back to article Crypto-cash souk Coinbase forced to rat out its high rollers to probing US taxmen

Cryptocurrency exchange Coinbase will be turning over information on 14,000 of its users to the IRS – Uncle Sam's tax collectors – thanks to an order from a US court. Judge Jacqueline Corley of the San Francisco district court ruled on Wednesday the Bitcoin, Ethereum, and Litecoin trading website will be required to hand over …

  1. frank ly


    If you were a private Bitcoin investor/speculator and you cashed in all or part of your wallet, would the money be taxed as capital gains or some other form of taxation?

    Is there an equivalence comparison with any kind of real world asset holding? etc?

    1. Mark 85

      Re: Bitquestions

      I asked this of my tax guy a year ago.... the answer is "it depends" but most likely falls under capital gain or loss rules as there's some gray area according to him. I'll have to check again with him when I do my taxes for this year. But a gain is "income" and will be taxed.

    2. Anonymous Coward
      Anonymous Coward

      Re: Bitquestions

      It would almost certainly be taxed as normal income - gold is because the IRS accepts the argument that it is interchangeable with currency and is thus classified as such for taxation, as opposed to say copper which is classified as a commodity and thus taxed as a capital gain. If bitcoin supporters want to claim it is a currency, then they have to accept the consequences of that classification.

      1. Bill Michaelson

        Re: Bitquestions

        It's cap gains in the US according to the IRS. They are treating it like securities, not currency. This is at odds with a handful of other federal agencies who have classified it differently for their convenience, but for now, that's where the IRS stands.

    3. katrinab Silver badge

      Re: Bitquestions

      The position in the UK is:

      If the bitcoins are held for business purposes, eg like a business bank account, it goes to “exchange gains / losses” in the accounts, and “loan relationship income” in the tax return, and it is taxed as income.

      If a customer pays you in bitcoin, you convert it to pounds at the rate applicable on the date of transaction, record that amount as sales, and pay tax on it as if you received pounds. Same if you pay a supplier in bitcoin, convert to pounds and claim that as your business expense in the usual manner. Any change in value between sale / purchase / conversion, see above.

      Basically the rules are the same as if you were trading in Euros / USD etc.

      If it is held for personal purposes - to fund personal expenditure or as an investment, then it is taxed as a capital gain. The first £11,300 per year is covered by your annual CGT allowance.

    4. razorfishsl

      Re: Bitquestions

      This is where HK wins.

      once you have paid tax on any of your money, you are free to invest it for "free"

      so if you paid tax on your $14USD to buy a bit coin....

      then cash it out at $10,000USD, your tax is zero.

      1. Bronek Kozicki

        Re: Bitquestions

        I'd suspect that HK tax rules for investment in crypto-currencies may soon change .... if they haven't already.

    5. CrazyOldCatMan Silver badge

      Re: Bitquestions

      would the money be taxed as capital gains or some other form of taxation

      It should be. But I somehow doubt whether is it..

    6. Jonathan Schwatrz
      Big Brother

      Re: frank ly Re: Bitquestions

      "If you were a private Bitcoin investor/speculator and you cashed in all or part of your wallet, would the money be taxed as capital gains or some other form of taxation?...." Wrong question. Right question - could Uncle Sam's taxbods present a case in court that makes it look like you intended to avoid paying tax by using Bitcoins? If so, you are screwed even if your intentions were otherwise. The taxbods work on the basis "you didn't ask us if you needed to pay tax on that, therefore we think you were trying to avoid paying tax (and are probably a criminal anyway)". And remember - Bitcoins are not anonymous!

      1. Anonymous Coward
        Anonymous Coward

        Re: frank ly Bitquestions

        If you were an investor/speculator you'd be have some sort of record of when you bought the bitcoins you have and for how many dollars. Then when you sell them you can show the records and calculate the appropriate taxes, just like when you buy and sell stock or other financial instruments. If they were private sales it might be a bit harder, but just like most stock sales are via a broker that provides records, it is still allowable to buy/sell stocks privately though you may get a bit closer look from the IRS if you do.

        If you're a criminal buying and selling illegal items with your bitcoins, you probably aren't listing anything on your tax forms about them - in particular if you sold some drugs for bitcoin a few months ago and then bought something else (or converted them to dollars) at today's higher price you should declare that income based on the bitcoin conversion rate then and now. Criminals rarely do - in fact many don't even file taxes - which makes it really easy to get them for tax evasion even if they can't get them for other crimes.

  2. Anonymous Coward
    Anonymous Coward

    Why don't they just get the information from the banks where the money is transferred to?

  3. J.Smith

    I'm not bothered about this, my bitcoin are located in the Caymen Islands.

    1. Colabroad

      You do realise all the Cayman banks would also give this information to the IRS if they asked.

      You want them in a Delaware shell corporation, not as pleasant weather there though.

      1. Anonymous Coward
        Anonymous Coward

        Delaware shell corporations don't protect you from the IRS, because those shell corporations still have to file tax returns.

        1. katrinab Silver badge

          True, the only benefit of Delaware is that there is no state income tax. You still have to pay federal income tax.

    2. katrinab Silver badge

      They are not, unless you are, they are located wherever your wallet software is running.

      1. Bill Michaelson

        They are not "located"...

        Except perhaps, if you consider the distributed public ledger a location. Or perhaps you mean the secret key? It's in a capsule that I implanted in my cat. So my bitcoins are getting some sun ATM, I guess...

        1. katrinab Silver badge

          Re: They are not "located"...

          If your Chase account transactions are held at their data centre in Basingstoke, that doesn't mean the money is located in England for tax purposes. Same with Bitcoin.

  4. TDog

    So fundamentally

    97% of investors make less than the threshold level; and 3% make more.

    Now what sort of investment encourages that sort of hype?

    "hello, buy some shares in xyz; not only will you have a 97% chance of being fucked upon, but if we can remember the other deals, then you too can support their desire to avoid taxation. "BUT IT'S THE GREATEST DEAL IN THE WORLD; I KEEP THE RESULTS IN MY TROUSERS TIGHTLY FURLED, ITS A DEAL AND A HALF WHEN IT'S UNFURLED, IT' S THE GREATEST DEAL IN THE WORLD"

    A slight abuse of Ivor Biggun; but I suspect that Doc Cox won't mind.

    He was straight but there are an awful lot of suckers out there.

    Bit like sterling but without the taxation assets to support it.

    1. Anonymous Coward
      Anonymous Coward

      Re: So fundamentally

      Wrong, if you invest £100 / $100 and you made £200 / $200 you are not affected, but still a bloody good return on investment.

  5. The Man Who Fell To Earth Silver badge

    I am surprised its taken so long

    Coinbase is basically a brokerage. I am surprised they have not been generating 1099's like any other US financial institution.

    Or did they take the Uber approach and simply claim obeying Laws is for chumps?

    1. rmason

      Re: I am surprised its taken so long

      Nail. Head Hit.


      *spreads arms slowly wide*

      The internet (hushed whisper).

    2. Bill Michaelson

      Re: I am surprised its taken so long

      Yeah, this is puzzling. It's been several years since brokerages have been required to record and report basis info too. But as recently as three years ago, CC were unclassified as assets for the IRS. I guess that was the "first they ignore you stage." Now we are even beyond "then they laugh."

  6. Barry Rueger

    Or did they take the Uber approach and simply claim obeying Laws is for chumps?

    But! But! But! It's on the Internet! Bitcoins want to be free!

    1. CrazyOldCatMan Silver badge

      Bitcoins want to be free!

      In which case, I'll give a good (albeit temporary) home to 200 of the free-range Bitcoins.

      Of course, they'll pretty soon become barbecue^W cashed but they were happy while I looked after them..

  7. Anonymous Coward

    So if you withdrew from coinbase at a maximum of $15,000 dollars a time, once an hour, during 2013-2015, you have avoided being caught up in the investigation?

    Looks like I'm safe then......

    1. Mark 65

      I think you'll find that this is the IRS' opening offer and those 480,000 accounts are not safe either. They are likely fishing but with a fair estimation of how successful they will be. If, after investigating these details, they can then persuade the next judge that there is rampant tax evasion going on in this area or with this company based on what they found under this warrant then the flood gates will open. They do have some clue as to what they're up to.

      NSA, FBI work on a similar basis. First the overly broad catch-all warrant request. When that is denied refine your criteria to focus in on the information you need but try to still be overly broad to get more information on where to go next. Repeat until warrant is obtained. Use any criminal activity found to show how you were "right all along" and use it to persuade the next judge the activity is rampant and the next warrant needs to be far more all encompassing else they are implicitly condoning the behaviour etc. etc.

  8. amanfromMars 1 Silver badge

    A Virtual AILand Grab Identifying Crooked Robber Barons?!.

    NEUKlearer HyperRadioProACTive IT Terrain with all manner of unknown and unforgiving man traps and money pits. And IT is not an Advanced IntelAIgent Space for either the Unwary or the Less than Perfectly Prepared for Remote Anonymous and/or Autonomous Virtual Assault.

    One does wonder at the wisdom of bankrupting services opening up yet another novel front for mass innovative attack.

    Whenever they cannot help/stop themselves, are they just as hopeless addicts to the drug which others produce and supply?

    That's a systemic vulnerability for exhaustive exotic and erotic exploitation and 0DayTrading.

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