tax implications of block rewards

Chris Muller

Chris Muller

New member
I was just reading about the tax implications of block rewards at:

https://dashpay.atlassian.net/wiki/...theTaxTreatmentoftheMasternodeOperators’DASH?

It says block rewards are considered "income" based on the market value on the day it was received. This makes no sense to me in terms of how it affects its tax liability as a capital asset which could subsequently grow or shrink in value. If I keep the mined Dash and it soars after it was mined, is there any capital gains tax liability on top of that and, if so, what is the cost-basis?

Likewise, what if it plunges afterward? I will have paid tax on "income" much higher than I actually have.

It seems insane to have to keep track of which coins have income tax and which don't. The sensible thing would be to simply treat them ALL as "shares" of a capital asset, with the cost-basis of the mined shares being the cost of doing the mining, just as the cost of the purchased ones is the purcase price. This mix of counting some shares as as income, but some not, is very confusing!
 
Chris Muller said:
I was just reading about the tax implications of block rewards at:

https://dashpay.atlassian.net/wiki/...theTaxTreatmentoftheMasternodeOperators’DASH?

It says block rewards are considered "income" based on the market value on the day it was received. This makes no sense to me in terms of how it affects its tax liability as a capital asset which could subsequently grow or shrink in value. If I keep the mined Dash and it soars after it was mined, is there any capital gains tax liability on top of that and, if so, what is the cost-basis?

Likewise, what if it plunges afterward? I will have paid tax on "income" much higher than I actually have.

It seems insane to have to keep track of which coins have income tax and which don't. The sensible thing would be to simply treat them ALL as "shares" of a capital asset, with the cost-basis of the mined shares being the cost of doing the mining, just as the cost of the purchased ones is the purcase price. This mix of counting some shares as as income, but some not, is very confusing!
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How can they prove you didn't lose all your coins when you tried transferring them to another wallet?
 
Simple, if you write them off as a loss then you must have lost them.
 
Chris Muller said:
I was just reading about the tax implications of block rewards at:

https://dashpay.atlassian.net/wiki/...theTaxTreatmentoftheMasternodeOperators’DASH?

It says block rewards are considered "income" based on the market value on the day it was received. This makes no sense to me in terms of how it affects its tax liability as a capital asset which could subsequently grow or shrink in value. If I keep the mined Dash and it soars after it was mined, is there any capital gains tax liability on top of that and, if so, what is the cost-basis?

Likewise, what if it plunges afterward? I will have paid tax on "income" much higher than I actually have.

It seems insane to have to keep track of which coins have income tax and which don't. The sensible thing would be to simply treat them ALL as "shares" of a capital asset, with the cost-basis of the mined shares being the cost of doing the mining, just as the cost of the purchased ones is the purcase price. This mix of counting some shares as as income, but some not, is very confusing!
Click to expand...

You pay the income tax based on market value on the day it was received. If the value goes down and you sell the coins at a lower value, then that is a capital loss which you can use to offset other capital gains.
 
So if I trade my MN earnings for BTC, then USD, does that mean I'm effectively taxed three times, once as income when they're "mined" and twice as capital gains when they're sold for BTC and USD?
 
raze said:
So if I trade my MN earnings for BTC, then USD, does that mean I'm effectively taxed three times, once as income when they're "mined" and twice as capital gains when they're sold for BTC and USD?
Click to expand...

Earn $1000 income from earnings = $1000 of taxable income
Sell the coins for BTC at $1200 = $200 taxable capital gain
If you sell the BTC for fiat right away for the same price, then this transaction will have close to $0 capital gain. If you hold on to the BTC and the BTC goes up or down before you sell, then it would be an additional cap gain/loss.

Easier of course if you can manage to sell dash directly for fiat which will be easier to do soon hopefully!
 
raze said:
So if I trade my MN earnings for BTC, then USD, does that mean I'm effectively taxed three times, once as income when they're "mined" and twice as capital gains when they're sold for BTC and USD?
Click to expand...
Yup. The IRS fraudulently misrepresents spending savings as income under a misuse of the concept of Capital Gains, just because it changes form.
 
raze said:
So if I trade my MN earnings for BTC, then USD, does that mean I'm effectively taxed three times, once as income when they're "mined" and twice as capital gains when they're sold for BTC and USD?
Click to expand...

Zzzz just move to another country and send them to where they belong.
 
Anonymous Dude said:
Zzzz just move to another country and send them to where they belong.
Click to expand...
I do think US citizens (hodling DASH now) will need to consider one day renouncing their citizenship. The onerous/adversarial nature of the tax code combined with the reward available for hodling DASH longterm just seems to point that direction.
 
This is from TurboTax .Com

Length of ownership matters
If you sell an asset after owning it for more than a year, any gain you have is a "long-term" capital gain. If you sell an asset you've owned for a year or less, though, it's a "short-term" capital gain. And the tax bite from short-term gains is significantly larger than that from long-term gains.

"You pay a higher capital gains tax rate on investments you've held for less than a year, often 10 to 20 percent more, and sometimes even higher," says Matt Becker, a financial planner and founder of Mom and Dad Money, LLC. That difference in tax treatment, Becker says, is one of the advantages a "buy-and-hold" investment strategy has over a strategy that involves frequent buying and selling, as in day trading.

Also, Becker notes that people in the lowest tax brackets usually don't have to pay any tax on long-term capital gains. The difference between short and long term, then, can literally be the difference between taxes and no taxes.

Hope this helps a bit, thought it was rather relevant.
 
Also, if you say you are mining dash and selling it as a business then capital gains tax shouldn't even apply as it would be income not capital gains.
 
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