Capital Gains tax-Crypto?

What's to stop one availing of the annual gift allowance of €3k?

Scenario:

Gift €3k equivalent of btc to a friend's btc wallet, they transfer back €3k via Sepa Transfer

Bob24 wrote: »

When you are transferring those BTCs to your friends wallet you are disposing of them and CGT is due.

CGT wouldn’t be due.
Work out how much CGT and you’ll see why.


As for the strategy. It’s doesn’t work. Well, not really. It’s removes your CGT liability. But it doesn’t just disappear. It’s just passes to your friend. Who would now owe more than you did.

Mellor wrote: »

CGT wouldn’t be due.
Work out how much CGT and you’ll see why.

CGT is due when gifting assets.

As long as there are any capital gains on that amount and the yearly exemption is exceeded, CGT will definitely be due.

For example lets say the person has already depleted their CGT exemption with other transactions and those 3000 euros worth of Bitcoin were originally acquired for 1500 euros. Then there is 1500 euros worth of capital gains, hence a CGT liability of 500 euros.

Bob24 wrote: »

As long as there are any capital gains on that amount and the yearly exemption is exceeded, CGT will definitely be due.

For example lets say the person has already depleted their CGT exemption with other transactions and those 3000 euros worth of Bitcoin were originally acquired for 1500 euros. Then there is 1500 euros worth of capital gains, hence a CGT liability of 500 euros.

Except that they haven’t made a gain of 1500.
They made a loss of 1500. CGT is owed on gains.

Say he sold it for 1500. His liability would be zero.


And yes, I’m aware that there’s an argument that it should be taxed on market value. And certain asserts are. I have not seen it stated by revenue crypto that market value applies to crypto

Bob24 wrote: »

No, in the example I gave there definitely is a gain of 1500 euros.

No there isn’t.
They bought it for 1500. And gave it away for free.
They haven’t made a gain.
You are arguing that they should taxed on the value, which I refer to aboved.
Which isn’t an actual gain.

When you are gifting an asset the disposal value is the fair market value at the time of the gift (for obvious reasons, as otherwise everyone would use this to evade CGT as all you would have to do is gift the asset to someone else and have them gift it back to you which would reset your acquisition cost).

It wouldn’t reset your acquisition cost though.
Acquiring an asset for free would increase the gain when you sell.
As I said above it doesn’t work. It just moves the liability around.

I’m well aware that they’re are no special rules for crypto. But a lot of the specific areas are in clarified .
For example we all agree FIFO is the correct assessment. But revenue doesn’t actually state that in black and white.

Mellor wrote: »

It wouldn’t reset your acquisition cost though.
Acquiring an asset for free would increase the gain when you sell.
As I said above it doesn’t work. It just moves the liability around.

The same legislation I referred to above clearly states that when an asset is gifted to you, your acquisition cost is the market value on the day of the gift ...

547.—(1) Subject to the Capital Gains Tax Acts, a person's acquisition of an asset shall for the purposes of those Acts be deemed to be for a consideration equal to the market value of the asset where—

(a) the person acquires the asset otherwise than by means of a bargain made at arm's length (including in particular where the person acquires it by means of a gift),

I have to say I find this thread very amusing even though the cycle repeats itself so often

1. I'm going to do this, that way I don't have to pay tax on my gains
2. I'm afraid that is still a taxable event for CGT, not paying the tax would be evasion.
3. No you're wrong. So everyone is in agreement, I should do this.
4. Well actually here is the law in black and white from the Revenue Commissioners
5. back to step 1

So it’s only cgt on it or is there prsi
So selling bitcoin is like selling a house you pay 33 percent on the gain

timeToLive wrote: »

is tax loss harvesting a thing in Ireland? My coin tracking app says I can do it but not sure if it applies here

Yup.

Rob2D wrote: »

Do you offset losses this year or carry them over to next??

You can carry them forward, no time limit. The one pleasant surprise I learned.

Rob2D wrote: »

Oh wow, no limit? That's kinda cool.

I guess they figure capital gains will be used to reinvest in good productive work which gives them more tax going forward so it's best to help alleviate any problem somebody might have with accruing capital.

Little do they know I just want the capital and scoff at investing in anything that isn't a sh!tcoin.

If you sell an asset to realise (and bank) a loss, is there a time restriction on how quickly you can re-aquire the sold/similar asset?

Jackben75 wrote: »

High level Scenario:

99k liquidated
Keep 66k 66% etc
Reinvest 33k 33%

Can you then deduct/write off (for the moment) the reinvestment against the 33k owed in cgt?

No, the tax is already due (if applicable) on the original sale.

Umaro wrote: »

I have to say I find this thread very amusing even though the cycle repeats itself so often

1. I'm going to do this, that way I don't have to pay tax on my gains
2. I'm afraid that is still a taxable event for CGT, not paying the tax would be evasion.
3. No you're wrong. So everyone is in agreement, I should do this.
4. Well actually here is the law in black and white from the Revenue Commissioners
5. back to step 1

Tax Avoidance and Tax evasion are not the same thing.
You'll see from my posts in this thread and the other thread. that I've actively made the point that CGT is owed on trades between crypto and not just when claimed as Fiat. I
But despite your claims, the laws are not actually black and white on all aspects of crypto. Crypto is a novel type of asset. Many of the activities that can be undertaken with crypto could not happen previously with traditional assets. As such, there are in fact grey areas.

1. You buy some coins, immediately transfer them to your wallet, and immediately send to a friend. I think we can agree that no CGT is due?
2. You repeat the above. The friend holds the coins for 12 months, then the friend transfers back the coins. When is CGT owed and by who?
3. You buy some coins, immediately transfer them to your to a wallet, and immediately delegate them to a pool. The coins are not held by you. After 12 months, the pool transfers back your coins. When is CGT owed and by who?
4. You use a trading website. You upload money to an account. You "buy" 1 BTC for X. THe price of the coing rises to 2X and you "sell".
   Buy and sell are in commas as you never really bought or sold anything. You never owned coin, you never possesed the coin. When is CGT owed and by who?
5. You have a Paddy Power account. You bet the price of coin will go up 2X within the next 12 months. It does and you get paidout 200% of your stake.
   You never owned coin, you never possesed the coin. When is CGT owed and by who?

These are just a few random sitituats that are somewhat legitimate.
Obvious there's a number of ways you send crypto to another wallet for the purpuse of hising it and evading tax.

Mellor wrote: »

You buy some coins, immediately transfer them to your wallet, and immediately send to a friend. I think we can agree that no CGT is due?

You’ve got an acquisition (when you buy the coins) and probably a disposal (when you send them to your friend, unless “send” simply means “give to your friend to keep for you, but they’re still your coins”). But assuming you buy at market value, the gift to your friend is a disposal at deemed market value and, as it happens “immediately” after the purchase presumably the market value hasn’t changed. So no gain, no loss — therefore no CGT.

Mellor wrote: »

[*]You repeat the above. The friend holds the coins for 12 months, then the friend transfers back the coins. When is CGT owed and by who?

Your friend acquired the coins at deemed market value on the date you gifted them to him. When he gifts them to you, he is disposing of them at deemed market value on the date he gifts them to you. If that’s higher, there’s a chargeable gain, and your friend has a CGT liablity calculated in the ordinary way.

Mellor wrote: »

You buy some coins, immediately transfer them to your to a wallet, and immediately delegate them to a pool. The coins are not held by you. After 12 months, the pool transfers back your coins. When is CGT owed and by who?

Depends on what is meant by “delegate them to a pool”, but as I understand it pool members all have an undivided interest in the pool assets. So, when you when you buy the coins and immediately transfer them, you’ve got an acquisition (when you buy the coins) followed by a disposal (when you dispose of the coins, receiving in return your rights in the pool). As one transaction follows immediately on the other, there’ll be no loss, no gain, so you’ll have no CGT liability at that point.

A year later, you dispose of your rights in the pool, receiving in return equivalent coins. If the coins have risen in value over that year, you’re rights in the pool will have correspondingly risen in value, so you’ll realise a gain on disposing of your rights in the pool. CGT is calculated and payable in the usual way. (Or, of course, if the coins have fallen in value, you have a loss.)

Mellor wrote: »

You use a trading website. You upload money to an account. You "buy" 1 BTC for X. THe price of the coin rises to 2X and you "sell".
Buy and sell are in commas as you never really bought or sold anything. You never owned coin, you never possessed the coin. When is CGT owed and by who?

It doesn’t matter that, strictly speaking, you never bought or sold a coin; you bought and sold something of value - your rights as against the account operator. Your CGT liability is calculated and payable in the usual way.

Mellor wrote: »

You have a Paddy Power account. You bet the price of coin will go up 2X within the next 12 months. It does and you get paidout 200% of your stake.
You never owned coin, you never possessed the coin. When is CGT owed and by who?

What you’ve got here is a contract for differences - a contract for a payment depending on the movement of the price of a specified asset, without either party to the contract necessarily ever acquiring, holding or disposing of the asset. If you’re carrying on a trade in financial assets, your profits from a contract for differences are taxable as income; otherwise, CGT applies and is calculated in the usual way. The acquisition cost of the contract is your stake; the disposal proceeds are your payout; the gain is the difference between the two.

What unites the answers to all these questions is one simple principle; it makes no difference at all that these transactions relate in some way to cryptocurrencies. There are no special rules for crypto; dealings involving crypto have the same tax consequences as dealings in other assets. So if you want to know the tax consequences of a particular dealing involving crypto, just ask yourself what the tax consequences of an analogous dealing involving any other kind of asset would be. And there’s your answer.

Crypto fans will sometimes try and persuade you that there are some transactions involving crypto which have no analogy with transactions involving any other kind of asset and that are beyond the rules that underly CGT. But I've yet to see a plausible example of such a transaction.