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NINA HAGEN

Understand The Benefits

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March 12, 2022
Cryptocurrency


UNDERSTANDING CRYPTO AND CAPITAL GAIN TAXES

The recent years have made many headlines on the wide popularity of
cryptocurrency by creating several millionaires and billionaires. Cryptocurrency
can be defined as a digital currency that uses cryptography for security, thus
avoiding the chances to double-spend or counterfeit. Cryptocurrencies have a
decentralized nature which makes them detached from the government authorities
or financial institutions around the world.



At present, the IRS is trying to tax the capital gains one makes through the
profits, which is the buying price reduced from the selling price or the amount
you earned as profits through your trade. Your taxation will depend on the state
you are in.

Important taxable situations

 * Selling your cryptocurrency

People who hold cryptocurrencies for more than a year are considered as
long-term capital gains. If the holding period is less than a year, it will be a
short-term capital gain and the tax rate will be higher.

 * Spending your cryptocurrency

When you purchase anything using cryptocurrency, this is considered as selling
your cryptocurrency and will activate capital gains.

 * Trading cryptocurrencies

If you trade cryptocurrencies and exchange one with another, it can also be
considered a taxable event unless you do it properly. However, traders must find
the right opportunity to trade cryptocurrencies. Bitcoin robots like the Bitcoin
360 AI use AI technology to find the best trading signals. Check the
funktioniert Bitcoin 360 AI blog to learn more about the benefits of this
platform.



Strategies to save taxes

If the owner of your cryptocurrency is a Private Contract Common Law Complex
Trust with a contract that permits the trustee to consider the cryptocurrency
like stock or security, you can escape from paying capital gains tax.

These trusts can assemble an entity of the trust and continue reinvesting that
entity to develop the trust for the advantage of the beneficiaries. If the
transactions are categorized as securities, the trustee can assign all the
capital gains to the entity and avoid the chances of paying capital gains tax.

The important thing to remember while using this strategy is that the
cryptocurrency has to be transferred to the trustee’s name without triggering
any taxable events. After the trust owns the cryptocurrency, you can open new
accounts in the trust’s name on the trading platforms like Binance, Kraken,
Coinbase, etc.

The document of trust has to be in a particular way that allows you to have the
amount of control and should match with the properly executed above plan to make
sure that you are completely following the 1041 form instead of 1040 that is
used by most of the CPAs.

A good financial consultant who is an expert in cryptocurrency and 1041 complex
trust may be able to help you with this strategy. The IRS is actively tracking
all the cryptocurrencies and sending letters to people who are ignoring the
payment of taxes. They are using the KYC agreements of exchanges like Kraken,
Coinbase, Binance, etc. TokenTax, Koinly, Accounting, etc are some other tools
that track all your crypto activities.

Final Thoughts

The Taxation differs from country to country and state to state. But many
experts believe that in the coming years, many countries will start accepting
cryptocurrencies and blockchain transactions as the world is demanding more
secure and fast transactions.




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