Transcript
Introduction
Eric
Hello, this is Eric Goldman and my guest today is Dan Hannum, the chief operating officer of ZenLedger, a crypto tax software similar to Turbo Tax. Dan is here today to help us understand the evolving world of taxes and the impact on crypto, DeFi and NFTs.
Framework for US Tax Code & Crypto
Eric
Dan, thank you for joining me today.
Dan
Yeah, thanks for having me on.
Eric
Before we launch into it, I want to give two quick disclaimers to our listeners. First, this conversation should not be considered investment, legal or tax advice. And second, throughout the show, we will be referencing the US tax system. With that in mind, Dan, can we just kickoff with a framework for how the US tax code currently is structured as it relates to crypto?
Dan
On the US side, there's some interesting parameters and, really, the first one was back in 2014, which seems wild. There's still people that get into crypto today that are like, well, the IRS didn't give any guidance. It's like, well, they did, you just don't like it. They first guidance that the IRS really put out was in 2014 and, essentially, that's what created a lot of the mess around crypto taxes. And, really, what that distinction was, was that the IRS was going to view crypto assets as property, somewhat similar to stocks. And then, really, that's what has created a lot of the ambiguity in crypto taxes. And what I mean by that is, essentially, there's three main buckets that you can look at, we can dive as deep as we want. On a high level, going from dollars into crypto is not a taxable event. So, you can put as many dollars into whatever asset, assuming it has its Fiat On-Ramp, as you want and then hold it for as long as you wanted, there's no taxable event. Then you have crypto to crypto and this is really where a lot of people start to get thrown off, going from Bitcoin to Ethereum or Ethereum into USDC or even going from USDC into USCT, a stable coin, has a taxable event. And then, the third buck is going from crypto back into dollars, which I think is more intuitive for everyone. It's like, okay, I sold crypto, I have dollars, I probably had a gain or a loss, that one's intuitive. So, the three main buckets are those and that's really where the rise of DeFi and NFTs have become challenging to keep track of, it's because there's so many items within that transaction that you need to really be aware of, as you're continuing to buy NFTs or to buy DeFi assets.