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 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

1. So you want to do an ICO

Disclaimer The number of token offerings through ICOs or otherwise that have crossed my desk in the last 12 months has exploded.  Many of those transactions have been put together with such speed that corporate structure and tax treatment are an afterthought with expensive consequences.  Even now, most of the focus seems to be on the securities law treatment of Tokens.  The following is a brief outline of some issues that are worth considering -- primarily in order to avoid adverse tax issues for founders, issuers and investors.  Following posts will discuss different structures mentioned below in greater detail. Before we get to actual structures, however, it's important to understand what kinds of adverse things can happen to you.  Many people think that selling Tokens should be taxed the same way as a stock sale is taxed -- but there is a specific Internal Revenue Code section that provides stock sales are tax free -- and it doesn't apply to Token sales. ...
Read more

Taxes on Token Sales (in particular CA State taxes)

Disclaimer  Assuming you have successfully designed a Token Network and are selling Tokens (whether directly or through SAFTs) you need to determine where you owe tax and at what rate. The new federal rules  (Section 14202 of the Tax Cuts and Jobs Act) may provide significant benefits to Token sellers who can show that their income from Token sales is "foreign derived" (a reduced rate to 13.125%).  Unfortunately, the term "foreign derived" is not well defined and its unclear if Token sellers merely need to prove that the buyers have a foreign address or will need to show actual foreign residence and use, but it's worth watching and tracking whatever information you have on buyers. Fortunately, the California rule is more straight forward and may offer some opportunities. It says that the income from sales of intangible property may be allocated instate (subject to CA tax) and out of state (not subject to CA tax) as follows: "Sales from intangible ...
Read more