Do altcoin trades count as like-kind exchanges? (Deferred capital gains tax)
"In June 2016 the American Institute of CPAs sent a letter to the IRS requesting guidance on this question.   Quoting from section 4 of this letter, which is available at https://www.aicpa.org/advocacy/tax/downloadabledocuments/aicpa-comment-letter-on-notice-2014-21-virtual-currency-6-10-16.pdf If the IRS believes any property transaction rules should apply differently to virtual currency than to other types of property, taxpayers will need additional guidance in order to properly distinguish the rules and regulations. Section 4, Q&A-1 of Notice 2014-21 states that “general tax principles applicable to property transactions apply to transactions using virtual currency,” which is guidance that is generally helpful in determining the tax consequences of most virtual currency transactions. However, if there are particular factors that distinguish one virtual currency as like-kind to another virtual currency for section 1031 purposes, the IRS should clarify these details (e.g., allowing the treatment of virtual currency held for investment or business as like-kind to another virtual currency) in the form of published guidance. Similarly, taxpayers need specific guidance of special rules or statutory interpretations if the IRS determines that the installment method of section 453 is applied differently for virtual currency than for other types of property. So, at the very least, a peer-reviewed committee of CPAs finds like-kind treatment to have possible grounds for allowance.   I would disagree with calling this a ""loophole,"" however (edit: at least from the viewpoint of the taxpayer.)  At a base technological level, a virtual currency-to-virtual currency exchange consists of exchanging knowledge of one sequence of binary digits (private key) for another.  What could be more ""like-kind"" than this?" Just a thought because this is a really good question: Would the buying and selling of blockchain based digital currency,   using other blockchain based digital currencies, be subject to like   kind treatment and exempt from capital gains until exchanged for a   non-blockchain based good or service (or national currency) Suppose someone sells 1 bitcoin to buy 100 monero.  Monero's price and bitcoin's price then change to where the 100 monero are 3 bitcoins.  The person gets their bitcoin back and has 66.67 monero remaining. This scenario could be: Suppose someone sells 1 bitcoin at $1000 to buy 100 monero at $10.  Bitcoin crashes 80% to $200 while monero crashes to only $6 per monero.  $6 times 100 is $600 and if the person gets their bitcoin back (at $200 per bitcoi), they still lost money when measured in US Dollars if they move that bitcoin back to US dollars. In reading the IRS on bitcoin, they only care about the US dollar value of bitcoin or monero and in this example, the US dollar value is less.  The person may have more bitcoins, but they still lost money if they sell. Like-kind of exchanges have a list of requirements. The IRS has not issued formal guidance in the matter. I recommend to be aggressive and claim the exchange, while justifying it with a good analogy to prove good faith (and persuade the IRS official reading it the risk of losing in tax court would be to high). Worst case the IRS will attempt to reject the exchange, at which point you could still pony up to get rid of the problem, interest being the only real risk. For example: Past tax court rulings have stated that collectable gold coins are not like kind to gold bars, and unlike silver coins, but investment grade gold coins are like kind to gold bars. So you could use a justification like this: I hold Bitcoin to be like-kind to Litecoin, because they use the same fundamental technology with just a tweak in the math, as if exchanging different grades of gold bars, which has been approved by tax court ruling #xxxxx. Note that it doesn't matter whether any of this actually makes sense, it just has be reasonable enough for you to believe, and look like it is not worth pursuing to an overworked IRS official glancing at it. I haven't tried this yet, so up to now this is a guess, but it's a good enough guess in my estimation that I will be using it on some rather significant amounts next year.
"How is that possible?? The mutual fund doesn't pay taxes and passes along the tax bill to shareholders via distributions would be the short answer. Your basis likely changed as now you have bought more shares. But I gained absolutely nothing from my dividend, so how is it   taxable? The fund has either realized capital gains, dividends, interest or some other form of income that it has to pass along to shareholders as the fund doesn't pay taxes itself. Did I get screwed the first year because I bought into the fund too   late in the year? Perhaps if you don't notice that your cost basis has changed here so that you'll have lower taxes when you sell your shares.  Is anyone familiar with what causes this kind of situation of   receiving a ""taxable dividend"" that doesn't actually increase the   account balance? Yes, I am rather familiar with this. The point to understand is that the fund doesn't pay taxes itself but passes this along. The shareholders that hold funds in tax-advantaged accounts like 401ks and IRAs still get the distribution but are shielded from paying taxes on those gains at that point at time. Is it because I bought too late in the year?  No, it is because you didn't know the fund would have a distribution of that size that year. Some funds can have negative returns yet still have a capital gains distribution if the fund experiences enough redemptions that the fund had to sell appreciated shares in a security. This is part of the risk in having stock funds in taxable accounts. Or is it because the fund had a negative return that year?  No, it is because you don't understand how mutual funds and taxes work along with what distribution schedule the fund had. Do I wait until after the distribution date this year to buy? I'd likely consider it for taxable accounts yes. However, if you are buying in a tax-advantaged account then there isn't that same issue." 1031 is a section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Taxes on capital gains are not charged on the sale of a property if the money is being used to purchase another property - the payment of tax is deferred until property is sold with no re-investment. Having lived in both places, I have to say you can find a higher income in the US for the same job and can live in a small town versus having to live in a big city in Canada to find decent salaries.  For similar sized cities, the cost of housing is significantly lower in the US than Canada.  That is your biggest factor in cost of living.  If you are thinking of NYC or San Francisco, there are no comparable size cities in Canada and you would probably be better off in Canada.   My tax preparer was amazed at how much I paid in Capital Gains taxes when I left Canada.  Maybe it is different now but I doubt it. The biggest free lunch in the US is a generous capital gains exemption when you sell your primary residence without any lifetime cap or cap on the number of times you can do it.  There are rules on how long you have to live in it before selling. For investment real estate, all expenses are deductible in addition to fictional depreciation so with a mortgage you can have positive cash flow and pay no income tax.  You can keep doing tax deferred exchanges into bigger and bigger rentals.  When you are close to retirement, you can exchange into your ultimate beach home, rent it out a few years, then convert to a primary residence. You can use Norbet's Gambit to convert between USD and CAD either direction. I have never personally done this, but I am planning to convert some CAD to USD soon, so I can invest in USD index funds without paying the typical 2% conversion fee.  You must be okay with waiting a few days for the trades to settle, and okay with the fact that the exchange rate will almost certainly change before you sell the shares in the opposite currency. The spread on DLR.TO is about 0.01% - 0.02%, and you also have brokerage commissions and fees. If you use a discount broker the commissions and fees can be quite low. EG. To transfer $5000 USD to CAD using Questrade, you would deposit the USD into a Questrade account and then purchase ~500 units of DLR.U.TO , since it is an ETF there is no commission on the purchase. Then you request that they journal the shares over to DLR.TO and you sell them in CAD (will have about a $5 fee in CAD, and lose about $1 on the spread) and withdraw. The whole thing will have cost you $6 CAD, in lieu of ~$100 you would pay if you did a straightforward conversion with a 2% exchange fee. The difference in fees scales up as the amount you transfer increases. Someone has posted the chat log from when they requested their shares be journaled from DLR.TO to DLR.U.TO here. It looks like it was quite straightforward. Of course there is a time-cost, and the nuisance of signing up for an maintaining an account with a broker if you don't have one already. You can do it on non discount-brokers, but it will only be worth it to do it with a larger amount of money, since the commissions are larger. Note: If you have enough room to hold the CAD amount in your TFSA and will still have that much room at the end of the calendar year, I recommend doing the exchange in a TFSA account. The taxes are minimal unless the exchange rate changes drastically while your trades are settling (from capital gains or losses while waiting a few days for the trades to settle), but they are annoying to calculate, if you do it often. Warning if you do it in a TFSA be sure not to over contribute. Every time you deposit counts as a contribution and your withdrawals don't count against the limit until the next calendar year. It really depends.  If it is offered as compensation (ie in leiu of, or in addition to salary or cash bonus) then it would be reportable income, and if sold later for a profit then that would be taxable as gains.  If this share is purchased as an investment at current value then it would be treated like other securities most likely gains realized at sale.  Any discount could be considered income but there are some goofy rules surrounding this enacted to prevent tax evasion and some to spur growth.  That is the answer in a nut shell.  It is far more complicated in reality as there are somewhere around 2000 pages of regulations deal with different exceptions and scenerios. Buying a put is hedging.  You won't lose as much if the market goes down, but you'll still lose capital: lower value of your long positions. Buying an ultrashort like QID is safer than shorting a stock because you don't have the unlimited losses you could have when you short a stock.  It is volatile.  It's not a whole lot different than buying a put; it uses futures and swaps to give the opposing behavior to the underlying index.  Some places indicate that the tax consequences could be severe.  It is also a hedge if you don't sell your long positions.  QID opposes the NASDAQ 100 which is tech-heavy so bear (!) that in mind. Selling your long positions gets you out of equities completely.  You'll be responsible for taxes on capital gains.  It gets your money off of the table, as opposed to playing side bets or buying insurance.  (Sorry for the gambling analogy but that's a bit how I feel with stock indices now :) ). I don't see a tag for United States, so I'm having to assume this is US taxes.  It doesn't matter what app you use, IRS trades are all calculated the same. First, you have to report each trade on a 8949 and from that the totals go into a schedule D.  Short term trades are stocks that you've kept exactly one year or less, long term trades are for 1 year + 1 day or more.  Trades where you sold a stock for a loss, then bought that stock back again under 30 days don't get to count as a loss.  This only affects realized capital gains and losses, you don't count fees. First, take all of your short term gains then offset them by all of your short term losses.  Do the same for long term gains and losses.  Short and long term gains are taxed at different rates.  You can deduct losses from short term to your long term and vice versa.  Then you can deduct the total losses up to $3000 (household, $1500 married, filing separately) per year on your regular income taxes or other dividend taxes.  If you have over $3000 in losses, then you need to carry that over to subsequent years. Edited per Dave's comments: thanks Dave If you don't like it create your own exchange with those rules :) Seriously though, It's not the government's job to set a tax, it's the exchange's. If there was a large enough market for such an exchange it would already exist.