U.S. Bitcoin Exchange Coinbase Ordered to Give Customer Data to IRS

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A U.S. District Court judge has ordered bitcoin exchange Coinbase to provide the Internal Revenue Service (IRS) with the transaction records of more than 14,000 customer accounts.

The ruling (PDF), which was filed in the Northern District of California’s San Francisco courthouse, compels Coinbase to provide the IRS with customer records for accounts that had at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any single year from 2013 to 2015. Coinbase estimates that 14,355 accounts will fall subject to the purview of the summons.

Since the IRS classifies cryptocurrency as property, all cryptocurrency holdings are subject to capital gains taxes at the time of disposition. However, the IRS claims that virtually no U.S. taxpayers have reported bitcoin-related investment income on their annual tax returns. Armed with this data, the agency will be able to identify and levy penalties against investors who have skirted their legal obligations to pay taxes on their bitcoin investments, and — in some cases — prosecute offenders for tax evasion.

“That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” U.S. Magistrate Judge Jacqueline Scott Corley wrote in her ruling. “The IRS has a legitimate interest in investigating these taxpayers.”

The ruling did not come as a surprise. Earlier this month, the judge told Coinbase in a hearing that she was inclined to “give tremendous discretion to the agency as to how they investigate” whether people are making money on their bitcoin investments. Following that hearing, Coinbase published a blog post that more or less conceded defeat but took solace in the fact that the company had successfully forced the IRS to narrow its initial summons, which sought records from approximately 500,000 customers.

Despite the narrow focus of the final order, the successful defense of the summons will likely encourage the IRS to ramp up its efforts to bring bitcoin users into compliance with tax reporting obligations — particularly following the industry’s dramatic growth in 2017.

Featured Image from NPR/Dennis Brack/LandovIRS-v-Coinbase-order

Mark Cuban’s Bitcoin Investing ‘Hail Mary’ Is Paying Off

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When mainstream investors and analysts discuss bitcoin investing, their answers are often so divergent that one could question whether they are even talking about the same asset.

This contentious debate has heightened in recent months, as the bitcoin price has repeatedly shattered records and carried the markets to fresh all-time highs. That trend continued on Saturday, as the bitcoin price rode a post-Thanksgiving wave of euphoria to a new high-water mark of $8,754 on bitcoin exchange Bitfinex.

bitcoin price
Bitcoin Price Chart | Source: BitcoinWisdom

The bears have been out in full force. JPMorgan CEO Jamie Dimon says bitcoin is a “fraud,” even though his firm might help clients trade bitcoin futures, and other entrenched financiers have issued similar condemnations.

That said, the list of bulls is steadily growing, with market observers such as billionaire hedge fund manager Mike Novogratz beginning to realize that it is a revolutionary technology.

Mark Cuban, a long-time cryptocurrency skeptic, has softened his stance in recent months, but he still believes cryptocurrency is “more religion than asset” and that bitcoin investing is a longshot — but one that aggressive investors should consider taking.

In a recent interview with Vanity Fair, the dotcom billionaire and Dallas Mavericks owner advised prospective investors to take a conservative approach, allocating the majority of their assets to a simple S&P 500 index fund. However, he added that “true adventurers” should place as much as 10 percent of their savings into bitcoin and ethereum.

“If you’re a true adventurer, and you really want to throw the Hail Mary, you might take 10 percent [of your investment capital] and put it in bitcoin or ethereum,” he said.

Now, very few Hail Mary attempts succeed, and Cuban cautions those willing to take the chance that they should be prepared to lose all of their money.

Nevertheless, those true adventurers who did take the plunge into bitcoin investing on Cuban’s advice have already been richly rewarded. Since Cuban issued this suggestion on October 18, the bitcoin price has already risen by 60 percent, increasing the value of a hypothetical $10,000 investment to $16,000.

Counting the value of any coins derived from Bitcoin Gold, an altcoin that forked away from the main bitcoin blockchain in late October and airdropped coins to anyone holding bitcoin funds at the date of the fork, the present value of that initial investment rises to nearly $17,000.

if this trend continues, it won’t be long before Cuban’s bitcoin Hail Mary begins to look more like an extra point attempt.

Featured Image from ABC News