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American Expat Tax: Capital Gains and CryptoCurrencies

Transcript of the above video:

In this video we are going to be talking about cryptocurrencies. These are currencies like bitcoin, lite coin, Ethereum etc. These are basically assets now, which really 5 years ago, virtually didn’t exist. These are relatively, I shouldn’t even say relatively, they are very new on the horizon and they are very new with respect to dealing with issues of things like tax compliance, tax liability etc.

The topic, generally speaking, of cryptocurrencies is a rather hot topic amongst expats. I myself have been, you know, I have lived outside the United States for a number of years and I haven’t seen one topic more talked about than cryptocurrencies here in recent years, other than visas. It just seems a ubiquitous topic around a bunch of foreign nationals living outside their home country to talk about visas maybe 30% of the conversational time. But here recently, cryptocurrencies have been a really hot topic and certain of our clients, certain matters pertaining to US taxes, I am licensed in the US tax court, are of interest to me and one of the more interesting issues is that of capital gains and cryptocurrencies. So it’s rather interesting. You are sort of seeing a situation wherein, these cryptocurrencies say for example bit coin, bit coin is mined and I am not going to get into the whole definition of mining and things like that, there are people who could provide definitions on that far better than me, but as far as, from a capital gains perspective, bit coin mining, the process of mining bit coins requires the exertion of effort. It requires the exertion of resources in order to mine these bit coins and as a result, the gain in capital, so depending on how you look at these instruments, there may be a way to mitigate certain capital gains tax if one can show the amount of money it cost to come into possession of a given bit coin. I mean this is just a hypothetical but what I am trying to say is capital gain with respect to bit coin and with respect to all kinds of cryptocurrencies, especially at the rates at which some of these currencies cryptocurrencies are increasing in at least nominal value could result in some rather serious tax implications for various parties both inside and outside the United States and could result in tax implications in an international context as well. I am not going to get into that specifically but the long story short is, those who are living abroad and have significant assets in cryptocurrencies should seriously be considering retaining, especially those who are of relatively high net worth in these kind of assets, should seriously consider consulting professionals, tax professionals with respect to their liability and with respect to strategies, for not only dealing with disclosure but maybe even, I won’t say mitigating, but trying to be tax efficient when it comes to maintaining ones holdings so as to be in the best position legally with respect to tax compliance, tax enforcement and tax oversight.