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The Almighty Buck United States Businesses

Biden Budget Plan Would Close Crypto Tax Loss Harvesting Loophole (coindesk.com) 85

Posted by msmash from the up-next dept.
U.S. President Joe Biden's proposed budget, set to be unveiled Thursday, will include a provision to close tax loss harvesting on crypto transactions. From a report: A White House official confirmed that the budget will include a tax provision intended to reduce wash sales trading by crypto investors. At present, investors can sell any cryptocurrencies at a loss, claim the loss on their taxes and then buy the same amount and type of cryptocurrencies again. According to the Wall Street Journal, the provision would be expected to raise up $24 billion.

The president's proposed budget will lay out his fiscal priorities. White House officials told the Journal the plan would lower the U.S. deficit by $3 trillion over the next 10 years. Any budget would need passage through the House of Representatives and the Senate before going to the president's desk for his signature.
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Biden Budget Plan Would Close Crypto Tax Loss Harvesting Loophole More

Biden Budget Plan Would Close Crypto Tax Loss Harvesting Loophole

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  • Hold On (Score:5, Funny)

    by Barny ( 103770 ) on Thursday March 09, 2023 @09:07AM (#63355721) Journal

    Let me find my smallest violin to play just for the cryptobros.

    • Re:Hold On (Score:4, Funny)

      by Cyberax ( 705495 ) on Thursday March 09, 2023 @06:33PM (#63357147)

      Let me find my smallest violin to play just for the cryptobros.

      Is it available as an NFT?

  • Beware the taxman (Score:5, Informative)

    by quonset ( 4839537 ) on Thursday March 09, 2023 @09:08AM (#63355727)

    This is a good step in the right direction. People keep talking about all these loopholes allowing companies to not pair their taxes because they've bribed elected officials, at least this would cut down on another abuse. Too bad this doesn't apply to investment firms as well.

    In another unrelated tax news, the AirBnB folks are also having to pay their taxes. People who rent their homes through companies such as AirBnB (and yes, they are renting their homes. They're not "sharing") must report that income on Schedule 1 (Form 1040) [irs.gov] if they use that form. Line l states the following:

    Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property

    Also, line z is for any other income not declared elsewhere such as proceeds from your drug operations or crypto mining.

  • You'd think they'd be more interested in stopping it altogether. But hey may as well make a buck off market manipulation.

    • no they want to get people for not paying taxes so they need to close that loophole and when you don't pay they can send you to an super max pound me in the ass prison if they see money laundering

    • Why would they stop market manipulation? (Score:5, Informative)

      by DeplorableCodeMonkey ( 4828467 ) on Thursday March 09, 2023 @09:51AM (#63355851)

      You'd think they'd be more interested in stopping it altogether.

      If they were trying to stop market manipulation, they'd be hitting stock market dark pools [investopedia.com] before even touching crypto. Those were literally designed to allow whales to trade massive chunks of stock without impacting daily volume. The SEC is allowing market makers to route buy orders to dark pools to control price action on the buy side while routing sell orders immediately to the exchanges so that price action takes effect immediately.

      It's amazing to me how so many people on this site sit back and act like the crypto market is uniquely corrupt. It only seems that way when you actually learn how the stock market works these days. The games being played in the stock market make crypto look almost honest.

      • Re:Why would they stop market manipulation? (Score:4, Informative)

        by iAmWaySmarterThanYou ( 10095012 ) on Thursday March 09, 2023 @10:03AM (#63355901)

        Crypto is not uniquely corrupt. No one here has ever said that to my knowledge.

        Crypto is corrupt. Other things are corrupt, too. But that doesn't mean we can't talk about crypto. Just because there are murders doesn't mean we should ignore rape.

        The reason crypto gets more attention is because they ask for it. They push crypto bro shit all day long on blogs, Twitter, TikTok, and sites like this.

        I don't see Wall Street pushing hard in dark pool trading.

        • Re: (Score:2)

          by Deef ( 162646 )

          I don't see Wall Street pushing hard in dark pool trading.

          According to current SEC Chairman Gary Gensler, approximately 90% of retail investor stock trades are currently being routed to dark pools. (Note: "Retail investors" is stock trading by individuals like you and me, as opposed to hedge funds and big institutions.)

          Ninety.

          Percent.

          Do you suppose that brokers, market makers, etc. are doing this just because they are trying to get the very, very best prices for those retail investors, prices that they can't get on lit markets?

          I don't think so.

          Investors have been

          • You misunderstand what I was saying.

            I was not at all saying dark pools aren't happening. I was already aware and I'm sure it's exactly as you say.

            What I was getting at is that we have 2 different corrupt groups manipulating securities.

            Group A is very loudly all over the net and anyone with a microphone about how everyone should get in, buy their stuff, HODL it, and it can only go up, despite the blatant rug pulls, wash trades and endless other bullshit they pull right in front of everyone's face every day.

            • Re: (Score:2)

              by Deef ( 162646 )

              Thanks for the clarification of your position. I agree that we're probably not as far apart in position as I initially assumed.

              Still, I'll point out that while members of group B don't go out and say "dark pools are wonderful!", they often instead say "Look how awesome we are at improving price discovery! And the American stock market is a model for the world and totally transparent and you should totally invest in it! And a market maker and a hedge fund owned by the same people would totally not collude to

              • We're in total agreement. I'm with you on everything you're saying.

                I like that you point out Cramer in particular. He has been at it for a long time and is definitely a pos and should be fired, in jail or something.

                I also lmao when that hedge fund guy got crushed when AMC went up because of the Reddit crowd. That was well deserved.

      • Crypto is not uniquely corrupt but it is notably, highly corrupt - no other payment system was able to make ransomware practical.

  • Surprised to find out that the "wash sales rule" (which is well known) is limited to "securities". You'd think it should apply to anything that's a tradeable asset, whether it is defined as a registered security or not.

    • "The Commodity Exchange Act prohibits wash trading" - some government site

      As far as I know, wash trading is not allowed for commodities either. I'm not quite sure what they're trying to do.

    • Yeah, I'm astonished to find out that anybody would be trying to take deductions for wash sales. I've only read TFS not TFA but it stirs great curiosity. I would think that current rules prevent this and I hope the IRS comes down hard on anybody who tries such a thing.

      • Yeah, I'm astonished to find out that anybody would be trying to take deductions for wash sales. I've only read TFS not TFA but it stirs great curiosity. I would think that current rules prevent this and I hope the IRS comes down hard on anybody who tries such a thing.

        I'll need to talk to my spouse, the one with the MBA in tax prep about this.

        Just from the summary, I can see the process. I've bought an asset, it's lost value, I'd like to claim that loss this year to offset some other, real gains. The tradeoff is I'll have larger capital gains next year, when I sell for good and keep the proceeds.

        I can see the IRS taking a dim view on this. The only purpose of the transaction is to reduce your current year tax liability. There's no other legitimate business reason for the

        • There's no point of allowing deductions on wash sales. If you want to allow such deductions, you can simply let the tax filer deduct unrealized losses at the expense of their future cost basis. The actual sale/purchase isn't necessary at all and is a sham.
        • You're not reducing your taxes though.
          You're just choosing when to realize (and be taxed on) the gains and losses.

          If you pay less tax this year, you'll pay equivalently more next year, as your cost-basis is reduced by the sale.

          I don't see the problem with this.

          Someone please explain to me why this is wrong like I'm five years old.
          • I'm certainly not qualified to state what is "wrong" from either a moral or a tax policy standpoint. I can, however, describe current tax policy. In the current mechanism, unrealized losses cannot be deducted and unrealized gains aren't taxed. The alternative would be mark-to-market and calculate taxes on an annual basis including unrealized gains/losses.

            Allowing deductions for unrealized losses but not taxing unrealized gains would significantly reduce tax revenues as you would take deductions whene

            • I knew all of that. Thanks though.

              But still, whether it is you or your estate or beneficiaries paying the gain tax whenever eventually realized, the tax eventually would get paid, on the amount of the net gain after losses, which is as it was intended.

              I suppose you could keep the investment forever, unrealized, and use it as collateral for loans, as I believe very rich people like Elon Musk are doing.

              But anyway, if I have a stock, and it is in a loss position, and I have some other reason I need to reduce m
              • There's no law saying you can't sell/repurchase a stock to realize a large gain if you would like to do so. Would a repurchase allow you to "unrealize" the gain. No, not for ordinary stocks. However, with things like real estate you can set money aside for a similar purchase and not pay capital gains tax.

                Whether you want to call them "populist" reasons is again outside of what I can comment on. The government doesn't need revenue multiple generations from now. If you could deduct unrealized losses, g

                • Why is it considered an unrealized loss though? The loss was realized, for a moment, just like the gain would be if I did the same thing while in a gain position. i.e. sold then re-bought. In both cases, which are symmetrical, there is a realized gain/loss.

                  Calling it an unrealized loss is false.
                  • Because that would cost the government a lot of tax revenue. There's a lot of incentive to pull losses forward but not gains. That's why they aren't symmetrical. Whether that's good or bad policy is a different topic. But the budge hole would have to be filled if such a rule were instated.

        • The only purpose of the transaction is to reduce your current year tax liability. There's no other legitimate business reason for the transaction.

          Not necessarily. With crypto being so much more volatile than other assets we may have a greater likelihood of someone trying to time the market within the wash rule timeframe.

          Nevertheless, I'd say too bad and use the same wash rule and timeframe for crypto assets. The greater volatility is just a downside for the crypto niche, not a reason to apply a different set of rules.

  • This is pretty dumb. Maybe focus on people not paying their taxes instead of the people trying to.

  • Maybe they could just think about spending 3 TRILLION LESS over the next 10 years!

    ___________________________________________
    (What the hell am I thinking. That could never happen.)

    • I'll pose you the same challenge that has been offered to those in Congress advocating for the same: Please write down the things you will cut to save that $3 trillion.

      At that point there can be an actual debate about the merits of the concrete spending cut proposal against the merits of the taxes that have been proposed. Until then we're just off in fantasy land spinning our wheels.

      • That sounds like the budget process! You've probably never heard of it, but that's something they used to do every year before they got tired of arguing and realized they could spend whatever they wanted to if they skipped the process all together. Hence these things called, "continuing resolutions", and, "omnibus spending bills".

  • No losses should be covered by tax deductions - I hope it'll follow with gambling and others, additionally taxes should be the same regardless of the income - why stocks income taxes are different than salary?
    I would go even further - to remove all the business expenses deductions - it would incentivize business efficiency and cut corruption.

    This way taxes could be lower, simpler and more traceable with less room for cheating - but it will never ever be done and any politician even remotely proposing this (

    • Isn't it fair though? If you make money, you get taxed; so, why not give a break when someone loses money?

      • Isn't it fair though? If you make money, you get taxed; so, why not give a break when someone loses money?

        Because:
        - recklessness should not be rewarded
        - insurance is to cover risky endeavors
        - nobody get discount when buying e.g. a car (except corps), why when playing in a casino then
        - it's just a path for taxes avoidance - why not to lower taxes, but make everyone pay

        It's hard to define "fair", and I'm on the same boat - and still I think that in a long term simple, lower and not avoidable taxes would be better than complicated, high (only for people paying) and as the evidence shows lots of people don't pay a

  • Not sure how this new rule affects things, but one thing that really annoys me about tax law in regards to crypto is that if you are just moving funds between two wallets, that is a taxable event.

    Should be able to just shift funds around at will.

    • Re: (Score:2)

      by XXongo ( 3986865 )

      Not sure how this new rule affects things, but one thing that really annoys me about tax law in regards to crypto is that if you are just moving funds between two wallets, that is a taxable event. Should be able to just shift funds around at will.

      I'm not sure which part of the tax law you are referencing here. The current discussion is about the fact that the current tax law allows you to move funds from one wallet to another and take a tax loss by doing so.

      • Re: (Score:1)

        by Anonymous Coward

        This has nothing to do about transferring coins from one wallet to another.

        It has to do with SALES: converting currency types, from a cryptocoin to another cryptocoin, or from cryptocoin to cash.

      • I'm not sure which part of the tax law you are referencing here.

        I'm not referring the law in the article, just noting that if they are changing laws I really wish they would also effect a change that would allow moving crypto between wallets without it being a taxable event (well I guess it's a little related since as you noted that also allows for taxable loss; but the only change is that loss is treated as a wash sale).

        Come to think of it the notion that moving between wallets should trigger a wash rule i

  • What are the tax rules for commodities other than cryptocurrency?

    If this change makes cryptocurrency work the same way as pork bellies or oil barrels, then it's very likely a good idea.

    OTOH, if they're singling cryptocurrency out and treating it differently than gold bullion or wheat bushels, then fuck that.

  • A ban on tax deductions on wash trading doesn't affect tax revenues, only the timing.

    If someone is holding an asset for 5 years, letting them do wash trades every year before liquidating results in the same tax deductions as deducting the whole lot at the end.

  • If you make money on an investment, you pay more taxes on it. If you lose money, you pay less. That's fair, not nefarious. If people are re-buying the assets they just sold at a loss, what does it matter? Either they will continue to lose money on it, which in the end will be a wash, or they will make money on it and pay taxes they otherwise wouldn't have. All they are doing is spreading out the tax impact. Look at it like this:

    A = original value, B = final value, C = some intermediate value, using l

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