Student Cryptocurrency Portfolio Attracts Tax LiabilityNovember 5, 2018
A student cryptocurrency trader, a Californian, who started off with a $5,000 investment in cryptocurrency portfolio is now valued at $1 million. This, in turn, has attracted tax liability for $400,000.
The name of the student is maintained anonymously. The student is claimed to have started off his trading in May 2018 by signing up at Coinbase. The student further included a range of alt-coins to his portfolio. The value of his portfolio increased by ten times.
During December 2017, when the cryptocurrency industry touched its peak, the industry attracted a lot of investors, and the value of Bitcoin reached $20,000. During that time the value of the portfolio was more than $800,000, which is not bad growth for a $5,000 in a period of 6 months.
The period of 2017, when the cryptocurrency industry was at its peak, the student did not cash out his investment. He continued with the belief that the markets will continue to improve and that the price would further increase. When the student was close to cashing out, the value breached the $1 million mark, but again he decided to allow his investments to run the trend race.
It was a loss of 90% when the market was moving downwards during the bearish trend in 2018, and the portfolio value went down.
The now total portfolio value is at $125,000. While several argue that this is a fairly good return for a $5,000 investment, the student has to face tax liabilities in consequence of the Bill that was passed in the US taxation laws for the profits made from cryptocurrency. The 1099-K bill requires a $400,000 tax payment.
While the student has only traded from crypto-to-crypto and has not made any fiat conversions, he is still expected to pay the taxes.
The student news was first made in a Reddit post, whereby it states that the student has been looking for tax advice from his peers. The student is now working as a Retail Associate for Barnes and Noble, for a payment of $12/hour. It is only prudent for the student to consult with a seasoned tax agent who is qualified to help in this matter.
When it comes to taxation for the income generated in the cryptocurrency industry, it is a pretty tricky area. Particularly due to the boundary less nature of the transactions. The US is very clear about the taxation, and they look at the investment at par with stocks, shares, gold and real estate.
The US Taxation states that every transaction is taxable by the appropriate value at that point in time. When it comes to discussing the liabilities, the costs are assessed for over the course of one year period consisting of the profits and losses with the associated costs.
The accounting, in this case, is not easy. Where the price fluctuates by the second and deciding on the profit or loss of each and every trade is a herculean task.
A recent poll revealed that 52% of the respondents are not interested in paying taxes.