EP.42 CRYPTO-TAXATION: Prager Metis’ Peter Goodrich on the State of Crypto-Currency Taxation

This week we have a special interview with Peter Goodrich on the tax ramifications of working with crypto-currencies. We packed a lot of information and debate in this quickly evolving field.

PETER GOODRICH is a Manager in the Tax Department of Prager Metis CPAs, a member of Prager Metis International LLC.  He specializes in tax planning, consulting, and structuring with domestic and international businesses, whether they are mature or startups, high net worth individuals, and trusts and estates tax planning. He assists and advises on complex business transactions.  He has expertise in several industries including blockchain/ cryptocurrency, entertainment, manufacturing, defense contracting, technology, hedge funds, automotive, hospitality and real estate. 

Here is a brief outline of what Peter and I covered:

INTRO

1)  Peter, how did you got into accounting and where did your interest in the crypto-space come from?

2)  What we are talking about when we say “crypto”?

3)  What makes the taxation of crypto currencies interesting/controversial?  Is it a currency? Is it property? Is it a security? Is it a collectible? What rules apply? Are there meaningful differences between the different currencies?

4)  The IRS decided that Crypto is essentially property with capital gains implications.  Is there any nuance around that?  Do the same “Long Term/Short Term” concepts apply?

5)  Is there a difference in trading between crypto-currencies vs transacting for goods?  I.e. if I buy a painting with bitcoin and sell it in bitcoin, how is that treated?

6)  Everyone’s situation is different, but if someone has a big gain, how should they think about it from a tax perspective?  

7)  We always worry about the gains, but can you take losses? The IRS determined that Crypto incorporates “property” tax concepts, but are there wash sales (which would be more of a “security” tax concept)?

8)  Crypto-Currencies are supposed to be “off the grid”? Is this really the case? What about penalties for non-reporting!  It looks like there is a disclosure box in this year’s forms?

9) What are the state implications for crypto-taxation? How does one determine and deal with nexus for state tax purposes?

10)  Vision for the future?  Will the government eventually accept payment in crypto? Or adopt their won?  Any other trends?

11)  What’s the best way to stay up to date on what you are doing and the direction of crypto-taxation?

OUTRO

ADDITIONAL READING:

Here are a couple of notices on cryptocurrency and taxation from the IRS and a good article from the American Bar Association (written by PARKER TAYLOR and his team from Hughes Hubbard and Reed) on the trustee and fiduciary issues related to cryptocurrencies and estate planning:

For more on this and other wealth topics, check out my book “Wealth, Actually” here:

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