It’s not, but “give us our money back or we’ll report you to the IRS” strongly implies that they were willfully assisting in tax avoidance before. It might even legally be blackmail, if they’re aware of any crimes their customers have committed.
Except that recent events regarding Citigroups incorrect $900M payout on the Revlon bond shows that in fact grown up finance will sometimes say, actually, the law is the law and the contract doesn't cover this, so thanks for the money.
This was a case where the bond holders did have some claim to the money, but it was clearly an error.
> This was a case where the bond holders did have some claim to the money, but it was clearly an error.
You refer to recent events, and I don't know how recent, so maybe I missed something; but my understanding was that the finding was that it was reasonable for Revlon to believe when they received the fund that it was a legitimate payment, not just an error. Of course in retrospect (e.g., when Citigroup calls and says so!) it is clear that it was an error, but the legal argument, whether or not you buy its truth, was that it was not clear at the time. I think that this sort of finding in which both grown-up financiers decide not to be chummy about misplaced funds, and the law sides with them in not requiring them to do so, is comparatively rare.
I'm a little foggy on details, but I remember reading that the bond holders had been kind of mistreated before all this. Something to do with reorganizing or splitting off valuable parts of the company. The bond holders weren't too happy as it was beginning to look like they might not get their money back. So it makes sense why they would not be quick to cooperate and return what they initially thought were early payments.
"Better" is debatable. If you've ever actually wired money to scammer, you'd know that the banking system isn't one giant kumbaya circle run on gentlemen's agreements to Do The Right Thing, and you were rolling your eyes through the whole thread[1].
At most, it works like that for anyone rich or working on behalf of a big firm, which isn't exactly a ringing endorsement. And don't you worry, cryptocurrencies are just as capable of reversing transactions of those with the real power! [2]
I think what that twitter thread points out is that #2 is harder and less common in crypto (for better or worse) in the current state. What would be a trivial correction in the normal system isn't here.
There are also a lot more ways for regular people to reverse transactions, but I take your point about how hard it is to reverse wires to scammers.
founder is clearly an asshole but "reporting it as income to the IRS" probably doesn't count as "threat of initiating criminal proceedings" as it's likely something that they are enjoined to do anyways.
Amusing as the founder then would be outright saying he knows what criminal activity has been going on and exactly who is up to it ... and is willing to use that info if he see fit.
That would seem to present all sorts of risks for his users, and himself, legal and otherwise.
Not really? There are things that you're not required to report to the IRS that others can use to underreport income -- for example, the identity of which contractor you made small cash payments to. Reporting their identities to the IRS is not illegal, but neither is failing to.
(Also, I assume you mean tax evasion? Avoidance is the legal one.)
Not sure that makes any sense... if users held the assets before, they have an asset with unrealized gains. When it transfers ownership, those gains are realized.
> [...] strongly implies that they were willfully assisting in tax avoidance before.
It does nothing of the sort. It's a enormous leap based on an assumption of bad faith to go from expecting protocol users to sort out their own personal tax situation to "willfully assisting in tax avoidance."
> It does nothing of the sort. It's a enormous leap based on an assumption of bad faith to go from expecting protocol users to sort out their own personal tax situation to "willfully assisting in tax avoidance."
There are obviously lots of subtleties here, including places where no-one knows how the legal implications will shake out, but "expecting … users to sort out their own personal tax situation" isn't always an option; for example, my bank isn't allowed to assume I'll sort out my own personal tax situation and must report my interest earned, whereas, say, Amazon is allowed to make that assumption, and so need not report the items that they have sold to me. It could be that this is a more Amazon-y situation, but it could also be that it's a more traditional-bank-y situation. Probably even the IRS and Leshner, but definitely those of us who aren't involved in the situation, don't know which it is.
Precisely, which is why the jump to "strongly implies willfully assisting in tax avoidance" comes off so poorly. In my opinion, it not only mischaracterizes what is happening, it imputes ill intent to boot. Guidance for DeFi apps is poor currently and policy in this area is actively being legislated. In the meantime, shifting the onus for tax reporting back onto individual users !== willful assistance in tax avoidance any more than companies not witholding income taxes from payroll pre-WW2 was willful assistance in tax avoidance.
Further, since these transactions are all captured on a public ledger, anyone using this for tax avoidance is really just electing to pay their taxes later with massive penalties and possible jail time once the IRS gets around to tying addresses with unreported transactions to fiat on/off ramp transactions that are KYC'd.
> Paying taxes on free money isn't the end of the world.
Playing devil's advocate: it's not exactly "free money", it's free "tokens" of some kind, which might not be convertible to money at the same rate which was used to estimate the tax. If the tax amount was assessed at the value the tokens were supposed to have today (based on what they recently traded for at some exchange somewhere), but you were too slow and only traded the next day and the price paid for these tokens has fallen heavily, you might have to pay more in tax than the money you can get from these "free tokens". So yes, it's not hard to imagine a situation in which paying tax on that "free money" can be "the end of the world" for some.
Agree fully with this point if it is considered income and not a gift.
Let's assume the income case, a qyestion:
What would happen if someone took these coins then transfered them to a new wallet while claiming that their private key was compromised. So "theft" essentially. Would they still be on the hook for taxes?
The real downside to crypto to me is that there is no ownership, only proof of authentication credentials ownership.
From position of ignorance, I assume broadly same as being paid and than saying dog ate your cash on way Home. Crypto is not the first opportunity for dishonest actors to do dishonest things (it's just more fun to watch as they proclaim princioles and future and innocence :-)
So just offload ~35% or whatever it is to cover the taxes in anticipation that they're reporting it to the IRS. Not sure if it qualifies as a gift though, which may be taxed different than income.
The giftor pays the tax in the US, not the person receiving the gift. And only under certain scenarios. Practically speaking, "gift tax" is usually not a thing for what most people would consider gifts, but always speak to a CPA and probably attorney, etc. etc. etc..
In the US, you only pay taxes on income and gains. In other words, you’re not going to pay taxes on those tokens until you redeem them for fiat currency. The tax is an percentage of the fiat currency you receive, not the token value.
Just like stocks (you don’t pay for any changes in value to the stock until you sell it for fiat currency).
Crypto is taxed as income. Everything is taxed as income. You are only taxed on gains if you have a cost basis and are trading the tokens, but otherwise if you are compensated via tokens you owe income tax on that whether or not you convert it to fiat.
Yep, not just stock grants, but anything. For example you find a bug in an airline, and report it and they compensate you as a thank you with 200k airline miles... you now owe income tax on those miles.
Based on the value of the "item" for example airlines will assign a value to these miles ie (100,000 miles worth $1200) - or something like that. Otherwise, I don't know. I'm not an accountant/cpa, but I know that this stuff is taxable whether it's tokens or ketchup packets.
Imagine that, they tax you on a special “number”! Do they accept Crypto? If not, please point to the money they want to tax.
They can’t have it both ways. Either crypto is an equivalent to money or it isn’t. If it is, accept it. If it’s not, tax it when the money “appears” out the other end.
The government does not accept RSUs at tax payment. Instead, you pay tax as if you were paid the amount said RSUs are worth at the time you received them.
Basically the current trade value for the non-dollar item is your income on it.
There are some exceptions like exercising stock options where you’re taxed for the difference between the strike price and the fair market value at the time of exercise (I’m not sure why the law is this way).
The difference between the strike price and market price is the value of the option--its the money you otherwise would have had to pay to buy the stock if you didn't have the option. That's why it is so.
So tax the gain on sale of the stock - there's no good reason to tax it on exercise (especially when the stock is illiquid and the price can still go down).
Because your trading thing A for thing B. Suppose you could trade stock for a Yacht without income taxes applying. That’s the kind of loophole everyone buying a yacht would use, especially if you could use a near cash equivalent like gold instead of barter.
The difference between stock and stock options might not seem like enough to matter, but it’s simply the same generic rule applying.
I'm not sure this follows in the case of options? You have a contract to buy stock at X price. You do this at a discount and get the stock. You could just tax the gain on the stock on its sale with existing tax law and you could do this specifically for options if having some broad law would create weird exceptions like you suggest.
ISOs existed to correct for this failure in options, but the income at which AMT removes that protection hasn't been updated substantially since it was created so this protection no longer really covers exercise. I also don't really understand how it could be abused.
My change would be to have option exercise pay no tax on the spread, with all taxes payed on gains on sale.
As it is, people with massive wealth can exercise when there is no spread (because they have lots of cash already when the shares are granted to them) or they get special early exercise via the 83b election with the IRS and special access from their startup.
The people that get hit hardest by this are regular employees starting out that don't have lots of cash to exercise when the spread is zero.
Changing the law would of course change the system but paying people with options has significant economic and political implications. The current solution is for companies to agree to buy back enough shares to cover the tax burden when people exercise their options.
It might even be the best way to legitimize (legally launder?) the money.
If I receive $XX, would happily pay %Y of that to stay above board. If the IRS wanted to audit me, my personal war chest is now $XX-%Y greater than it was before and more than adequate to cover whatever past (accidental) tax errors I may have had in the past.
