 And everybody welcome to Thursday's live stream This is a special stream because we're talking about everybody's least favorite subject, which would be taxes Now I know it's not something that people really want to talk about But believe me when I say we need to talk about this. So I have two gentlemen that'll help me out We got Jordan Jordan bass from Bass Law Jordan. Thanks for stopping by appreciate it I mean and then David Kemmer who's the co-founder and CEO of coin ledger David. How you doing? I'm doing good calling in from an undisclosed location here Looks like it looks like an infrared treatment, but I'll take it. I mean we're glad we're just glad you're here. So again So gentlemen today, we want to talk about again taxes and just kind of do some updates I just want to do a Q&A and go over a couple of different things because if there's one thing that really Scares me quite honestly. It's taxes and screwing up the taxes because I just want to be On the on the straight and narrow because I don't want to have to go through an audit I want to make things easy because I can't buy time. I can't there's only so much minutes I have on this planet. So I want to make things super simple for me and everybody else So there's two stories. I wanted to go over first of all before I get in the Q&A I know people will say like well who cares about taxes because you know I mean I can do whatever I want to and that's you can you can go that route But I think the IRS is really trying to do some top-up things. There's two stories that caught my attention one This was put out by the block. This was just on the 28th yesterday IRS tabs and the strategic hires from private sector to improve crypto tax enforcement because let's be honest The IRS has been a lagging just a little bit, but what they need is the people that really know what's going on So they hired two individuals. They're gonna be building service reporting compliance and enforcement programs These two people are Mukherjee That's his last name is joining the IRS from a private blockchain Software tech company where he was a global head of tax He's more than 10 years of experience in tax compliance attacks info Reporting for financial institutions, which is if you're thinking yourself like I cannot smart these guys You can remember they got an army behind them pretty much and then the second guy Wilkes Which I wasn't too impressed with till I read this piece He's prior extensive work with tax compliance and planning issues related to multi national corporations Manufacturing focus on complex applied chains transfer pricing and cross-border transactions. I gotta tell you if You want to catch cheats? That's the way to do it because the big corporations are the masters at it We think we're good. Those guys got it down to a science So there was that article and then this little gem came across my my desk from friend of the show Sheehan Chandrasekara who's also a CPA and he talked about how just this month The federal government brought the first pure legal crypto tax indictment against a tax individual and before anybody asked Oh, this was not me Thankfully, so what he did allegedly was he sold 3.7 million of Bitcoin and bought a house 2017 tax return and again, this is what I'm talking about like we think we get away with things But this is all the back in 2017 in a 2017 tax return He falsely inflated the cost basis of Bitcoin to reduce capital gains, which makes sense, right? Like ah, you know I was actually I actually bought it at a much higher price 2018-19 his tax returns he failed to report 650k in Bitcoin sales must have slipped his mind Structured earnings he sold Bitcoin in exchange and made a series of bank deposits of the cash in amounts less than 10k each To avoid triggering currency transaction reporting requirements. It's actually not a bad idea But now he faces a maximum penalty of five years in prisons for each structuring count and three years in prison for each false return count So I just want to preface that before we move on so gentlemen any any thoughts Jordan have you had any clients who were just like hey bad news. This just happened something as crazy as this Yeah, you know when when we see issues for prior years like that 2017 2018 2019 And of course, we've been around as a firm since for the 2017 tax filing season That was the first, you know group of individuals that we helped I can recall a bunch of them that actually had Bitcoin holdings because they were maybe trading alts pairs on BTC with on some of the obscure exchanges back in like 2015 and 16 and 17 But I recall a handful of those people where we actually went back and amended a 15 and 16 return so that we could adequately show that they had Basis from 15 and 16 and a holding pattern from back then when they actually sold in 17 because they were like hey I put barely any money in here Bitcoin was worth close to 20k. I made a lot of money. Let's do this right so for that from that perspective I can tell you I have personal anecdotes of people are going back to fix issues before 17 and 18 so that they could report that accurately and and pay tax obviously Mitigate the liability as much as possible, but I do know that there are there are also people that have been involved in issues Let's say IRS is not necessarily civil issues But maybe some criminal investigation issues where they had been using You know Bitcoin and or Ethereum or any other token that you could use for the purpose of what they were engaged in maybe Like this guy buying the house of Bitcoin somebody that's gambling right professional gamblers possibly and they're gambling in private events private games And and they're sending Bitcoin here and there and and then maybe they're reporting it right if they're a client of ours They're reporting it right, but they might get caught up with with somebody who isn't and that person's under investigation And then their wallet gets tagged and somehow they get information of who that wallet belongs to and you could see how this leads down a path of 1520 30 people getting caught up in in this issue. So I don't have any personal Stories about someone like this individual. I can't tell you that I would imagine this is probably going to come out more and more in the future Where we have these extended filing periods or this extended audit periods Based on the fact that somebody may be misrepresented their income in a material way or in this case outright fraud when the statute of limitations is effectively unlimited so Just because just like you said somebody filed something in 2017 and and it's 2024 now and nothing's happened I would say nothing has happened yet if they did something to the scale of what this individual allegedly did But it's rare. I would say we still have a very limited amount of people filing crypto tax returns in the US True maybe maybe there maybe that number is also deflated. Maybe it should be you know millions more than half You know check the box. Yes, but It's not it's it's never a good idea to sell something and then buy an asset that you have to hold title to your aim or something that Maybe will ultimately flow back to you and then have to explain where the money came from, right? That's probably not the best decision to make. Yeah, no, it's not the best decision But you know it makes sense what you said that you know if you can go back far enough You can kind of prove these things so David Here's a question then how far back can coin ledger go because is there like is there like a Limit to how far is it just all based by wallets and the exchanges that are reporting? Kind of both we can go as far back as Really you need now as people maybe do or don't know some exchanges do have Limitations in terms of how much data and how long they hold it for you Some exchanges are better than others right if you're on Binance or bit true You know or Q coin they maybe only hold three months of your data historical data at a time But coin ledger has no limitations there So like our software is built to reach back as far as you ever had transactions because we need that data to accurately state Cost basis and income and holding periods So there's no limitations on one ledger side But sometimes we will bump a bump up against rails of other third parties that we're integrating with Gotcha. Oh, that's okay. That's good to know because I mean at some point We might need those and someone just just gives a shout out. Thanks for the Voyager patch. What is going on with that? Because I just had my my CPA just gave I just gave her Re-accessed to my Queen ledger account or I actually sent over over the reports Excuse me and she was asking about Voyager. How is that working out as far as the patch? Are they still able to integrate or no? Mm-hmm. Yeah, yeah, so that's all rolled out All Voyager users can sync up their accounts will pull in all their transactions Including all bankruptcy related transactions and you know, they can use that to report losses and all that activity on their taxes Gotcha. Okay. Well, let's roll into some questions and everybody if you've got questions for these two gentlemen You can put them in the comment section, but here's what we had Today and I actually put this out Yesterday last night as a matter of fact just said hey, I got you know, two times on what's your questions? And here's the first one from Chris from Chris M. He says my cost basis for Bitcoin e that came as a disbursement is 70% of what all my coins were worth at the date of the bankruptcy. This could be FTX Celsius Voyager I'm not for sure However, it was 50% of what my coins were worth at disbursement date. How do I write off the 50% loss? I don't know if that's enough information for you guys or does that make sense? Kind of makes sense I think I know generally with the question where the question is coming from but at a high level You know, it really depends on how the disbursement was made For example, we could use Voyager because I know David was just using that as an example which You know the integration with coin ledger is really great I actually Aside there are people that I know switch to coin ledger because they were voyager users that were using other Softwares because they couldn't get access to the data So that voyager patch that the user that would just let the comment mention is was actually really helpful for for many people That I talked to but in this situation you receive a disbursement They have you know, 70% of the value of what the coin the coins were worth at the data the bankruptcy They list that price so you can kind of determine what that value is If you receive that disbursement in kind let's say this individual was able to get right the same You know value or the same underlying asset, but the different value There maybe wouldn't be any gain or loss at that moment in time So they'd have to actually execute a transaction to generate that loss If they received, you know, USD or US dollar equivalent USD see a different asset distributed to themselves from Voyager in this example, I think somebody mentioned it this this sounds like Celsius So maybe we could talk about that a little later, too But if they receive something that was different they may or may not have a gain or a loss But if that value was worth less than what, you know They initially put into the underlying investment and they receive a different asset or a different piece of property in exchange for what Their claim and bankruptcy was they for sure certainly at that moment in time can recognize that loss And that's how they would have effectively let's say quote-unquote write off I don't like that term, but right off the 50% loss They would have a a loss that has then been recognized for tax purposes and then can be reported on their individual tax return if the loss is you know Substantial and they had some other gains that they could offset in that year That would be great if the loss is substantial and they don't have gains that they can offset in that year They'll be able to use some of it and the rest would roll forward as a capital loss carry forward in future years That would then offset, you know future gains In the Celsius situation, it's a little bit different and I know that that is still actually a pending matter of releasing disbursements and sometimes people were receiving, you know last year some people were receiving assets in kind this year Maybe receiving equity or shares in a new a new company and then also maybe potentially having future distributions So there there are a couple different things that could happen. It's somewhat complex If Chris has any specific questions that maybe are more nuanced that he would like to discuss I you could reach out to me and I can you know talk to him and walk him through that process because it is a rather complex proceeding for tax purposes and everyone's situation is different and they might want to take one approach versus a potential mother Gotcha, and then this was this was a good point I want to bring up because as we're talking about this people will always say well, okay, is this you know for what? For what countries are we talking about and someone? Let's see where it go Someone said is you have to understand Yeah, here he goes you have to understand that every country has different tax legislation I think this is important to note, you know about what Jordan is talking about but Just to the point of with coin ledger David when you're doing this software for everything Because I know people get like myself. I get tunnel vision far as united states united states united states, but who can use this software? So we support over 30 different countries now. We have kind of two different levels of what we call supported support and one is full tax support, which is like here in the u.s. Canada Australia For us where we're actually going to generate your country's tax forms for you and like everything that goes into that now All like the 30 some other countries what we do is we have a lighter support where we're still going to crunch In that country's fiat currency According to the capital gains losses or income rules that they require But we're not going to go and auto fill any tax forms that they need you would essentially take The excel or csv reports of all your transactions that coin ledger generates and then use those to complete your tax forms So we really have customers all over the world now Most of our customers are in u.s. Australia Canada and then a handful of european countries Okay, yeah, I just want to make sure I just wanted to clarify So I don't want people ask me that i'm like i'm pretty sure it's all the place and yeah It's on the website and before we go we go on to the next question Jordan when you were talking about taking those those losses and carrying them over How much how because I I know for like if somebody gets rug pulled scam lose all their crypto There's a certain percentage or a certain amount that they can actually use as a loss every year But if you're talking about losses from voyage or celsius ftx block fi What how much can you say or how much can you use on the on the tax year? As a loss for let's say last year Right, so again, it will depend on the type of loss that's being taken right because For a lot of individuals what they'll probably do is a more simplified, you know Filing a simplified method of taking these losses where they know what they're initially depending on how the Disbursement came to them. They know what they initially invested. Obviously that value has gone down significantly They might have received the same asset in return What you would do is you would carry over your cost basis from what you originally had Just like just like this question right here since btc to btc is not a conversion Do we inherit the cost basis from before what we would do in that situation is yes You probably would have significantly Potentially have a significantly higher cost basis versus what the value that you received back Upon sale of that asset that you received in kind You would then recognize the gain which hopefully you don't have maybe you do actually hopefully you do or the loss Which could help you from a tax perspective, but that would be capital in nature So one of the questions you asked was how do you how many how much can you use? Well, if the loss is let's say $50,000 and you have no other gain You would be able to offset up to $3,000 of your ordinary income in the current year Which that number hasn't been adjusted for inflation and in forever So I think it should be substantially higher personally But it's not and then 47,000 would then roll over for future years And if you continue to have no gains every year thereafter 3,000 3,000 3,000 deducted for until you get rid of that now 47,000 that has been carried forward if I have no gains in the current year But $40,000 of gain in the subsequent year I would effectively pay no tax on that $40,000 gain because I had 47,000 that rolled forward And if in the current year this would be the third example if I had a $50,000 loss from this activity But I had a you know a sale of coin based stock For a $38,000 gain my net loss on the year would be $12,000 I would still use the $3,000 loss and now I'd have $9,000 to roll forward So looking at it from the the perspective of like the capital loss bubble That's how that stuff gets reported However, there's a possibility that somebody could take you know a different type of loss when it comes to Celsius The safe harbor safe harbor Ponzi loss. It's a potential option. It's very very complicated And that would result actually in an ordinary income deduction if it was successfully honored by the IRS And it could be but it is a more of a complex process So we could talk about it, but I would probably need a lot of time to get into the details When we talk about the USDC This person says do we count that USDC was swapped to ETH or to a mix of ETH and BTC? Does that count as a capital loss? I'm not really sure what that question is entailing, but If you receive an asset that's different than the underlying asset that was being custodyed on the exchange That's when you may have a loss or a gain that's recognized on that disbursement and I know that uh Um David you could correct me if I'm wrong, but at least as far as Voyager goes This is all automated inside of coin ledger and it's done very well And probably would be something similar With with Celsius moving forward. Yep. Yep for Voyager. It's all taken care of Celsius. Um, not fully automated We don't have a direct immigration with Celsius, but you can still do the same manipulations More manually, but it is what it is Yeah, and the key actually With what David's saying there is because the transaction classifications have already been in there in coin ledger If somebody has to manually, you know mess around with their coin ledger activity, which The reality is most softwares. You need to make some changes those transaction classifications are already there They're already there for you to choose And the flow of the transactions will be somewhat similar to what is automated with Voyager So that's what I know. It should be a fairly get more straightforward process. Exactly Got you. So let me let me make sure because I I heard someone that uh was very positive I did not know this so let's say for example someone goes into Celsius, right? And they lose they put in 100,000 somehow they get 50 back 50,000 the other 50,000 is gone So over time if you're having losses for your ordinary Uh Income it's up to three thousand dollars But let's just say for that next year that you got lucky and you You you bought a bitcoin at 50,000 And it goes up to 100,000 and you sell and now you have a 50,000 dollar capital gain Can you what you just said can you take those losses? From Celsius that you got screwed over And say hey, I don't want anything because I'm going to take these losses Uh that I had and roll these into my capital gains. Is that right? Yeah, so if that loss that you've captured is considered a capital loss in in our example that we were using before Yeah, and I would say hopefully That person we don't we don't count them as as lucky we say they're a skilled investor and they made the 50,000 dollars, but they had this this other 50,000 that they had lost if you think about it from from a Policy perspective not even from a tax perspective if they put 100,000 in and then at some point it was worth 50 And that was a recognized a taxable event And then they had a 50,000 dollar gain. They put 100,000 in they lost 50. They made 50 They're at and they're in no better place than they were before so technically they zeroed out However, it's been over the course of one two maybe three years So that's why that rule is there but to answer your question Shortly. Yes. That's how it would work. They'd have this loss then they have a gain and it would offset each other That's pretty that's pretty good. What about here's another question I I keep getting like I was in a voting accident My ledger fell off because I had it around my neck and now I lost all all my crypto But these other ones that that I had now there was 100,000 crypto in this ledger Now that I have these 100,000 I can only write off 3,000 dollars per year But what if I did some transactions and I'm a skilled now a skilled investor And I actually had some capital gains. Is that the same thing or is that because that's like a different category, right? I lost it as opposed to capital losses, you know, we we actually the the lost my ledger in a voting accident would be a bad tax situation actually because we don't really have a A deduction for that anymore these thefts slash casualty losses, which wouldn't even be it would be considered Nothing to be honest. It's more of a I lost my my ledger. I lost my my ledger in a voting accident I can't do anything, but maybe I remember, you know, my my secrets And I can get access to that in a year or two or three or five But no the reality is that's not really the same sort of situation You you want to really look at the the income characterization and the loss characterization and match those two together capital losses can offset that ordinary income in a very very small way, right that $3,000 per year But we see we see this happen actually a lot where if somebody generates a lot of income with yield possibly or maybe they get paid in crypto And the value is worth A lot and then the the market kind of retraces and now They have, you know 70 80 of that value left, but they haven't swapped out of it Let's say they're earning in bitcoin and the market comes down 80 percent And they had a hundred thousand dollars of earnings now it's worth 20 k They sell that they have an 80 thousand dollar capital loss But that's not going to offset the hundred thousand dollars of income that they had only three thousand dollars of it will so Um, there's a couple of things that you have to consider when you're going through that situation But no losing your ledger in a voting accident and then all of a sudden having gains You wouldn't really offset that because it's not a deductible loss anymore There goes my whole plan. All right then So next question then which was this is a good one And I think this is probably something that I was rallying around inside people's heads if I never filed since 2017 Hey, no judgment and I want to file this year for everything. Is that possible or do I just file for this year only? Well, now this might be a legal question. I'm not for sure. Yeah, I can I can give you my thoughts I think the lawyer uh David could talk about how a coin ledger can help with that process if you have like you mentioned, you know There's exchanges that you might not be able to get the information from anymore could have gone under 2017 there were a lot of exchanges that were around that aren't around anymore the more obscure ones even some of the bigger ones Obviously we saw 2021 2022 some of the bigger ones went under can you access that data? Maybe not so you could probably try to do your best to load that into coin ledger and let it auto populate and help you out But the reality is the reality of the situation is it really will depend on what kind of activity you had going on in those Prior years whether you want to amend a prior year return or not somebody that just spot buying, you know, crypto with usd Nothing really to do Obviously, you're just buying you don't really have any sales Then maybe you were swapping a ton in like 2020 d5 summer you started degening Maybe you want to go back and kind of take a look at that stuff 2022 you might have lost some money So you want to go back and look and see if you can get credit for that to offset maybe some gains you had in 2023 Everyone's situation is different What I would recommend is before you even consider That you want to file for this year and make sure that you have everything, you know, chewed up for 2023's tax filing You're going to want to at least get as much historical information as you possibly can So that you can like david mentioned have all your cost basis and holding patterns roll over into the current year, but also See what you should have done in 2017 18 19 20 21 22 And and you know what just to piggyback on that because if you haven't sold anything If you haven't sold anything or transfer anything since 2017, maybe you're a diamond hands person It's not like you're going first of all you're not going to own anything because of all this time You just held and even if you transfer from wall to wall that is not a taxable event So this would there's a couple questions from there. This will this would go to david What about block fine ftx? Do those need patches to access the data? How are we looking for those two? defunct exchanges Yeah, so similar situations You know, we support all of the transaction history files that these exchanges export Since they've been bankrupt their apis, which is how you kind of automate these integrations have been shut off So a lot of folks have You know old csv transaction transaction history files from these platforms. Those can still be imported into coin ledger Um, a lot of people already had their data imported into coin ledger But in terms of the bankruptcy data, no that would have to get You know imported manually, um on behalf of users now as jordan mentioned we have all of the Transactions to classify those within coin ledger, but unfortunately we didn't we weren't able to build You know some sort of custom arrangement Like we were with voyager would love to so if you know zack or any of those guys are watching We're all years, but uh, haven't been able to get in contact with those folks. I got you. All right What about this one? I was told by a crypto cpa that I cannot write off voyager since the final settlement has not occurred comments thoughts Well, you would have received and this goes back just to like what david was mentioning with the the voyager patch Let's call it. You still would have received some assets In return of what you had on the exchange and like we were mentioning earlier if they were received in kind You know what your cost basis was because coin ledger could help you figure that out You know exactly what your basis was for the asset that you received now Some of the assets weren't supported for the distribution. So you might have received us dollar equivalent at that moment in time You have a gain or a loss so writing off voyager again I don't like to work right off but writing off voyager since the final settlement has not occurred You still will have had some taxable events that may have occurred when you received us dollars or usdc for uh Whatever the value of the distribution was for those alts that weren't supported If you did receive the distribution in kind your basis and holding pattern will roll forward And then you can make that determination if you want to sell that asset to trigger a gain and or a loss Depending on what your basis was versus what the fair market value is today Now if you didn't receive everything in return right if there was still something left on The platform or that you received, you know, let's say 70 percent 70 cents on the dollar 40 cents on the dollar and That's what you're talking about. I personally like to take the the approach of waiting to see this whole thing out to get a Good understanding of what you should be doing from a tax filing perspective But there is a portion of what you would have received where you already know what the tax consequence Either will be if you haven't had a you know a tax triggering event Or was at the time that you received that that distribution of property that was different from what you had held on the exchange so That's kind of a loaded question. I think it does depend but They would I would say your crypto CPA that says you can't write off wage I think it would depend on the question that you asked them to give you the proper answer of you know, how that conversation went about and for charles again like The other individual if you have a specific question there could obviously there's more nuance than a one sentence question Feel free. Don't hesitate to reach out to To me or the team and we can kind of provide you with some some insights with your specific situation if you need Yeah, and then before we get to this other one, which is a good question I saw youtuber influencer claim that exchanging one crypto from that doesn't incur a tax liability. I'm sure he's wrong Is there any condition in which he was corrupt before he answered that just for everybody knows if you go to There's a link in the description for coin ledger and even there's even a deep dive video of how to use the software But if you go to this the site and screw all the way down on the bottom right hand corner It says find a crypto expert If you're questioning it and say like well, maybe I like a little more guidance There's a plethora of different people you can contact so you guys can sort this whole thing out I just wanted to throw that in there before anybody we get to the next piece and I forget to actually answer that so Anybody want to take this one? Yeah, generally speaking he is wrong You know when you exchange one piece of property for another that is a disposal of the original property And so you're going to incur a gain or loss depending on how the original piece of property has fluctuated in value at the time Now there's you could make some nuance arguments in cases because as we know There's gray areas in crypto that haven't had explicit rulings and Jordan I don't know if you want to touch on any of the gray area, but some people would argue You know bridging tokens to different blockchains wrapped tokens, etc could You know skirt that not be considered a property exchange But the vast majority are going to trigger a capital gains tax event Yeah, I mean I would imagine that the If you're looking at that question and how it was framed and maybe how that Influencer might have made the statement They probably weren't talking about bridged assets or wrapping your tokens They were probably talking about trading one alt for another or you know, whatever chain They were on whether it was birium any evm chain salana cardano polka dot. Who knows whatever they're doing And then swapping in and out to and from There's no I mean I would love for someone to come up with a creative argument as to how that would not be a taxable event because we've gone through this for Almost 10 years now with you know the iris and guidance that has been released now wrapping and bridging tokens I mean most of the time you're actually receiving the same or substantially identical piece of property in return However, sometimes you're not so yeah that little bit of nuance probably more so on the wrapping side than on the bridging side I mean we pretty much by default treat a bridged asset from one chain to another as a non taxable event Some wrapped tokens have different forms and in functions of what they do versus the underlying asset So maybe there's an argument that it is a taxable event But nine like david mentioned 99 probably 99.9 percent of transactions that are processed on chain Would be taxable if there's a piece of property swapped for another and I don't think you could Say of any, you know centralized exchange transaction where you're trading against a btc pair or an eth pair or us dt or whatever Where there isn't a taxable event that occurs now if you swap a stablecoin into something else You might not have much tax Maybe a small amount of slippage for what the price of this if this stablecoin was pegged to the dollar perfectly maybe but That would be maybe the only type of situation where you don't have a quote unquote tax Right if I have $30,000 of usdc and I swap it for $30,000 of solana I'm probably won't have a tax because I probably bought the $30,000 with the usdc for $30,000 But it is a taxable event. It's just zero gain or loss. So Yeah, that I would say that influencer they might be great. They might provide you with good insights They might do really good research on certain projects, but maybe not so much on the tax Hey, we all screw up. Look, uh yesterday or a couple days ago I was talking about the bitcoin etf and I substituted the amount of bitcoin for dollar And uh, because I was thinking of bitcoin. So hey, we all we all make mistakes. Just it's just one of those things Before we go on as a bunch of there's like three or four great questions just came in But this question has come up in the past fifo first lifo And we're talking about first in first out first last in first out. How are we how? For for setting this up Could you could one of you guys explain this to people because I know when when they ask me about this or like Well, when I sell something if I if I had bought bitcoin for four years And then I go to sell Is it the is it the first one in and the first one out that I can do it? Or is it just how I structure it based on my preferences and my cpa's recommendations? I think I should give this one to jordan just uh Iron out fully that's fine. Yeah, I mean david Honestly does a really I've heard him explain this a million times the different cost allocation methods He does a really good job doing it. But using your example. I'll just kind of at a high level. Thank you go in there. Thank you um realistically This whole fifo versus lifo versus whatever other specific cost allocation method that you would potentially want to use Um conversation always it always comes up at the end of the year always I've never it's it's a zero percent chance that nope that somebody would ask I wouldn't ask about it. They always do it's a hundred percent of the time Now in your question that you asked or your example I've been buying bitcoin for four years and now I want to take some profit and sell some How do I know If it's the first in that's first out the last in that's first out the highest in that's first out Am I going to specifically identify one specific? Uh tranche of btc that I want to sell well technically you could do all of those things um, but um The reason why first in first out is something that is discussed in like the default is because when you have a you know a brokerage account like let's say robin hood e-trade schwa whatever And you're selling your stock They're going to default to first in first out because the longest holding pattern to asset would be the first one in Right means you're incentivizing long term capital gains which get taxed at a you know A preferable tax rate Um, you would have to go in and elect make an election to have a different tranche of the asset of your stock Because we're not really talking about crypto here in this example that I'm giving To be sold And you could say I want the last one in because maybe the spread is smaller So you actually have a loss or a smaller gain and you're okay with paying ordinary income tax rates on the smaller gain Or you want to trigger some losses because you might have some capital gains in other areas of your portfolios in crypto First in first out is not often the best choice because maybe you want to hold on to those longer term bags And the way that you are transacting the the fast nature Quick transaction flow a lot of turnover Maybe last in first out is more of an accurate depiction of what you're what you're doing because maybe in 2017 18 I bought a lot of spot btc or in your your example. I bought a lot of bitcoin old and cold I want to hold on to that stuff and and some of the stuff I bought maybe in the higher You know caught like maybe I bought 69,000 btc in 2021 and I wanted I'm selling one one of the maybe two three four five six that I bought over the four years I want to I want to sell I want I want 63 thousand dollars in my bank account But if I can trigger a loss in doing that because I have a higher cost based asset then let's let's do it now The reason why it always comes up and I'm sure david and and the support team at cusp at a coin ledger Get this question all the time is can I switch from one cost allocation method to another from this year to that year and so on I wouldn't recommend that because you're probably going to then double dip in your basis tranches because Coin ledger as a software does a great job of aggregating the data, but it's not a a human cpa that is going to tell you You've you know utilize this tranche up when you switch your cost allocation method from life Oh to fight foe and then fight photo life oh and high photo whatever you're doing Now if you could lock that year over year possibly could you do that? Yeah, and now coin ledger actually has a function where you could import transactions as of a certain date which is amazing David by the way, I don't know if we talked about that, but it's amazing But the reason why it's such an important question Is because sometimes people will plug their data in or your your example of this person could have plugged their wallets in their exchange data in And shifted from life photo fight photo fight photo life or whatever just because in that little window in the tax offer It showed a smaller tax liability. They might be reporting the same tranche of sales over and over and over again So explaining what life oh and fight foe and all these other cost allocation methods are That's fine. It's important. It's kind of easy to find numerical examples But the reason behind why you don't want to go from one to another year over year Why you shouldn't is because you ultimately are probably going to be showing on your tax return that you sold that same Asset over and over and over again and you're double dipping in your cost basis, right? So you don't want to do that That's from a from a you know Tax law perspective But again, like I said, David actually does a really good job of explaining Hypo life oh fight foe if you want to give a rundown Yeah, and it's just highest level right first in first out It's exactly what it sounds like the first bitcoin Let's say you acquired it's gonna be the first one to get sold off when you're calculating the gain or loss So in a period of rising prices Fife foe would lead to a higher capital gains number because you're selling what you bought at a lower amount Right at a higher amount. So that delta will be greater where in a period of decreasing prices A life flow would actually maximize your taxes and the vice versa on the minimization And so I think Jordan you hit everything else pretty well there Got it life. Oh sounds good. Okay. So that is Excellent excellent responses before we go on to because Amy's got a really good question about Exchanges breaking up her transactions How's got a good questions about gifting crypto and how much you can do before we get into that? Just remind everybody that's for coin ledger, you know, there's a portfolio tracking We talked about this if you go to the website on the very top click on learn more you can sign up for it I've already signed up for it. This is not my portfolio. This is a It's actually a pretty good portfolio actually and it's one that David graciously gave to me as like as like a test thing But I want to show everybody how this actually works. So like you all you have to do is For your wallets or you can do it you can do it one or two ways You can do an api integration with all your exchanges Like I just use coinbase and kraken essentially I integrate with those and any wallets that I have like on my tangent on my ledger I just gave read-only access to it and it can show me like my profits and loss My cost basis my unrealized returns and things like that So like in this example and like the example before this was funny. I asked david I go Hey, I didn't like a million dollars with a bitcoin. Just you know something crazy and he puts in 1.7 bitcoin I didn't do a million. I could have you could have but but it would like it would look cool but that's that's that's fine hundred thousand so like like This it's not really a great example Like but like let's say you're like, okay. Well, where is this bitcoin? You know because it says I have you know 1.7 Okay, well on coinbase. You sold it a little bit coinbase pro There's nothing there even though you're integrated and this manual integration You got two bitcoin and it'll tells you your unrealized return So like your cost basis, which is pretty good. You paid 13,000 89 dollars per bitcoin 81,000 is your unrealizer. So if you sell it, that's what you're going to be taxed on And there should be a date somewhere on this Where is it if you if you drill into any of those columns It'll show you the actual calculations in the time stamps for all the transactions But it's all based on imported data and so I like here That's why this dummy data is a little bit funny looking. Yeah Hey, so like it's like this one you'd say, okay, it's october verse 2022 great It's after it's after a year. This would be long-term capital gains. Got it There's another good example I liked in this one, which was this the link the chain link one And let's drill down. So I have almost 50 link And it looks like I deposited it Calculated balance. I bought it on january 4th, 2021 718 my cost basis where'd that go? So if you There you go Okay, so the market value is my cost basis is 13 dollars per link. Not bad. I don't know what it is right now 649 It will be on the left side showing what the price of link is right now right there in 1958 Oh, thank you So yeah, not too bad And it's just gonna give you a pretty good idea If there's anything that you guys think could be added here Like I will tell you one thing that I I'd like to see because I've got a lot of transactions David And a lot of nasty d gen plays So what'd be good is like all these different time frames Like it's great if I can just kind of see it But if if there's like a thing where like you could like like a highlight like look today is february 29 And it takes you all the way back in red to like february 28th 2023 If you sell well, I guess if it's first and first out won't really matter But like if it was there you could say look if you're in the red You're gonna sell for short term capital gains as opposed to long term. I don't know if that's a thing But I thought I think I I think I follow what you're saying Um, this really has a lot to do with like how we're thinking through expanding our tax loss harvesting Yes Module really giving a better tax lot breakdown So you can do the hypotheticals like you mentioned like, okay If I want to sell 10 link and as you mentioned my costing method is currently set to fifo This based on current market rates would be The gain or loss that I would realize if I did that trade So that is all stuff that We're working on and so as you said for anyone who has feedback ideas things that they want to see us build with this, you know It's pretty elegant and simplistic right now and we're going to continue to add functionality. So we're really all all years You know, we build these products in tandem with user feedback So I appreciate any suggestions or things people have because it's really helpful to hear what people want to see with it And this is my favorite part where I can see how much how much gains I actually have makes me feel Makes me feel safe And then also, of course, if you have your portfolio, you just click over here to tax reports and you're able to rip them off Or just kind of go from there. That's I think that's that's the beauty of the integration. So all right question time so Amy Johnson She says, uh, I got hundreds of missed cost basis on one transaction It's like the exchange broke my transaction into a ton of small ones. That's I wonder if there's a reason for that Is there a way I can quickly group them together to handle that as far as like for tax reporting or how would that work? That's a tough one Well, when we see a missed cost basis issue, it's not usually coming from or it could be coming from that actual transaction But what's usually happening is there's something that happened before that That's creating a balance issue. So if I were to have sold x amount of abc coin Um, but I didn't have that in my wallet based on the reconciliation and the transaction data It would look like a overdrawn balance potentially Or it would look like I never acquired it in the first place. So I have, you know, zero cost basis potentially um, that is an issue that can be Seen and and remedied looking at the transaction history actually before that executed trade where you're having the the signal pop up but uh Reality is a lot of these exchanges that you think you're trading with one transaction They're going to fill with like multiple orders. So it could be, you know, 100 different line items for one trade that you think is one trade Uh, but it's just not Uh, so when you have a missing cost basis issue for that one trade or this one trade But it's a hundred different line items and now it looks like you have a hundred line items of missing cost basis Just know that realistically it's from it's from that one transaction. You remedy that issue All of them will get fixed But the reality is it's probably because of something that happened before that transaction There could be something missing something misclassified something ignored in the software that you have to kind of You know come over uh with you know a good set of eyes and figure out what that issue is Gotcha Yeah, it's typically you're going to be missing either a buy a trade before that transaction But if I am interpreting correctly, it sounds like that one transaction was actually A trade going through the order book. Maybe it was a bigger transaction and a lot of exchanges You know, they're not gonna You know Give you just one price, you know, if you're trying to sell a large amount of asset It'll chug through the bid asks on that exchange and so you'll get filled at different price points Um, and so that could be what you're seeing within the software Gotcha, okay sounds good and then uh talking about gifts and things like that First of all before we go into that Etl says how do I get a membership? This isn't a membership site Like we were talking about first of all for the portfolio tracker. That's free Just go to coin ledger.io links in the description But if you want to do your taxes and you want to save your time Uh, just know when you go to the site under pricing It depends on how many transactions you have like I got a boatload So I pay 200 bucks which is fine because I'm not going to pour through a bunch of a bunch of Spreadsheets and like that if you're just up to like a thousand sling a hundred bucks and 50 bucks is and then there's a zero Tier as well. So uh, check all those out. But back to the the question though which was Gifts which goes to tyler's question How does it go for gifting cryptic? I've heard a lot of things about this Uh, he says what if I can give my spouse who is never running crypto? X amount of of crypto worth of 10,000 17,000 20 10 10 million who knows What's the gift tax cap and how does that work? Well gifting gifting quote unquote gifting to a spouse. You don't really have that issue. Um, It's a spousal gift. I mean it's it's most likely maybe it depends on how you file but married filing joint Uh individual or a couple, you know It's not really you not have to worry about gifting You can treat it as though it was yours and then now it's your spouses So when you file you can code that it's either the taxpayer or the spouse whoever's the the main taxpayer on the filing Would be considered taxpayer the spouse would be considered spouse and you can allocate that sale to a specific individual But there should be no, you know gift tax consequence for an interspousal gift However, if you're going to get something to another individual, um Like this question. What about your kids? You also may have no issue at all. Um for 2023 the limitation from when you would have to file a gift tax return the gift tax exclusion was $17,000 it's been escalating pretty much each year this year 2024. It's now $18,000 for a couple for a married couple You could double that right so for 2023 that 17 would have turned into 34 And technically you could have gifted your your kid a bitcoin and a half at some time in 2023 $34,000 worth of Bitcoin which now we know would be worth about a hundred thousand dollars. So really A friendly gift to your child if you did that and not really have any gift tax Again consequence now the gift tax sort of thing that we were talking about filing a gift tax return It doesn't result in you having to pay a tax or the individual that's receiving the gift having to pay a tax It's more it's merely informational for the irs to know that this individual gifted this piece of property to this other individual It helps them track what they're the gifty the person that's receiving the donor is person giving the funds Let's say and the dough knee the person asked to track what their cost basis and holding pattern in that asset is That is something that could be delineated in a form that's filed to the irs if you exceed that either 17 000 if you're Individual or 34 if you're married and you're saying it's coming from the community It's not it doesn't result in any tax liability. It's just informational So you want to do it you want to make sure that you're covering that that issue if your Gift exceeds that amount and even if it's not just one gift that exceeds that amount If you do it three or four or five or you gift a certain amount per month You could reach that threshold and maybe need to file the gift tax return Now the only time when you have to maybe pay a gift tax Is if you exceed that lifetime exclusion, which I should know the exact dollar amount I'm not entirely sure what it is. It's somewhere over. I think close to 13 million or maybe a little bit more for each person So when you combine those two married individuals you have a huge Estate that you can kind of gift into throughout the course of your life So you don't necessarily have to worry about the gift tax But you might have to worry about the gift tax return and most of the time from what I've seen you don't unless you're very very You know loving to your child or your you know cousin or your mom or whatever it is And you want to gift them more than 17 or 34 thousand dollars for for the 2023 year Yeah, it's pretty good pretty good deal for now. I think and then there's a question I'll answer Rob does coin ledger able to import Tax to turbo tax and yes it does right there on the website And that's what I don't use turbo tax, but it goes right to my cpa and that's the most important thing So I just send it over to her. She has everything that we need to do and then go from there All right, right, right, right a couple more questions and we'll we'll get out of here. Everybody. Thanks Again, david jordan. Thanks for stopping by and talking about this It is uh, not the most favorite topic, but trust me on april 15th Or if you get an extension whatever you're go to in october, you'd be like, wow, I'm glad I actually I got those questions answered Uh, let's see Melanie says is it taxable if you use usdc to buy solana chain tokens in phantom? That's a wallet. I'm gonna say yes because you're transferring From one crypto to another crypto Uh, it is but it you likely won't have much gain or loss, right? So if you bought the stablecoin for a dollar and then he used it to buy a solana token It's likely that stablecoin is still worth a dollar when you bought it Technically corn ledger will report it for you, but it'll be like zero dollars of gain So you won't incur any taxable income from that true true true. Yeah, even though like you've got like 0.998 It's like a little bit off the peg Sasha says if we don't understand how to reconcile the issues that are learned in the reports Can we hire your lawyers to do it? I think we're talking there about the cpa's and then yes Just like we talked about scroll down find there's a broad list there And then I wanted to answer this one. It's a good. It's a good point It doesn't make sense. You want to rob the tax man at the same time you want to pay him I'm not trying to rob anybody. Here's what it comes down to I am just not a fan of paying an over-exorbitant amount of taxes Take this room for example and this nice green screen. So there's a green screen that I purchased I get to use that as a tax write-off, right? I don't want to pay $12 or $24 that I got this at a target or whatever it was I want to use that as a deduction and actually use the less amounts or this actual room The electricity that I use because this is this primarily used as a studio So I am not about paying my fair share. I don't want to pay more than I have to I think that is the big the big thing. I'm not here to cheat anybody I'm just here to minimize taxes and not avoid taxes Sounds good. Sounds good Let's see. I think this is the last one last one's This was a little bit different Celsius question. I had dotmatic and synthetics Celsius said on my claim and sent my bitcoin and eith, which is what we were talking about in the beginning But they had to roll it into It wasn't in kind. They had to transfer it. I know my cost basis. That's good But how do I attribute the bitcoin and eith to each of my three cryptos to figure out the gains? David, would coin ledger be able to do that for you? Yeah, so that would essentially be handled as a trade And so I'm sure jordan can actually hit on You know the actual taxability there and what he would recommend on that front But yeah coin ledger will import all of that for you Okay Yeah, so you might have to in we talked about how coin ledger had the automatic integration with voyager And now we're talking about Celsius where we don't necessarily have that But we have all of the the mapping of the transactions that can be classified inside of coin ledger in this situation You would probably have to do Immanuel calculation to determine the spread of what you receive bitcoin and eith back in return for these underlying assets You want to determine exactly what the value of the btc and the eith were that were attributed to those holdings You know what your initial cost basis was You know what the value was that you received you likely have a taxable event with that situation Obviously, you have to figure out do you have a gain or a loss? But you most likely or what I would do and what we would probably do as a firm here because of the integration issue Where you're receiving kind of two things for three things It's not something as simple as just doing a swap for one token to another Take that offline get the calculation proper and then manually upload the information kind of similar to how your Your default or dummy account was just shown in the portfolio how David had input some manual transaction You saw that it said manual and had the coin ledger symbol You'd probably have to do that for a handful of those types of transactions just to make sure that you're Picking up the income and or loss correctly For the year in which you received that distribution So there could be like I said, there could be some other nuanced complication complicated issues that you have with the Celsius distribution, but with that example Um, you probably want to take the calculation offline upload it into coin ledger and let coin ledger do its magic Awesome. All right guys and last question and this would we talk about this many a time But uh, do you report staking as income and that's been a topic? You know for as long as I can remember who wants to take this one Yeah at a high level staking is treated as ordinary income And so what'll happen is the value of the stake tokens that you receive When they hit your wallet and you have possession over them, you know, you'll incur Ordinary income at the fair market value of the that those staking rewards when you gain possession over them So the answer is yes treated as income Okay. All right, buddy. So that would do it for today. I We've all we've gone almost an hour. I think that's pretty good. But again Everything we just talked about there's links in the description. You can check those out and get ahold of Jordan You can find the great coin ledger software that I will be I will be using this year Actually, I've already used it and then also the the portfolio matcher. So everybody. Thanks so much for stopping by. We appreciate it David Jordan. Thank you so much Thank you for having us. Yep. We'll be back. See you later up. See you now. Bye guys