Death of Gemstone

[Whirlin]

Problem is I don't think Congress/IRS has quite tackled virtual goods yet. They have gotten around to things like Bitcoin and other virtual currency because those currencies typically have a real world value that you can easily trade it in for, but how do they tax things like selling bloodscrip for real dollars?

Someone spends 1000 real dollars to buy SimuCoins to run arenas and they end up selling all of their earned bloodscrip for 1200 dollars. Can the person deduct the initial 1000 dollars or do they have to pay taxes on the whole 1200? Can they deduct their monthly GS account fee? What about what they pay for internet? And how is it supposed to be reported? As regular income or is the person supposed to be considered a business?

I think this is the problem with the IRS just being given all of this information without any details, are they going to look at it and be like "Holy shit! This guy received 25k via PayPal and didn't report any of it! They owe us thousands of dollars!" without even realizing the possibility that this person genuinely received 2k in gifts and spent 20k to earn the other 3k they received? This just seems like a way for the IRS to put the onus on citizens to prove they don't owe taxes rather than the IRS proving the person does owe taxes.

I literally just answered this a few posts ago. You used to be able to reduce the earnings, Trump removed that ability if it's a Hobby. You'd need to treat it like a small business.

Yeah but how is it classified and how does it work? If I spent 5k buying an item and I sell it for 6k do I pay taxes on the 1k profit or the whole 6k? Is it income similar to working income or is it considered business income? Do I have to pay social security taxes on this?

If the IRS hasn't spelled any of this out yet then it's kind of absurd for them to expect people to comply with this.

Yes... they have. Multiple times. This is inherent with the management of hobby versus small businesses.
If it's consider a hobby, and not a small business, the 5k expenses is no longer realizable, and you're taxed for the full 6k income per Trump's reforms. Previously, and post 2025, you'll be able to realize the associated hobby losses associated with the revenue that's generated.
Previously, 9/10 times, it was considered to net out, because hobbies are expenses. However, with Trump's change, it's a new revenue stream that's untapped.

[Whirlin]

To be fair gifts have always been taxable, but the person giving the gift is the one responsible for paying the taxes and you can give something like 15k dollars per person per year that is 100% non-taxable, anything over that amount and the giver has to pay taxes.

But like I said before if this is all happening on PayPal it's going to send up red flags to the IRS. Like, just for shits and giggles, let's say 4 people send the same person 15k via PayPal in a single year, that's 60k that the IRS is looking at and thinking "That sure looks like a large amount of unreported income to us." What are they going to do with this information? Set up an audit? Harass this person into proving it was all a gift?

Just handing over this information to the IRS with absolutely no information behind the payments is dumb.

15k per sender per recipient. I could give you 15k, I could give shaps 15k, I could give PB 15k, before any gift taxes are enforced. And even then. If I paid you 20k, that would be 5k off of my death tax estate which is currently like, over 10 million. So instead I may have taxes garnished on the amount I have over $9,995,000. Gift taxes really aren't consequential. And if I have that much money, I'm setting up a trust anyway, and skirting the death tax holistically.
Right now, those transactions, because they're over 10k, are already required to be submitted by any financial institution to the IRS, because of the existing AML laws.
It's worth pointing out... Paypal is not an FDIC insured institution, doesn't comply with regulations, and no money that Paypal has is secured or protected, and they are under no obligation to return/protect your money.

[C.Difficile]

Be careful, some very bad misinformation being passed around here.

For example, cost of good sold is always "deductible", since the TCJA only removed deductions on INCOME. If you paid 5k for something and sold it for 6k, only the 1k is income, and you can't deduct any expenses from that amount.

https://www.taxwarriors.com/blog/did...ive-under-tcja

[Whirlin]

Really liking the conversations so far in this thread... learning some stuff myself.
I think people haven't thought about some other random stuff... ie...
Parents with kids at college... a lot of parents send money throughout the year to their kid... their kid is now going to need to file taxes on that money they are receiving from their parents...

Most parents make the payments direct to the college on their kids behalf, the money never really changes hands to the kids before payment. Before Trump, tuition education expenses used to be a For Adjusted Gross Income Reduction of income with a phaseout depending on income, so the payer of the tuition bills would receive some tax incentive for paying for college. This was removed.

Sons/Daughters that send money to their parents/siblings... same thing...
Family loans that go out to help... etc...

There's no sale. This is not revenue. This is a gift, and subject to estate taxes. Right now the max is $15k/yr per individual per recipient. Essentially, if I'm on my deathbed, sitting on $50m, and I would need to pay taxes on 40m of it when I die (assuming the current threshold is 10m, it changes every year), I can't just go around and start writing $1m checks to avoid that final taxation. Every dollar sent to a person over 15k reduces your estate before the death taxes hit. So if you write a check for $1015,000, your estate taxes would begin at 9m instead of 10m.

$ is already taxed like 4-5 times by time we get to spend it.... now it's just getting taxed again and again each time people transfer money they've earned already to friends/family/whatever potentially.

Yes, it's the velocity of money in economic theory. And again, this is not related to the changing the gift/estate taxes, it's a mechanism to identify revenue streams. The way it's proposed now, yes, you may need to substantiate/flag the transactions that entered your account that were gifts, where they came from, etc to verify that they're not revenue streams. However, the larger revenue generation comes from unregulated earning ability through 'the gig based economy' which they are using as a term to reference websites like Fiver, Etsy, Patreon, EBay, Facebook Market Place, etc, where individuals may be doing hundreds of onsy-twosy sales, which aggregate up into an entire way of life, but those goods and services and do not necessarily enforce revenue reporting (I think some may over a threshold).

That being said, this is speculative, but I wouldn't be surprised to identify a gift, you may be required to provide an SSN or something of the sender. You should be close enough to that person, trust that person, and be able to identify/obtain that information. Otherwise, is it really a gift?

Lastly... another loophole would be using Simu's GoA for smaller sales. But I doubt they'd be hitting those proposed reporting thresholds anyway.

[Tgo01]

For example, cost of good sold is always "deductible", since the TCJA only removed deductions on INCOME. If you paid 5k for something and sold it for 6k, only the 1k is income, and you can't deduct any expenses from that amount.

I didn't think it made any sense at all that you could in theory pay 100k dollars for something, sell it for 90k dollars, and be taxed for the full 90k, which would not only mean you lost 10k in the transaction but you now have to pay taxes on something you lost money on.

[Methais]

This like the 200th Death of Gemstone, if I had to hazard a guess, and I and the rest of us do, not a damn thing will change.

[Methais]

I'll probably talk to my tax accountant about it, and I honestly have no idea what he'll say. "Wait, you sold a text axe for $12,000? Explain this to me one more time."

Please follow up on this post with his reaction.

[Neveragain]

If you buy something, and sell it for a profit, it doesn't matter what it is or whether or not the IRS has figured out how to prove it yet, you owe taxes. This is true for illegal drugs, NFTs, and Gemstone silvers. Not getting found out is not the same as not owing the tax on the income, and if you deliberately try to hide it, well that's probably a whole different set of penalties. It's one thing to deceive PayPal, and another to hide income from the IRS.

I totally agree that they haven't got it all figured out, but that doesn't change what you're technically liable for. I'll probably talk to my tax accountant about it, and I honestly have no idea what he'll say. "Wait, you sold a text axe for $12,000? Explain this to me one more time."

Pretty much every time I tell people about $20,000 text boots their first comment is "That sounds like money laundering."

And you have to admit that it does and I'm sure the IRS will be thinking the same thing.

[Flap]

Hahahaha, yes of course you'd think this is the death of Gemstone.

OH NO I HAVE TO PAY TAXES ON MY INCOME BUH HUH HOO I HAVE TO CONTRIBUTE TO THE SYSTEMS I BENEFIT FROM!!!

[C.Difficile]

Pretty much every time I tell people about $20,000 text boots their first comment is "That sounds like money laundering."

And you have to admit that it does and I'm sure the IRS will be thinking the same thing.

They won't, because they actually know what money laundering is.