Most of the pieces are in place for creating a stablecoin that lets you legally declare 0% in capital gains tax every year. Let me explain.
I came across an idea here to create a coin that people could roll their capital into before declaring their taxes that would allow them to book a loss while not actually losing any money. The original idea was for a stablecoin that would “self destruct” and pop back up after the new tax year so that everyone holding it could loss harvest while in theory not lose anything.
Implementation:
* The stablecoin would be a fork off any algorithmic stable coin, with minor features detailed below
Features:
* Stablecoin remains pegged at $1 through most of the year
* Right before the new tax year the following events occur on the blockchain
** A snapshot of the blockchain is taken (detailing who holds how much)
** The stablecoin is “rebased” to $0
** All tokens are then automatically liquidated at $0 out of holders wallets (realizing the tax loss)
* After the new tax year a completely new clone blockchain (lets call it series B) springs up and new tokens are airdropped to wallet holders that were wiped out according to the previously referenced snapshot (of series A) effectively reimbursing them and restoring the blockchain to what it was before, just on a new chain (theoretically the new chain should achieve the same market cap as the previous chain in the series).
* Rinse repeat the above steps every tax year iterating on the series of new chains that spring up by 1.
So, buy the coin before the new tax year, get liquidated for 100% loss, file taxes, get airdropped your wealth back. Rinse repeat every year and never pay capital gains.
The last part of this problem is how to redesign the airdrop action in this system. The IRS declares airdrops as income so we need a different method to basically achieve the same outcome. This is where I'm hoping the community can come in. Thoughts from the jungle?
Lol I had thought about on-demand tokens that can be invested in a programmed market that makes them loose value to declare as losses but your idea is much more thought out. It would have to look "natural" in my opinion: make the liquidation happen at random and through several cycles during the year. Use a chainlink Oracle to create close to true randomness while keeping a log of balances. Maybe instead of airdrops a "lottery" system/game?
In current tax year, stable coin A gets air-dropped tokens B with same supply as A that can be redeemed at 1:1000 ratio B:A (Does this dilute A so you break even? Pay 0.1% income?)
In next tax year, A gets rebased to B some how. If we simply admin burn or otherwise zero out A, do we then get to claim a loss if there was 0.1% paid for airdrop? Does A's market cap naturally move over to B? Thinking yes since A+B market cap should be stable wrt something
Interesting idea - would love to see someone come up with a system that could find the loophole. Although the wash rule doesn't currently apply to crypto assets, that may not last much longer and it seems like the IRS could issue guidance that would bring something like this under those rules. Or worse, could the IRS classify the new token / beginning of the year airdrop as income rather than capital gains? Lastly, I expect there are lots of people in government who may hate crypto but are willing to tolerate it as it provides a whole new source of tax revenue. Taking away the fed's cut would not be pretty. They would hire someone smarter than the wallet card guy (or gal) to figure out how to get that money back!
And I'm not a tax person so happy for anyone to correct this post.
In USDT vs other currencies this already works especially for companies. (At least on most European tax laws - but pretty sure it’s the same in the US).
For companies all unrealized gains in different currencies ARE taxed as income and all unrealized losses are taxed as loss.
Let me explain for a EUR company.
- You have 100k USD in income and get paid 4 times a year.
- Because it’s a company you have a double booked balance sheet. Legally you need to have the USD account be in EUR in the book keeping.
So now you get income with course of 0.85, 0.86. 0.87 and 0.88.
So you’ll have ~ 86’500 EUR at the end of the fiscal year in the virtual account.
But now course has fallen to 0.66 😱.
So while technically you should have 86500 EUR in reality you only have 66000 EUR.
So that’s a loss to your income of 20000 EUR. The same is true if you are holding USD over a year.
IF now on Jan 2nd the course is back to 0.865 then you have 20000 plus and you hold it for a year, but before the year ends the course is down to 0.66 so you are again back to 0 loss/win on the year.
So all a coin needs to do is reset to it’s exchange rate of something low always for the tax season (it’s not stable at that point). The rest is neutral. So a mostly harmless stable coin is needed.
Now probably IRS and co might find a way eventually but volatility can be bad and good and sometimes it evens out.
Wonder if this could tie into Wyoming DOA/LLC somehow. If you contribute appreciated crypto can basis and attribution of gain/loss be handled same as LLC rules?
Equivalent of blocker C corp could be that you're airdropped a token that has zero or nominal par value and it somehow regains value after some time. Idk
If binary options looks too much like gambling, hold both sides of bull+bear call/put spread on a super small cap where price can be pushed outside the strikes
There's a travel and sovereignty channel in http://BowTiedDiscord.com with people who are breaking down the pros/cons of certain countries and why they're good for expats. take a look and see what you like. probably better to leave once you have a fat stack of cash that you can put into investments because you don't want U.S. capital gains and exit taxes to eat up your earnings.
As an example, someone could exit their business with a $5M "event", pay tax, and then if they had Portuguese citizenship, they'd move there, drop their $5M into crypto, and then renounce U.S. citizenship because Portugal has 0% crypto taxes. This is just an *example* and renouncing citizenship is a big deal so be extremely careful and know what you are doing before you do this.
No, it's never too late. You need to stop comparing yourself to others and compare to yourself. You will age regardless of whether you decide to start now or later. Might as well start now. There are infinite resources out there. Take a look at http://bowtiedtetra.substack.com and http://bowtiedopossum.substack.com to get started. When you have SPECIFIC questions you can go to http://BowTiedDiscord.com and ask there, but nobody is going to hand-hold you so start reading and put some action in.
BTB or anyone running e-commerce biz, do you have a preference or opinion on digital products vs. physical products. The BTB vernacular seems more in-line with digital products however most of the e-commerce discussion on the stack seems to refer to physical products due to inventory references but could be wrong. I would also assume it's far cheaper to create and test products with digital/information products.
New here and would like some input. Considering the move in crypto's of late, what is the consensus on paying off debt now. I have been going 50/50 on debt vs investment. I was late to the crypto game and tried to catch up before the latest run. Didn't get there. Now wondering if I should go all in on getting my debt paid off? Or should I just continue to DCA and pay off 50/50?
How much debt do you have? I always told friends and family to pay off anything that is above 4%. Anything below that, you can pay the minimum or more. Helps you invest the rest. No debt = no stress too. Always depends on your situation!
I still have some student loan debt averaging around 5% and a car payment. Having a hard time balancing opportunity cost of not getting enough into crypto versus getting out of debt. I have a decent equities portfolio.
Current invest allocation is: 8% 401k at work (6% match), 2% Roth IRA, 2% taxable equities account and 1% crypto. I need to significantly increase my crypto holdings, but the debt is holding me back. Considering reducing the above allocation and moving into crypto and debt more. Just not sure.
I used to have higher work 401k and lowered it to a minimum. Lowered my expenses to buy more crypto. Sold any BS I had. Ate out less. Changed jobs to get more pay. Do what you can. I took to risk to switch jobs during pandemic but doubled my income. Maybe make a drastic change to get more invested?
I am not an accountant but general advice is to hold the debt if it's <7% interest and you think you can earn more than that through investment gains. If you earn 10% interest after taxes with debt that is rising at 7%, you've earned 3% through the difference.
If the first $50k biz fails should we invest another $50k with the knowledge learned from the first experience? Or if we cant get something running with that amount we are ngmi
It's never too late to start. Instead of dropping $50k on a business though, you should first test demand with some ads with $1k-$2k to see if anyone even cares about it. That way you won't have to drop as much money.
To be honest I've been on the fence of getting back into ecommerce after leaving my last business and reading this post I'm feeling good about starting another company. Last time was a partnership, this one will be solo and I'll take the lessons I learned last time. Thanks for the great content always.
A product I buy regularly had its price go up, but they also improved its quality. Good move.
The alternative (reducing quality to keep costs down) is why you can't buy Olympia Beer anymore, even though it used to be the #2 beer in the USA. Each change may have cut quality by 1%, but over time they made a hundred changes...
Level 7 - Interstellar Autist
Most of the pieces are in place for creating a stablecoin that lets you legally declare 0% in capital gains tax every year. Let me explain.
I came across an idea here to create a coin that people could roll their capital into before declaring their taxes that would allow them to book a loss while not actually losing any money. The original idea was for a stablecoin that would “self destruct” and pop back up after the new tax year so that everyone holding it could loss harvest while in theory not lose anything.
Implementation:
* The stablecoin would be a fork off any algorithmic stable coin, with minor features detailed below
Features:
* Stablecoin remains pegged at $1 through most of the year
* Right before the new tax year the following events occur on the blockchain
** A snapshot of the blockchain is taken (detailing who holds how much)
** The stablecoin is “rebased” to $0
** All tokens are then automatically liquidated at $0 out of holders wallets (realizing the tax loss)
* After the new tax year a completely new clone blockchain (lets call it series B) springs up and new tokens are airdropped to wallet holders that were wiped out according to the previously referenced snapshot (of series A) effectively reimbursing them and restoring the blockchain to what it was before, just on a new chain (theoretically the new chain should achieve the same market cap as the previous chain in the series).
* Rinse repeat the above steps every tax year iterating on the series of new chains that spring up by 1.
So, buy the coin before the new tax year, get liquidated for 100% loss, file taxes, get airdropped your wealth back. Rinse repeat every year and never pay capital gains.
The last part of this problem is how to redesign the airdrop action in this system. The IRS declares airdrops as income so we need a different method to basically achieve the same outcome. This is where I'm hoping the community can come in. Thoughts from the jungle?
Lol I had thought about on-demand tokens that can be invested in a programmed market that makes them loose value to declare as losses but your idea is much more thought out. It would have to look "natural" in my opinion: make the liquidation happen at random and through several cycles during the year. Use a chainlink Oracle to create close to true randomness while keeping a log of balances. Maybe instead of airdrops a "lottery" system/game?
OK, think I finally have a sane idea.
In current tax year, stable coin A gets air-dropped tokens B with same supply as A that can be redeemed at 1:1000 ratio B:A (Does this dilute A so you break even? Pay 0.1% income?)
In next tax year, A gets rebased to B some how. If we simply admin burn or otherwise zero out A, do we then get to claim a loss if there was 0.1% paid for airdrop? Does A's market cap naturally move over to B? Thinking yes since A+B market cap should be stable wrt something
Hmm if it can be redeemed at fixed ratio then A + B's supply would change. Idk if this works at all
Interesting idea - would love to see someone come up with a system that could find the loophole. Although the wash rule doesn't currently apply to crypto assets, that may not last much longer and it seems like the IRS could issue guidance that would bring something like this under those rules. Or worse, could the IRS classify the new token / beginning of the year airdrop as income rather than capital gains? Lastly, I expect there are lots of people in government who may hate crypto but are willing to tolerate it as it provides a whole new source of tax revenue. Taking away the fed's cut would not be pretty. They would hire someone smarter than the wallet card guy (or gal) to figure out how to get that money back!
And I'm not a tax person so happy for anyone to correct this post.
In USDT vs other currencies this already works especially for companies. (At least on most European tax laws - but pretty sure it’s the same in the US).
For companies all unrealized gains in different currencies ARE taxed as income and all unrealized losses are taxed as loss.
Let me explain for a EUR company.
- You have 100k USD in income and get paid 4 times a year.
- Because it’s a company you have a double booked balance sheet. Legally you need to have the USD account be in EUR in the book keeping.
So now you get income with course of 0.85, 0.86. 0.87 and 0.88.
So you’ll have ~ 86’500 EUR at the end of the fiscal year in the virtual account.
But now course has fallen to 0.66 😱.
So while technically you should have 86500 EUR in reality you only have 66000 EUR.
So that’s a loss to your income of 20000 EUR. The same is true if you are holding USD over a year.
IF now on Jan 2nd the course is back to 0.865 then you have 20000 plus and you hold it for a year, but before the year ends the course is down to 0.66 so you are again back to 0 loss/win on the year.
So all a coin needs to do is reset to it’s exchange rate of something low always for the tax season (it’s not stable at that point). The rest is neutral. So a mostly harmless stable coin is needed.
Now probably IRS and co might find a way eventually but volatility can be bad and good and sometimes it evens out.
Wonder if this could tie into Wyoming DOA/LLC somehow. If you contribute appreciated crypto can basis and attribution of gain/loss be handled same as LLC rules?
Lmao my brain is spinning
Have the DAO hold a blocker C corp in low tax jurisdiction to convert airdrop income into capital gains
Equivalent of blocker C corp could be that you're airdropped a token that has zero or nominal par value and it somehow regains value after some time. Idk
How about something like binary options? You buy both sides, one goes to zero one doubles. Could be called insurance policy instead of option
At expiration or insured event outcome, the valuations are decided but you don't control the token until you claim it next tax year
This assumes crypto tokens representing options/insurance would be taxed like property/commodity heh
If binary options looks too much like gambling, hold both sides of bull+bear call/put spread on a super small cap where price can be pushed outside the strikes
17 Years Young. Closed first two digital marketing clients with a third on the way.
@ChadMuzlim on twitter by the way. Thankful for yall
Needed this reminder. Thanks for cutting through the noise (again).
Thanks. Great post as always. I couldn’t stop laughing about the wallet card.
A lot of people calling for a 50% Correction/Bear Market in 2022 (Crypto Birb, Qiao Wang), what's your view Bull?
We post our portfolio every month. We aren't "hiding" anything. We'll always post our opinion monthly.
At what point is it time to move out of the US?
There's a travel and sovereignty channel in http://BowTiedDiscord.com with people who are breaking down the pros/cons of certain countries and why they're good for expats. take a look and see what you like. probably better to leave once you have a fat stack of cash that you can put into investments because you don't want U.S. capital gains and exit taxes to eat up your earnings.
As an example, someone could exit their business with a $5M "event", pay tax, and then if they had Portuguese citizenship, they'd move there, drop their $5M into crypto, and then renounce U.S. citizenship because Portugal has 0% crypto taxes. This is just an *example* and renouncing citizenship is a big deal so be extremely careful and know what you are doing before you do this.
2035
It’s either before that or never required.
Is it too late to start a business if you are 30 and just realizing all of this?
No, it's never too late. You need to stop comparing yourself to others and compare to yourself. You will age regardless of whether you decide to start now or later. Might as well start now. There are infinite resources out there. Take a look at http://bowtiedtetra.substack.com and http://bowtiedopossum.substack.com to get started. When you have SPECIFIC questions you can go to http://BowTiedDiscord.com and ask there, but nobody is going to hand-hold you so start reading and put some action in.
What an awful face
BTB or anyone running e-commerce biz, do you have a preference or opinion on digital products vs. physical products. The BTB vernacular seems more in-line with digital products however most of the e-commerce discussion on the stack seems to refer to physical products due to inventory references but could be wrong. I would also assume it's far cheaper to create and test products with digital/information products.
New here and would like some input. Considering the move in crypto's of late, what is the consensus on paying off debt now. I have been going 50/50 on debt vs investment. I was late to the crypto game and tried to catch up before the latest run. Didn't get there. Now wondering if I should go all in on getting my debt paid off? Or should I just continue to DCA and pay off 50/50?
How much debt do you have? I always told friends and family to pay off anything that is above 4%. Anything below that, you can pay the minimum or more. Helps you invest the rest. No debt = no stress too. Always depends on your situation!
I still have some student loan debt averaging around 5% and a car payment. Having a hard time balancing opportunity cost of not getting enough into crypto versus getting out of debt. I have a decent equities portfolio.
Current invest allocation is: 8% 401k at work (6% match), 2% Roth IRA, 2% taxable equities account and 1% crypto. I need to significantly increase my crypto holdings, but the debt is holding me back. Considering reducing the above allocation and moving into crypto and debt more. Just not sure.
I used to have higher work 401k and lowered it to a minimum. Lowered my expenses to buy more crypto. Sold any BS I had. Ate out less. Changed jobs to get more pay. Do what you can. I took to risk to switch jobs during pandemic but doubled my income. Maybe make a drastic change to get more invested?
my debt is not important because it doesn’t relate to your risk tolerance. but I do have around 1x annual salary’s worth
Yep just sharing what worked for me.
There are some accountants and tax guys that you can talk to at http://BowTiedDiscord.com
I am not an accountant but general advice is to hold the debt if it's <7% interest and you think you can earn more than that through investment gains. If you earn 10% interest after taxes with debt that is rising at 7%, you've earned 3% through the difference.
If the first $50k biz fails should we invest another $50k with the knowledge learned from the first experience? Or if we cant get something running with that amount we are ngmi
Keep going. Read http://bowtiedopossum.substack.com and http://bowtiedtetra.com then ask questions in http://BowTiedDiscord.com
It's never too late to start. Instead of dropping $50k on a business though, you should first test demand with some ads with $1k-$2k to see if anyone even cares about it. That way you won't have to drop as much money.
Thanks. I'm in a the situation BTB describes with 6 figs in crypto and looking to diversify into my own biz.
Love you, bull. I heard there’s a discord of the jungle, anybody got a link?
http://BowTiedDiscord.com
https://discord.gg/CpPqg9AC
How do you see inflation affecting less-wealthy countries such as Mexico, Thailand etc?
Everything is intertwined (the fiat ponzi) so no real change
Meaning everyone is impacted not just the USA
To be honest I've been on the fence of getting back into ecommerce after leaving my last business and reading this post I'm feeling good about starting another company. Last time was a partnership, this one will be solo and I'll take the lessons I learned last time. Thanks for the great content always.
A product I buy regularly had its price go up, but they also improved its quality. Good move.
The alternative (reducing quality to keep costs down) is why you can't buy Olympia Beer anymore, even though it used to be the #2 beer in the USA. Each change may have cut quality by 1%, but over time they made a hundred changes...
If Wood is correct it will change financial theory and monetary policy forever. They will find out how much is too much the hard way.