Sheltering ICO Gain

Disclaimer 

[To Come]

For example, if the company described above took $35 mm in the first year and invested it in a a qualifying equipment lease, it might have results along the line of a net $5 mm tax loss in year 1, ~$6.5 mm loss in year 2, ~$4.5 mm in year 3, followed by $21 mm of income in year 4.  A transaction like this effectively shifts $21 mm of loss into years where a refund can be claimed ($8.4 mm worth), and the money has to be invested somewhere.  (Yes, of course, leases are higher risk than Treasury Notes, but maybe that risk is manageable.)

Comments

Post a Comment

Popular posts from this blog

Should we replace the SAFT with a DEFT?

Disclaimer  In the last year, many pre-sales of tokens have been structured as "SAFTs" ("Simple Agreement for Future Tokens"), partly because it's hard to sell a token that doesn't exist yet and partly because SAFTs were seen as a pathway through securities laws and other issues. More recently, I've been hearing about the death of SAFTs.  The word "future" in the title implicates CFTC rules (with a potential related significant increase in the required net worth of purchasers), and the promise to issue tokens that don't currently exist make it questionable whether a SAFT is "property" for tax purposes, which is a prerequisite for an "83(b) election". It's also not possible to use a SAFT to make an acquisition of another company or assets without having the seller be taxed on the value of the SAFT on the date of issuance regardless of when the tokens ultimately are issued -- i.e. when the SAFT recipient can'
Read more

Should I sell my Tokens and realize a loss before year end?

Disclaimer     I have now been asked almost a dozen times about the "Wash Sale Rules" and whether token holders should sell and repurchase tokens before year end. The Wash Sale rules (IRC Section 1091) provide that if you sell a security at a loss and repurchase a substantially identical security within 30 days, your loss will be disallowed (and added to your tax basis in the purchased security). People have been hearing that the Wash Sale rule doesn't apply to tokens because the IRS has not designated tokens as securities.  (Remember that the characterization of tokens as securities by the SEC or as something else by the CFTC is not relevant for tax law purposes.  Tokens may be securities for some purposes and not for others.) If that's true, you could sell your BTC today and buy back BTC an hour later and trigger a loss that you can use to offset capital gain (or up to $3,000 of ordinary income) from some other source. That's a very reasonable argument
Read more

2. Structural Alternatives (Outline)

Disclaimer There are at least three basic structures for Crypto Companies, which will be discussed in separate posts: A.     International Structure  (very hard to make work) In order to have any reasonable argument that this structure work, you have to assume:  Existing network development is extremely limited (e.g., pre White Paper); and Sale of Tokens will be part of an operating business where the Sponsor provides software or services to users. OpCo forms a wholly owned foreign subsidiary ("ForCo") OpCo and ForCo enter into a "Cost Sharing Agreement" pursuant to which each will fund a portion of the development costs of the Network, based on the projected share of income from foreign sources and domestic sources.  OpCo funds a portion of its share of those costs by contributing all the foreign rights to the Network to ForCo Each of OpCo and ForCo sell Tokens or SAFTS to raise money to fund the expenses of developing the network and operating t
Read more