[redspectre]

The problem is, USD is the only legal tender. When I sell Intel stock, that where I made profit in USD. I pay tax on that. But if I trade BTC for DOGE, I haven't made any money. All I have done is swap tokens. And just because someone would pay X dollars for tokens, doesn't mean I made any money.

I mean where does it end? If I tell you I'll pay you 10000 dollars for the pocket lint in your pocket, did you just make a gain of 10k? Do you now owe the IRS 10k? If you haven't actually made any legal tender, how can you be taxed on a trade at all? The value of something is completely relative, speculative, and ever-changing.

[davidgh]

Profit or gain may be measured in USD, but a transaction does not need to include USD to generate a taxable gain.

The IRS has all sorts of rules involving barters, meaning trading one asset for another without USD being involved in the transaction at all. [1]

Say you buy a car for $10k, let it sit in your garage for 30 years and it now becomes a classic vintage worth $30k. If you go and trade that car for a new motorcycle worth $30k, the IRS requires you to record your $20k gain on the car when you make the trade for the motorcycle.

Where does it end? When you’ve paid the IRS the tax you owe, as per the law.

Regarding the pocket lint, if you tell me you’ll pay $10k for mine, I have no gain. When the sale happens, I recognize the $10k gain and pay the tax. This seems to be a pretty typical transaction for pocket lint or a truckload of butter.

1. https://www.irs.gov/taxtopics/tc420

[dmoy]

Or actually if it was literally pocket lint, y'all could probably get away with having the payer file form 709 and the seller doing nothing, and nobody would owe any tax.

[aggronn]

Lets say you make a 50% gain on btc. You have made money, but haven't realized the gain. You pay taxes when you realize a gain. You're argument is based on semantics, and not convincing.

At the end of the day, whether you traded BTC for DOGE or for IKEA couches, you were able to buy more of the second thing after you traded your BTC. You sold it. You realized your 50% gain.

Its farcicle to argue that by trading BTC for DOGE you're not realizing your gain. You're no longer tied to BTC, and your purchasing power increased at the time of the trade. Your wealth converted to USD went up. You sold your asset. You owe taxes.

> If I tell you I'll pay you 10000 dollars for the pocket lint in your pocket, did you just make a gain of 10k?

Yes. this is exactly how it works. you made a $10k profit. Its not a capital gain, but you made a profit and owe taxes. You dont owe them 10k, but you owe them part of it. If you then go and invest that 10k on physical capital in order to make more lint, then you can deduct that again as a business expense because you've essentially lost 10k on an investment (assuming 100% depreciation).

> The value of something is completely relative, speculative, and ever-changing.

This is why the thing that matters is when you realize your gain by selling the asset. It doesn't matter what you sold it for, you either realized a gain or a loss and that has tax implications.

[amorphid]

Say you're way, way up in your Bitcoin investment, and you yse part of the gains to buy a $10 toaster with the equivalent amount of Bitcoin (let's assume no tax in the toaster itself).

Do you realize a $10/gain, and owe money on that? If yes, let's say you return the toaster, and your Bitcoin is refunded. Do you still pay taxes?

[aggronn]

Yes. The point is that when you "trade" BTC for something, you're selling it. We differentiate between a sale and a trade colloquially based on whether currency is involved, but currency isn't that special--its just another good. You realize your gain when you sell your thing in exchange for some other thing.

Moreover, if you bought the toaster, and sold it for $20 in BTC, you would have profited $10 and would need to pay taxes on it.

[jabgrabdthrow]

Your comment reads like an insight from an authoritative and trustworthy source, but you have no idea what you’re talking about and your intuitions are totally wrong.

[dmoy]

If lint is something people are commonly buying, selling, speculating on, sure. Otherwise no.