Crypto in Ahs?

[JustinD]

Originally Posted by BobC

Now that is interesting to hear and know. I have never personally worked with or used Zelle, but was under the impression it operated similarly to Paypal, Venmo, and other similar third-party Payment Settlement Entities (PSEs). And that therefore it is also subject to these 1099-K reporting requirements. But that is only for reporting payments for goods and services using such third-party payment network services. Is this specific Zelle Network(R) only for personal and not any type of business use then, and thus exempt from any 1099-K reporting requirements? I'll have to look into that.

And apparently Zelle did catch some loophole so its payments are exempt from 1099-K reporting. Goood news to know.

This is why Zelle has become the new method of late other than PPFF for many sellers. A quick sweep of secondary marketplaces is now full of Zelle mentions since the states and then feds started launching these new methods for redistribution of funds to seemingly anyone but me, lol.

[BobC]

Originally Posted by JustinD

This is why Zelle has become the new method of late other than PPFF for many sellers. A quick sweep of secondary marketplaces is now full of Zelle mentions since the states and then feds started launching these new methods for redistribution of funds to seemingly anyone but me, lol.

Absolutely right, and makes perfect sense. And I wasn't aware of this till just reading this thread either. We can all learn and come across new information daily, as long as we keep an open and ever-inquiring mind.

Can easily see Zelle making a huge jump over other services like Paypal because of this new, lowered 1099-K reporting threshold, and apparent lack of fees (at least currently) for using Zelle. However, just to completely be up front, it also appears Zelle offers no protection for buyers using this payment service, like you'd otherwise have if using a credit card or Paypal - Goods and Services. Zelle is basically the same as Paypal - Friends and Family, no fees and no 1099-K reporting requirements, but also no similar sales/account protections.

[sb1]

I believe the difference may be that Zelle is essentially an electronic check/transfer between banks and not a payment processor.

[BobC]

Originally Posted by sb1

I believe the difference may be that Zelle is essentially an electronic check/transfer between banks and not a payment processor.

Exactly what I found out. Zelle acts as simply a communicator amongst the various banks to facilitate a bank-to-bank transfer, there is never an actual Zelle account in any user's name that holds or handles funds for them. Unlike Paypal, where when you authorize a payment to someone, the money first comes from your bank account to your Paypal account. Paypal then records the transfer from your Paypal account to the person you're paying's Paypal account. That person you're paying can then, if they choose, have Paypal transfer the funds from their Paypal account to their personal back account. With Zelle it is just a straight transfer from one bank account to another. Huge difference! Zelle never actually holds or handles anyone's funds, so nothing for them to report.

[parkplace33]

Lots of good conversation on this topic.

Question on crypto. I buy crypto at $5000. It is now worth $21000. If I pay for a card from an auction house today for that price, who pays for the $16000 gain? Me? Auction house?

[BobC]

Originally Posted by parkplace33

Lots of good conversation on this topic.

Question on crypto. I buy crypto at $5000. It is now worth $21000. If I pay for a card from an auction house today for that price, who pays for the $16000 gain? Me? Auction house?

You do!

Crypto-currencies under current U.S. tax law are considered the same as like investments in stocks or bonds, that can constantly go up and down in value. Whatever you originally bought (or acquired) it at is your tax basis. And you only recognize profit for tax purposes (or loss if it goes down) when you have a reportable tax event occur in regards to that crypto-currency. In other words, when you sell/convert it into actual currency, like U.S. dollars, OR, as in your example, trade it to acquire a baseball card worth $21,000. That is correct, by giving up your crypto-currency for a baseball card, you technically did not buy the card, you traded for it in a barter transaction! Let that sink in for a second or two.

How many times on this forum have I said to everyone that doesn't realize it that trading cards, instead of paying cash/check for and buying them, is still technically a taxable barter transaction in the eyes of the IRS and under the laws of the Internal Revenue Code?

So if you "trade" your crypto-currency for a baseball card with a deemed FMV of $21,000, that is deemed to be what you received for your crypto-currency, and what you then use to properly determine the gain (or loss) on its disposition. (Which in your example you properly calculated at $16,000.) The tax basis of the crypto-currency in the hands of the person you traded it to for the baseball card is going to be that same $21,000, which was likely the market price of that particular crypto-currency at the time of you trade. And your tax basis in the baseball card will be the same $21,000 agreed upon for your barter deal.

And by the way, how long you may have owned the crypto-currency you used to trade for the baseball card matters as well. If you had owned the crypto-currency for one year or more, that $16,000 gain is recognized as a long term capital gain, subject to a maximum federal gains tax rate of 20.0%. If you owned the crypto-currency for less than a year, then the gain is short term capital gain, subject to tax at ordinary federal income tax rates, up to a current 37.0% max.

Trust this helps and fully answers your question.