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OT: Crypto

DudyDog

DudyDog

Senior
Jun 18, 2008
1,800
563
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I know, I know....another crypto thread. But I've searched past threads and don't see anything about...

Crypto IRA's. Has this been discussed before? I've got to think it has and I just can't find it. If not, can we discuss? Anyone set this up? I'm confused as to why you would set up an LLC within it. I see that is an option. What's the benefit to that? What else do I need to know? I've looked at several of the "custodians" that would host the IRA and Alto stood out to me for some reason. Seemed to have lower fees, etc. Plus held everything in Coinbase, which I trust.

Anything to add??

fun fact....if you had put $15k in Aave crypto one year ago today, it would be worth $10,597,650 today. Don't you wish you could go "Back to the Future" and grab a newspaper to see what was going to happen one day in the future?
 
J-Dawg

J-Dawg

Junior
Mar 4, 2009
2,218
300
83
If I may also interject a side-OT in this thread relating to crytos.


Taxes. Someone explain the difference (if any) when filing regarding capital gains and such.
 
P

patdog

Heisman
May 28, 2007
57,098
26,709
113
No difference. It's the same as if you'd bought and sold a stock or mutual fund.
 
DudyDog

DudyDog

Senior
Jun 18, 2008
1,800
563
113
J-Dawg said:
If I may also interject a side-OT in this thread relating to crytos.


Taxes. Someone explain the difference (if any) when filing regarding capital gains and such.
Click to expand...

J-Dawg....from what I have gained, and if I'm correct, this is one of the advantages of holding crypto in an IRA. You don't pay taxes until you take it out. If you set up a Roth, there are no taxes. Someone can correct me if I'm wrong.
 
N

Nicephorus

Redshirt
Sep 3, 2018
150
0
0
patdog said:
No difference. It's the same as if you'd bought and sold a stock or mutual fund.
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There's a little nuance here if you are yield farming. Tokens rewarded as interest for a deposit are treated as income rather than investment. This is important because once you come in possession of them, they are valued based on their market price at that time. Since it is income, you can not declare a capital loss on them if the price tanks later forcing you to pay taxes on income you never realized.

Given the crazy high APY some of these farms can reach for short periods, this can be a significant amount of income (for example, floatprotocol.com "phase 1" yield farm is currently paying out at around 600% APY). So in order to protect yourself, if you are engaged in yield farming, the safest strategy is to immediately sell or convert these interest reward tokens to another token as this is a "taxable event" and will "convert" it from income to an investment, even if you trade back to the original token.
 
J

JenBielema

Redshirt
Jan 6, 2020
68
0
0
J-Dawg said:
Do the reputable brokerages such as Coinbase issue 1099-B's like the TDA's and Robinhoods?
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Hey babe Coinbase the last few years issued a 1099k which was basically the gross amount of your selling activity. In other words if you bought $100k worth and immediately sold it you got a 1099k showing $100k. It would then be up to you to provide your basis.

In this simple example you would have $100k proceeds and $100k basis and no gain.

The exchanges don’t track your basis. Like everything crypto tax filing is the wild Wild West.

Love you.
 
N

Nicephorus

Redshirt
Sep 3, 2018
150
0
0
More of an advanced topic but useful if you got significant capital gains.

You can somewhat get around capital gains taxes by borrowing against your bitcoin on makerdao. Would require “tokenized” bitcoin on ethereum, the most popular variety being WBTC. Converting to this would be a taxable event though, but you can buy wbtc directly through coinbase. You would then have to transfer it off the exchange to your own ethereum wallet (with a little eth for gas of course) and create a CDP (collateralized debt position) or vault on makerdao: https://oasis.app/.

Next you deposit your wbtc in and use it as collateral to borrow up to ~80% of its value in DAI. If your collateral falls below 80%, it will be automatically auctioned off with ~15% penalty to cover your debt to bring it back up to 80%. Since maker does not give you a token when you deposit wbtc, this is not a taxable event and is treated like a loan. If your looking at otherwise paying short term cap gains if you sell, this is an interesting option. You could conceivably take the max dai out and leave your wbtc on maker forever to be either liquidated or to increase in value in which case you could borrow more or sell wbtc to clear your debt.

DAI is exchangeable ~1:1 for USD on coinbase. Usually trades slightly higher than 1 USD as it is “overcollaterized” compared to other stable coins.
 
missouridawg

missouridawg

Junior
Oct 6, 2009
9,391
289
83
I was always skeptical of crypto. Still kind of am.

I put some disposable income in it a month and a half ago. It’s now almost doubled.

And after doing some research, I think the market is going to be extraordinary this year until Bitcoin crashes again. If you have disposable income, play around in the market with it. It’s pretty fun. The swings are wild though.
 
B

birdawg

Sophomore
Aug 13, 2009
993
168
43
Quincy A. Wagstaff said:
https://forums.sixpackspeak.com/sho...-is-priced-into-markets&p=1885909#post1885909
https://forums.sixpackspeak.com/sho...-is-priced-into-markets&p=1885962#post1885962

Here is where I discuss how I hold bitcoin in a Roth IRA. Happy to try to answer any questions.
Click to expand...

What's the process like to setup a trust? I've setup several very simple corporations e.g. ones with 1 shareholder, no employees etc.. I'm cheap and like to do things myself, but is setting up a trust something an attorney should handle?
 
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Quincy A. Wagstaff

Redshirt
May 28, 2020
1,387
0
0
birdawg said:
What's the process like to setup a trust? I've setup several very simple corporations e.g. ones with 1 shareholder, no employees etc.. I'm cheap and like to do things myself, but is setting up a trust something an attorney should handle?
Click to expand...

I used a lawyer to create the trust. You definitely should work with your IRA custodian before doing anything yourself. They may even offer a solution for you. I was referred to a lawyer by my custodian.
 
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Nicephorus

Redshirt
Sep 3, 2018
150
0
0
JungRebel said:
If your collateral gets liquidated I think that counts as a "sell" and a taxable event.
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I assume you're right so would still get dinged pretty good if the market crashes although could potential push short term into long term gains if it took long enough. It's really a potentially more tax efficient way to keep long bitcoin exposure will still realizing some of the gains in USD. I personally keep mine pretty conservative; around 200-300% collateral to debt and use the extra stables to do relatively lower risk yield farming. Maker only charges 4.5% APY so not hard to beat in current market.

If these mega bullish 200-300k bitcoin predictions ever come true, I may just use this method to borrow money for my next big purchase as it only takes around 5-10 minutes to access the cash and doesn't require credit check, proof of income, waiting period, or all the other paperwork and added costs a bank would make you jump through for a loan.
 
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