Skidis]

Cryptocurrency and Taxes.

Cryptocurrency is here to stay, Whether it is Bitcoin, Ethereum, Pi or anything else, they are here to stay.  As both a fellow real estate investor and a Registered  Tax Return Preparer (RTRP)  I hope you avoid the pitfalls and profit handsomely.

For a couple of years now the IRS is asking all income tax prepares to question everyone we prepare income tax returns by asking the following question:

"At any time during 2021, did you receive, sell, exchange or otherwise dispose of any financial interest in any virtual currency?

When you answer yes, you have triggered a taxable event. Lying to the IRS and not disclosing it can result in greater penalties. If the profit was earned in your name it will be treated as Capital Gains and will be subject to the current Capital Gains Tax. Whether that will be 10, 20, 30 percent or more will depend on who is in office when you sell it. As an individual, you can only deduct the cost of acquisition. The math is simple. What you sold it for less what you paid for it equals the amount you must pay taxes on. Depending on your income bracket, Capital Gains Tax can be in addition to income tax.

Would you like a better way to do this? You should consider buying any future cryptocurrency in a business entity. The entity will allow you to deduct the cost of the mining equipment, internet and other related expenses from the profit made on the sale.

Please seek competent tax advice from the firm that prepares your income tax return before before rushing into what I am about to say.  - In my opinion, an entity taxed as an S-Corporation is your best bet. When set up properly an S corporation can allow you to treat the Gain on the Sale of Cryptocurrency as passive income which is not subject Capital Gains. The bonus is that you were able to write off expenses as well.

Disclaimer: The article is not individual tax advice but a discussion on tax strategies. Please seek the advice of a competent tax preparer before employing any of these strategies.

  

[Duncan]

On 2/7/2022 at 11:26 AM, George Skidis said:

Cryptocurrency and Taxes.

For a couple of years now the IRS is asking all income tax prepares to question everyone we prepare income tax returns by asking the following question:

"At any time during 2021, did you receive, sell, exchange or otherwise dispose of any financial interest in any virtual currency?

When you answer yes, you have triggered a taxable event. Lying to the IRS and not disclosing it can result in greater penalties. If the profit was earned in your name it will be treated as Capital Gains and will be subject to the current Capital Gains Tax. Whether that will be 10, 20, 30 percent or more will depend on who is in office when you sell it. As an individual, you can only deduct the cost of acquisition. The math is simple. What you sold it for less what you paid for equals the amount you must pay taxes on. Depending on your income bracket, Capital Gains Tax can be in addition to income tax. 

RESPONSE

NEVER EVER SELL YOUR CRYPTO - This is the worst thing you can do.  If you need money, you first lend / stake your crypto on a DEFI platform and take out a loan against it. 

Not only will you get the value increase in crypto over the years, but you also get to earn interest on it. !  THe beautiful thing is that you can then take a loan against that crypto at a small simple interest rate at a term of your choosing!   Go buy more real estate to earn more income, and or buy more crypto.  Never pay taxes again! 
https://celsius.network/earn