 All right, everybody. So with the tax season coming up, I have to bring somebody in here to give you guys the best information you possibly can, because quite honestly, taxes scare the living hell out of me. So David Kemmer from CoinLedger, founder and CEO, welcome to the show for like the umpteenth time. I appreciate it. It's always good to be back. You know, thanks for having me back, Rob. Yeah, absolutely. So everybody, if you don't know, I've been using this service for this will be our third year straight. April 15th is coming up rapidly here in the States, and it is the ability for you to pull in all your data to do all your taxes that you need to do. And you guys have over half a million crypto investors. I'm pretty sure you have a lot more of that now. You can easily import historical data. There's an API integration where it's read only no rights. So like they just can pull the information and that's about it. Export and file, you guys have a looks like an integration with TurboTax. I don't use TurboTax. I have my own CPA, but then also international tax reporting, which is pretty cool. So any new new things going on with the platform before we get into the questions, David? Yeah, the big one, which we've worked with you, a good amount on is starting to really roll out our portfolio tracking product, which, you know, if anyone is familiar, CoinLedger has been mostly a tax reporting first platform for really the past four and a half, five years. And now we're bringing more real time, completely free portfolio tracking. So, you know, we're already bringing in a lot of your transaction history. And now we're giving you dashboards to understand your holdings across all of your wallets, you know, how long you've been holding those assets, tax loss, harvesting opportunities. And that's going to launch to a more public beta here in the next week. And so if anyone wants access to that, just ping me and we can get you right in actually right now. Perfect. So there's going to be a link in the description and we can go from there. And you guys can sign up for the portfolio tracker, which is again, is going to be 100% free, which I think is a real winner. If you're going to like, it'd be great if you can like say, what's my profit and loss? If I sell right now, what's going to happen? And then also all all the things there and then I can kind of roll that into with my CPA or generate reports and then bing bing boom. I'm done because time is money. Exactly. It's just like a great top of funnel marketing thing for us because this is a free product. You can build trust with people. They can interact with our brand for free, track their stuff. Once tax season rolls around, if they want to download their tax reports from us, you know, they'll pay 50 bucks or whatever to get those. And so free portfolio tracking monetize it with tax reporting at the end of the year is, you know, we've seen is a good formula. Yeah, it's pretty easy. And then like as a reminder, everybody, if you've got like five or 10 transactions, this really isn't for you. I'll be honest with you. You can probably figure this out. But if you're kind of like us and you've done some degeny type stuff, this might be something to look into. So again, it goes from, of course, free and you can generate the reports to 50 bucks to up to $200, which again, I got to tell you it's just time is money. And I just would rather do it this way. So, David, let's get into it. And let's talk about first things first, which is I put this in X and I asked the question like, who's got questions for coin legend? We're going to go over all those questions. But can we back up for a second and just talk about the basics? What is an actual taxable event as determined by tax services or IRS? Yes. So it's pretty straightforward. You know, there's a lot of tax language that makes it sound complicated, but it really is straightforward. So crypto is a form of property just like stocks. I'm going to make that comparison because they're treated pretty much identically in that if I purchased Bitcoin for $100 and it appreciates to like $500 over the course of some period of time. And I sell that same Bitcoin. I realize a $400 capital gain, which is income on my tax return. And the same works with stocks, right? If you buy a stock for some amount of money, you sell it for more, that's income. Now, one caveat to crypto is often in addition to trading crypto, people earn cryptocurrencies, whether that's staking, maybe you're getting paid in crypto from your job, maybe you're mining crypto. That's not capital gains. That's just ordinary income. If I received one ETH from staking, I'm receiving ordinary income for the fair market value of that Ethereum when it hit my wallet. Right. It was $2,000. And that's really the basics. It's property. If you realized income by trading or by earning, that's a form of income. That's taxable income in the United States. What about in most countries? Yeah, in most countries. And it's the same thing also if I want to pay for services, right? So if I bought Bitcoin for a dollar, it goes with $100,000. And someone goes, hey, pay me $100,000 and I'll wash your house or whatever, wash your car. All right, here he goes with Bitcoin. I am going to have to pay not only that guy, but there's a taxable event, correct? Exactly. And to your original question, what is a taxable event? It's when you dispose of property. In this case, it's when you dispose of crypto. So whether that's disposing it is trading it for another coin, or as you mentioned, spending it on goods or services, you are disposing of property. And at that disposal point, at that time, that's when you realize that capital gain or capital loss, but that taxable event. Gotcha. And so again, this isn't about moving between wallets. You can move different cryptos between wallets as much as you possibly want to, but that's not a taxable venture of disposing of it because you still have the controls just to keep that current. Okay, great. So that's the basics of crypto. Let's go into the questions. This is the one that everybody's asking me. And I even had this question, which was this. Can we now claim the Voyager Celsius FTX or any hacked wallets that we have as far as last year? Because this has been an ongoing process. But right now, Voyager and Celsius have gotten out of the bankruptcy. So how does this work, Dave? Yes. So I can speak very intimately to Voyager. Obviously, we have worked to bring automated tax reporting to their users for a number of years. I'm not as intimately familiar with the details of how Celsius went about their disposed dispersion process of bankruptcy. But let me just tackle it from Voyager at a high level and you can jump in with questions that you have. So in July of 2022 or maybe June, Voyager officially filed for chapter 11 bankruptcy and all users lost access to move or do anything with crypto on their platform is locked up. Now, about a year later, they started their in kind distribution process, which is they're starting to give people assets back, but of course at a much lesser amount than they had. So it was about 35% were made available to customers. So the details on the Voyager side, they were either supported or non-supported assets in the Voyager bankruptcy process, which essentially just meant if it was a supported asset, Voyager had the ability to allow you to transfer it off of the platform once the asset was available to you again. If it was a not supported asset, that means they just didn't have the blockchain rails to allow you to move it off the platform. And so they converted you to the equivalent amount of USDC. And so when you got, let's say I had one Bitcoin locked up in Voyager, it was locked up for about a year. You'll see that within Coinledger or Voyager, however you view your transaction history, you'll see a withdrawal of that one Bitcoin and right away after a deposit of 0.357 roughly Bitcoin. And that was the dispersion. That right there is not a taxable event in Coinledger. All that's happening is the cost basis of your one Bitcoin, let's say it was $10,000, is moving to the now 0.357 Bitcoin. And so now your cost basis is artificially high for a smaller amount of asset, which means when you go to dispose of that Bitcoin, you will likely incur a very large taxable loss depending on what your basis was. But keep in mind, if it was a supported asset, you got access to that 0.357 Bitcoin in Voyager. And if you chose to take that Bitcoin off to your cold storage wallet and hold it or bring it to Coinbase and you haven't disposed of it, you have not incurred a taxable event, which I talked about, right? We haven't disposed of it yet. So you can't yet claim that loss. If you want to claim the big loss that essentially you lost out on 0.7 Bitcoin in this example from the Voyager Bank, you'd have to trade out of that asset. That's triggering the taxable event, and then you can write off that loss on your taxes. Now, that's the supported asset side. On the non-supported asset, let's come up with just a fake coin, XYZ coin, let's say I held one of those in Voyager. The same thing happened is I got withdrawn one XYZ coin and you'll see an immediate deposit of 0.357 XYZ coin in my Voyager wallet and immediately a conversion to USDC. So let's say it was worth $100, that's now the USDC I have sitting in my Voyager account. That, because they disposed of that asset for you, you did incur a taxable event. So let's say you bought that XYZ coin for $1,000, they converted you out to USDC for $100. Now you have in this tax year, or when that transaction happened, a $900 capital loss that can be filed on your taxes. And that's at a high level how it all works. Of course, any assets that were left in Voyager during the allowed a 30-day window for any of these transferable assets for customers to move them off the platform. If you did not move your assets, you were automatically liquidated to the USDC value of all those tokens about in August 2023, September 2023. And then you were mailed a USD check to your address on file with that amount. And so those are the mechanics of the dispersion process. And that's how Coinledger is handling it from a tax perspective. You don't have to do any of this, you just click a button and all that gets handled in Coinledger. But that's how it's being handled. And we have a bunch of documentation if people want to read up on exactly what's going on behind the scenes. Perfect. So let's just say a great response, great answer. Let's just say that we know that they're trying to claw back some different amounts that they can get back from either 3AC or FTX. So let's just say in the future that they're actually able to claw that back. Now what happens to those individuals such as myself, who all of a sudden I got another 20% of my portfolio back and I'm like, oh, this is pretty good. At that point, same thing happens. Or can we just write at this point, write everything off and go, I don't think it's ever going to come back. So it's really up to the user because let's go back to my Bitcoin case. Let's say I got 0.357 Bitcoin back from Voyager and let's say I brought it to my ledger wallet just to hold, but I'm not selling. Again, I haven't incurred a taxable event. So if at some point I get more Bitcoin back from Voyager, that would just add to that same position. And remember my basis of spending, we said $10,000 is still true in that amount of Bitcoin. So if I add another 0.1 Bitcoin. Now I have 0.475 Bitcoin, but my basis still remains the original basis of $10,000 of what I had there. So if you want to wipe the slate clean right now and realize what are likely capital losses because you lost 0.7 about worth of value in the Voyager bankruptcy, you need to dispose and incur taxable events, dispose of the assets. Of course, you can buy them back if you still want to hold them. Right. If you wipe the slate clean, you're kind of closing your positions. If at some point in the future you do get more income back from Voyager from the bankruptcy process, whether that's crypto assets or USD, that is a form of taxable income because keep in mind you already wiped the slate clean. You already realized all of your losses. And so by getting income in the future, that is just a form of income. Gotcha. Yeah. Well, how about this? Is there, and this would come back to the question about the hacked wallets because I remember this was a couple of years ago, maybe last year, where there was only so much you could claim as a loss because people were like, hey, I'm in a boating accident and there goes my ledger. I just lost $10 million. What was me? Can you still like, is it like the maximum amount which is very small every year or have they increased that? Or how does that work? So a hacked wallets theft is actually close to impossible to write off from a losses perspective. Those kind of, that ability got closed in the tax cuts and jobs act under the Trump administration. And it's much, much more difficult to claim a capital loss logically. You could claim anything you want. The US is a self identifying system. True. The law has closed a lot of the ability to write off meaning deduct from your income on hacked theft when it comes to property. Okay. So banking on that, is there a limit to what we just talked about with say FTX Celsius and Voyager? Can we say like, if we had it, I don't know, 20,000, 50,000, 200,000, we could all just say that's just a total write off. Like just give it using your example. Yeah. So the FTX and whatnot, those cases are different because they did file for bankruptcy. The ones that I'm more referring to in my prior dialogue right there is if you yourself got your crypto stolen from your ledger wallet or you somehow got hacked. On FTX, it's going to follow a similar like bankruptcy process as Voyager and Celsius. And those are going to be write offs because you had some amount of asset, you know, by the fault of the company. They're going through bankruptcy. You got back less and then you dispose of it and you're going to incur capital losses. Gosh, there's nuance to this. I'm simplifying. So if you have very specific use cases problems, of course, I'd always recommend talk to someone who's well versed in crypto taxes. You know, we have a bunch of folks on a directory on coin ledger that you can go and reach out to. They're very knowledgeable. Everyone's situation can be a little bit unique. Yeah. And then just to piggyback on that, if you're on coin ledger.io links in the description, but if you come down here, there's a link that says find a crypto tax expert. If you click on that, you've got a whole plethora of different people you guys can talk to if you have any questions about that. Now, it's going to be, of course, they're going to charge for those services. But I got to tell you, those services are worth their weight in gold. And I cannot stress that enough. And then also before we move on to the next question, to really dive deep into that question of can I write off lost all and scam crypto my taxes. There's a great article written on coin ledger by Miles Brooks, who has his master's of tax and he's the registered CPA director of tax tragedy at coin ledger. I will link that also in the description so you guys can take a look and go from there. So yeah, that article is going to cover this in detail. So that will be helpful for anyone who's in those situations. Perfect. So we've covered the bulk of it. Now let's get into some questions that I asked just this morning and people live to ask questions about taxes, even though people hate them. So let's just go through this. Why does money do it says this? Not a question. I think you should have them explain why it's so important to take responsibility for your taxes and pay them accordingly. I'm just going to say like this, I don't like to pay taxes, but I don't like jail even more. So that's my response. David, anything to add on this one? Yeah, I would echo a similar sentiment. I also am a fan of minimizing taxes. But you know, if you just choose not to pay taxes, you're incurring a large amount of risk. And sure, maybe you get away with it. No one ever notices, but you're incurring a lot of risk and the penalty for tax evasion is steep. So I personally don't want to live with that risk. And so I think it's important to do so. Yes, exactly. Talk to Wesley Snipes and Al Capone. So we'll go from there. Muffin asks a question. I had a presale where the token staking rewards were harvestable and manageable between Walton 2023. But launch on Uniswap beginning of January 2024, which is the first time I had to actually sell. Is this income for 2023 when I received these staking rewards, even though they weren't available to sell? Or would it be 2024? We'll be into next tax season. Yes. So this is good. You know, it's a little bit more advanced case of what's going on here. And I'll break it down from how I interpret this question. So actually, Rob, I don't know if you can pull up the question again. Yeah, got it. Here we go. So you had a presale for this token. You spent some amount of, let's just say, Ethereum to acquire this new token. That's often what happens. Number one, you're incurring a taxable event of your Ethereum because you just dispose of Ethereum for another token. And so, you know, you're either going to realize a gain or a loss depending on how that amount of Ethereum has appreciated or gone down since you originally acquired it. Second, now you hold this token. Let's call it XYZ coin. And it sounds like it's giving you staking rewards. Right. So those staking rewards, as mentioned by this user, she says, or he says they're movable, meaning they have, as the tax world calls them, dominion and control over those staking rewards. It's clear in tax law that if you have dominion and control, you're realizing income at the fair market value of those staking rewards when they're hitting your wallet. Now, the nuance here is, well, what if this coin really doesn't yet have an established market, which is probably likely, right? If it's kind of this early token, those staking rewards, yes, their income at the fair market value of the token as while you're receiving them in 2023. But it's very likely you're realizing a very small amount of income. I would let the user know, you know, you have to go find the fair market value for those tokens as they were hitting your wallet and that's how much income you're receiving. Obviously, this is what platforms like coin let you do automatically for you. Then when you go and swap it on Uniswap, let's say that whole amount, let's say you've been drip staking rewards for six months and now you just lump some of that and you trade it for something else in Uniswap. Now you're incurring another taxable event and you're either realizing a capital gain or a capital loss depending on how the value of your tokens have appreciated. And the cost basis in these tokens is the amount you've incurred in income. So let's say I receive 100 staking drips from buying this token and each drip was worth a penny. 2023, I would realize what $1 of ordinary income, right? And then when I dispose of it, let's say I dispose of all 100 drips of those that token for $1,000. In 2024, I am realizing $999 of capital gain in that scenario. Gotcha. Very nuanced question, but a good question. So what we know from pretty good. How about this one? Making donations to nonprofits through crypto versus through fiat. Because here in Puerto Rico, we have to do donations to non-profit, which is great. And then some I do in crypto and some I do in fiat. So how does this work? Yeah. So because crypto is property, there's a few more nuanced rules. But the good thing is you still get the benefit of a tax write-off when you're donating to 501C3 organization. We also have a blog post that discusses the ins and outs. But at a high level, if you're donating crypto that you've held for more than 12 months, similar to the long-term capital gains bracket, you get to write off the whole fair market value of that donation. If you are donating crypto that you've only held for less than 12 months, you're only going to be writing off your cost basis in that asset. So I would refer people to this blog post. It goes into even more depth. But the benefit is still you get a tax write-off for donating crypto as a form of property. Yeah. I did this in one of my videos, matter of fact. So tell me if I'm wrong here, which is crazy. I have $10,000 worth of Ethereum. And then I hold it for less than a year and it goes to $20,000. And I say, you know what? I'm just going to donate all those Ethereum's worth $20,000 because I'm a charitable guy. If it's less than a year, are you saying that I can only write off $10,000? Right. You can write off your basis in the asset, which is annoying. That's insane. Why can't I? Well, that's the IRS. So you're saying that if I hold for more than 12 months, I think the law is trying to protect against... The law is written for property as a catch-all. There's many types of forms of property. And I think what they want to catch is people who are saying, oh, I bought this. It's worth a ton of money now, Rob. I've held this for a month and I want to write off the fair market value of this piece of art. And so that's what it's protecting against on that side. Protecting us harder. Fantastic. All right. So how about this one? Can we migrate our imported and compiled tax bit account transaction in the coin ledger? I've used tax bit for years. They're doing away with their... I didn't know this. Away with their consumer-facing service and I haven't migrated yet. Yes, you can. We don't have a direct integration with transfer your tax bit account. It creates the same account in coin ledger. But we have... Our whole support staff is trained. We've been helping a ton of these tax bit users get migrated to coin ledger. And the other good thing is we've completely made the product free for tax bit users who have used tax bit in years past. So if you need to get up speed coin ledger, your 2021 reports, your 2022 reports, we're making those free to tax bit users. So just get in touch with our support team and they'll walk you through all of that. Yeah, that's pretty good. All right. BGD says, does the IRS allow a summary of crypto gains losses? Or does it require every transaction to be reported? I think this would be like if you get audited probably every transaction, but how does this work out? So just technically speaking, yes, you have to report all of your taxable events. This is annoying in crypto because there's a lot of them. But technically speaking, yes, you do actually have all transactions. This is why... Okay. So this is why when I send my CPA, it's like just a boatload of information. And she's like, okay, great. And then she just sends them over. I got you. Yeah. What's happening is the 8949 itself will get consolidated, but you also attach essentially a long file of just like all the transactions alongside it. So good. Have fun with that. Felix asks, will future recovery be treated as new income? I think we answered this actually. This was about the Voyager Celsius FTX issue, right? Yep. Exactly. Okay. Jimmy says, some exchanges don't hold reports pass quarterly. How can I use CoinLayer to verify account for yearly transactions? Yeah, this is a really frustrating problem. Some exchanges make it very difficult to get your transaction history further out than like three months at a time. Yeah. For these exchanges, one, just start making it a habit to download that three months. Every month you should be downloading that because our hands are tied as well. If an exchange is like, no, we're not going to give you your transactions for further than a year out. First, you should email their customer support saying, hey, I need my full transaction history to do my taxes. Please give that to me. Most times they'll give you the full stuff. You just have to go through the extra hoop of hitting up their support team, which is annoying. But to answer this question, I would just keep your account fresh. If you're using CoinLedger, you know, every month refresh that data and then you won't have that problem because we store all of that data forever. You'll always have access to it. Awesome. And then last question, which is, do I need to report my S coins? I trade on a dex because who cares? It's on a dex. Nobody cares. No one's going to catch me. Yeah. It just goes back to what amount of risk do you want to carry with you in life? Technically speaking, that is a taxable event, tax liability. You're incurring some amount of income that needs to be reported on your taxes. If you choose not to report that, that's on you. I can't make you, but you're incurring some amount of risk that you'll carry forward for some amount of time. Exactly. Me and David are not financial advisors or your dad, so do whatever you want to do. We're just here to give you the best information. All right, David, another fantastic showing. We appreciate it. Look, the links that we just talked about, everything we just talked about, there's links in the description. You can check those out. But again, make this consideration and because it's tax season, it sneaks up on us and it gets very quickly. So this is going to help you save a lot of heartache and time and frustration. So David, thanks so much for stopping by again. Thanks for having me on. We'll see you guys later. Thanks. See you.