US Tax Lawyers and CPAs of SAFE, how do I minimize taxes when selling MAID?

Autonomi Network Token (incl (e)MAID)
1

So, this question has bothered me for a long time. I don’t necessarily plan on selling MAID any time soon, but if some more big news hits in the next few months and MAID suddenly jumped and peaked at $10 USD, I may consider dumping some of my holdings to increase my cash liquidity.

I know the “obvious” answer is to hold on to coins for a year and sell them under capital gains, but I have a couple questions surrounding this.

  1. A pretty good bulk of my MAID is already past the 1 year mark of being in my possession. However, I have continued to accumulate here and there during some bigger dips to add to my holdings. Are these coins fungible, such that I can simply sell up to the amount that I have held for over a year without owing regular income taxes? Or is it the opposite? Do I have to pay regular income taxes on all coins that I held less than a year before claiming capital gains on the rest?

  2. There is no easy way to sell MAID directly for cash. The only real way that I know of, without getting into some shady private hand to hand sales deals, to sell MAID would be to trade it for BTC and then sell the BTC. Obviously, that is not ideal because of the fees associated with the trading/transferring/selling of BTC. However, I am also worried that if I were to take this approach, it would be impossible to claim capital gains, even if I was just using BTC as a vehicle to sell my MAID. What I mean by that, is, according to the IRS, I would have sold BTC that I held less than a year, thus I would have to pay regular income tax on it. Is there any wiggle room that I could argue here to get the capital gains rates on my MAID?

2 Likes
2

There is so much info on cryptotaxes online. That’s probably a better place to start. That said…

  1. Funglible, like stocks. Just indicate the reporting method, FIFO, LIFO, etc. or keep track of which tranch you’re selling. It’s short- vs. long-term cap gains, unearned income. Short-term follows your earned income tax bracket. Long-term follow long-term capital gains brackets.

  2. By the time MAID is in the top 10, there will likely be demand for OTC trades and likely more exchanges that trade for USDT/equivalents, etc. You’d pay the capital gains on the rise in MAID. The trading fees, I believe, might be deductible…if they are substantial. Also, the BTC that you would then have creates a new basis, but only in BTC. If you sell immediately, you likely have little to no movement, aka no taxes on the BTC. It could even be argued that BTC was used as a payment/settlement system rather than buying and selling it. More options will likely come as the space gets more sophisticated, but basically the transaction is understood under the current laws/rulings as like selling into cash, then buying Bitcoin, then selling into cash again. Don’t worry. Just enjoy the ride. Get an accountant too. It’s a small price to pay to get it right, particularly if your gains are considerable.

Of personal opinion…and few seem to understand what’s really going on with the Trump administration…and even less here would agree with me, but from what I see going on, there are some underground movements within the Treasury to indicate a massive behind the scenes movement coming to restructure the federal reserve, re-commoditize the currency with either gold or a basket of real property, etc., and potentially to address the illegitimacy of the IRS and the whole concept of income tax. These are gold bug and conspiracy theory subjects for sure, but FYI, coming from someone who follows politics like flies on you-know-what, there are real things happening on these fronts that haven’t been seen in decades…so…at the very minimum, expect change.

2 Likes
3

Thanks for the info, that was helpful. I have DuckDuckGo’d several times regarding this topic, but it is hard to find definitive info on alt-coins that aren’t the big boys you can sell directly for cash. Not to mention the fact that the US tax policy on crypto seems muddled, at best.

One more question… If I were to realize massive gains on MAID, could I, for example, quit my job on December 31 of 2018, sell a bunch of coins on January 1st of 2019 and not pay any taxes on them as long as I didn’t have any regular income in 2019? It seems to me that capital gains rates are based on your regular income, so if you didn’t have any regular income, would you not be in the 0% bracket? Is that where the AMT comes into play? I’ve never been rich enough to worry about large capital gains returns or salary, that the AMT would come into play for me.

And yes, of course I would get an accountant if I suddenly found myself with substantial wealth. God knows I don’t want to keep the government from their hard earned money, making them take even more hard earned money from me in penalties :stuck_out_tongue:. I am just trying to get a basic understanding of what to expect so I don’t get fleeced by an accountant that doesn’t know how crypto works, or an accountant with less than altruistic motives when handling my assets.

1 Like
4

Calling @SwissPrivateBanker! :slight_smile:

2 Likes
5

Haha…nice try. This is a bit more nuanced than I’m going to respond, but the short answer is: hell no. Not having earned income doesn’t really change anything. Maybe I misspoke on the earned income determining the bracket…I think I meant to say that the bracket which is applied to the earned income is also applied to the short-term gains…but it’s based on total income. There is also a bracket for long-term gains as well, but that quickly maxes out.

Taxes can get complicated fast. Unless you have some really special circumstances…and even then…I wouldn’t expect to find a loophole. The IRS is smart.

Pay the Piper and worry less about the marginal wealth lost through taxes and focus on the relative wealth that you’ll have then as opposed to today. The psychology of sunk costs and potential sunk costs is responsible for the majority of depression, stress, and unhappiness in the world. It’s really pretty wild.

1 Like
6

Ah, that makes more sense. So, in the US, the capital gains rates for a married couple are (including the 3.8% Medicare tax > $250K):

0% < $73,800
15% > $73,800 and < $250,000
18.8% > $250,000 and < $457,800
23.8% > $457,800

So, if I sold $300K in crypto assets and no other income on the year (earned or not) my tax burden would be
$0 for the first $73,800
$26,430 up to $250K
$9,400 up to $300K
For a total tax burden of $35,830, or an effective Federal tax rate of 11.943%

Am I understanding that now?

Can I further reduce my tax liability with unearned income by selling these assets by maxing out IRA and HSA contributions, or are you not allowed to remove liability from unearned income?

Again, I would and will definitely hire an accountant if it gets to the point where this actually becomes I reality. I am just curious for my own edification, and I like to have a basic knowledge of things before I rely on complete strangers to handle something important like my finances. Unfortunately, I don’t have any CPA or tax attorney friends.

2 Likes
7

Since the IRS believes that every crypto transaction is a taxable event, than you would have two taxable events. You would have long term capital gains on your MAID-BTC transaction, taxed at the lower rate. You would also have to pay the much higher rate, short term capital gains on any money you made in the 15 minutes that you owned the BTC, before dumping it to dollars. As you can imagine, this is not important, as you doubtless will not make anything in 15 minutes, so paying the higher rate of 40% on nothing is still nothing.

3 Likes
8

Thank you for the concise answer, thc, and also the assumption that I am wealthy enough to be in the highest tax bracket. If only :slight_smile:.

2 Likes
9

I’m not checking, but sounds correct for the short-term rates.
The IRA/HSA stuff gets a bit more complicated, like what types of assets they can hold, who can manage them, who holds custody. The self-directed IRA seems to be what people are using for the Bitcoin IRA. It gets hairy quickly, but if you think you’ll see wildly high growth, there would definitely be a benefit to max out a transfer into a Roth-IRA now, pay the taxes, and see massive untaxed future gains…but you can’t access it until you’re of age without penalties…then again, maybe the penalties are worth it if they gains are so substantial compared with what might be the impact of income tax. This gets into areas beyond my knowledge and awareness.

10

Going to be a little cheeky here: simple—don’t sell & thank yourself later :wink::sunglasses:

6 Likes
11

Oh, I plan on holding on to a sizable majority of my MAID/Safecoin for the foreseeable future. I’m hoping and believing it will hit $100/coin or higher in the next ~5 years. I was just looking to cash out probably about 10% of my holdings if and when it hits $10 to recoup my investments and replace the liquidity that I have invested into crypto up until now. I have left myself a little cash poor buying into crypto projects, particularly MAID. :slight_smile:

7 Likes
12

Considering that you are an US person, move to Puerto Rico, before the prices go to the roof.
Sign the Act 22 tax exemption decree.

And boom, any capital gains (from the moment you become a tax resident of Puerto Rico) are 100% tax exempted.

4 Likes
13

Expect that loophole to close soon also. For the foreigners, I’d also warn against offshore accounts as well. There is a pretty large reckoning coming.

14

That “loophole” is gonna be valid until 2035, by Puertorrican law.

2 Likes
15

Also consider using a service like tokentax.us I used them last year and they are extremely helpful.

16

If you own 500000 Maid, move to a tax haven

17

The Puerto Rico 0% rates only apply to gains achieved after moving to Puerto Rico. That could be potentially beneficial if I still had enough after an initial cash out to make it worth my while to wait out for higher gains. Even still, their higher rates are only 10%, as opposed to the 23.8% on the mainland, so that may be worth it.

Peter Schiff is a big proponent of the Puerto Rico tax haven plans, but they also don’t have stable electricity right now, either, so that’s kind of a bummer.

Also, I do not have 500,000 MAID. I am closer to the 25,000 mark. I am not a wealthy person, but I have enough income to risk some investment here and there.

18

Yess, they might honor those that get in now, but they could close the door on newcomers at anytime. If things get really crazy, as they kind of are at the moment, there is a scenario in which Puerto Rico becomes a state. Dishonoring certain contracts could be apart of that. I’m just putting together a few factors. It’s not a situation that the US likes and Puerto Rico is losing leverage by the day. FYI, I’m just playing devil’s advocate here.
Correct me if I’m wrong but it’s 0% federal, but there is a PR tax of like 4-5%, right? There’s also a business incentive as part of the deal. Lot of NYC hedge Funds, like Paulson, have taken advantage of it…though some have left and just gone to Miami for the property tax benefits of FL.

19

The scenario of PR becoming a US state is certainly a risk, but the island is pretty much split between three groups, the “progressives”, “democrats” and “independentists”
The first are in favor of statehood, the second are in favor of the status quo and the third wants to gain sovereignty.

There was a referendum in 2017 by the ruling party (the progressives), but it was boycotted by the other two parties and the electoral turnout was only 20%, so the results of 97% in favor of a full statehood is based on a very biased sample.

The debate for statehood has been around for almost a century, and considering how divided it is the opinion of the people, it is clear that it is not something it is going to happen any time soon.
The current ruling party (the progressives) own the majority of the legislature of both houses, and yet they can barely do anything about it, no matter how hard they are trying to push the matter to achieve full statehood.

So, in short, I wouldn’t worry much about it.

Regarding to the 4% tax, I think you are confusing two laws, there is the act 22 and the act 20.
The Act 22 it is about individuals and the Act 20 it is for incorporating a Puertorrican company.

The Act 22 tax benefit is:

  • 100% tax exemption from Puerto Rico income taxes on all dividends
  • 100% tax exemption from Puerto Rico income taxes on all interest; and
  • 100% tax exemption from Puerto Rico income taxes on all short-term and long-term capital gains accrued after the individual becomes a resident of Puerto Rico.
  • 100% federal income tax exemption (for PR source income)

The act 20 is:

  • 4% corporate tax (for 20 years)
  • 100% tax exemptions on dividends
  • 100% tax exemption on property taxes (for the first 5 years, then it is 90%)

There are nuances, but that’s the gist of it.
Moving to the island now would be the right timing, IMHO. It is really not about how much you have now, but how much you are expecting it to grow.

I believe that MaidSafeCoin/Safecoin is grossly undervalued, I made my estimations before and minimum it should be worth 50x from the current price. I would want to be in the island before that happens.

There are also benefits even if you had accrued gains from before you were a PR resident, if you are willing to wait a decade, which gets your prior-PR residence capital gain reduced to 5%.

If you are interested in more details read up this:
Act 22: Act 22 – Individual Investors – Puerto Rico Tax Incentives
Act 20: Act 20 – Export Services – Puerto Rico Tax Incentives

Before making any decisions, be sure to be well assisted by a reputable tax attorney.

PS: the electricity is spotty, but you can get solar panels.

1 Like
20

Don’t sell…simple. let them try to go around and find what tens of millions of people have in some hidden wallets lol. We soon won’t need USD or any fiat. Forget the governments and all that bull. They will soon be extinct in their current form. Power shift is accelerating and those jokers will soon be working for us like it’s supposed to be…not the other way around.

1 Like