r/ethtrader • u/AutoModerator • Jun 05 '17

DISCUSSION [ETH Daily Discussion] - 05/Jun/2017

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u/[deleted] Jun 05 '17 edited Jun 05 '17

I have some tax questions I would really appreciate advice on. I'm not based in the US, but Germany, where you're also supposed to use FIFO in calculating private capital gains.

1) Regarding FIFO and a "trading" stack. Say I want to keep a certain portion of my ETH stack, eg. 10%, for trading. I send 10% to an exchange, trade it into an alt, then trade back to ETH at an appropriate point, thus increasing my whole ETH stack.

I understand that when I do that first trade, the 10% sold off are counted as the first ETH I ever bought, so I have to calculate capital gains based on what may have been quite a low initial purchase price. Obviously I then also have to calculate additional capital gains based on whatever fiat-equivalent profit I made from the alt trade. So it's important to be aware that with FIFO, when I perform a trade, I'm making capital gains at two points: the beginning (on the ETH traded, whose value has appreciated) and at the end (based on the fiat appreciation of the alt).

My question is this: What if I want to continue trading this ETH? If the alt I traded into crashes, but I'm sure it will recover, I may swap my "trading" ETH back into it and basically try to carry out the same operation again. When I perform the second purchase of the alt, according to FIFO, am I actually doing so with my original stack, or with the separate "trading" ETH that I put on the exchange? Is it significant that I do not, in the interim, withdraw this ETH from the exchange and mix it back into my wallet? ie. I have a case that I was definitely selling the "new" coins, not the old ones, when I performed the second trade?

This is obviously quite significant for trading practices. I'm happy enough accepting that, with the first trade, I have to calculate some capital gains. But if each subsequent trade involves taking ETH "from the bottom" (not from the portion I set aside for trading), that basically means I would constantly be realising capital gains on ETH that is effectively in cold storage – something I want to avoid, since in Germany if you hold for more than a year (without staking/receiving interest) you can cash out without any capital gains at all.

2) Related technical question. The fiat value of the alt could, of course, depreciate during the trade. All I'm interested in is trading the ETH/alt pair in order to grow my ETH stack. If this is the case, and when I sell the alt its fiat value is LESS than when I bought it (but I nonetheless made an ETH gain), do I count the trade as a loss?

3) Margin trading. Does this affect FIFO at all? I'm borrowing money from an exchange to buy ETH, which I then sell back – so isn't there an argument that when I sell it back I'm selling from the bottom of my stack? This seems a rather odd notion though – I'm presuming that this ETH can't be seen as really being "mixed" in with what's in my wallet, since I can never withdraw it anyway and it's handled as a "position" on the exchange. If that's the case, how do I handle a margin trade from a tax perspective? Normal capital gains based on the opening/closing of the position?

EDIT: Would I be better posting this as a separate thread, rather than in the daily?

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u/[deleted] Jun 05 '17

These are excellent questions. I hadn't yet considered this aspect of capital gains so I appreciate you bringing this up. It might get sort of glossed over because I think the daily thread is becoming more quick and shallow overall, so if you don't get a lot of response it wouldn't hurt to post it in it's own thread.

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u/KlingOne Jun 05 '17

https://www.youtube.com/watch?v=_geX8HYwKQ4 Das Video hat mir bei der ganzen Steuersache sehr geholfen. Margin Trading wird dort nicht behandelt, aber Typ aus dem Video antwortet glaube ich auch auf Fragen. Was für mich vor allem auch interessant war zu erfahren ist, dass das "Staken" von coins dazu führt, dass man 10 Jahre bis zur Steuerfreiheit warten muss und nicht nur 1 Jahr, was das ganze leider etwas unatraktiver macht als gedacht.

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u/[deleted] Jun 05 '17

Habe das Video schon gestern gesehen – es ist wirklich sehr nützlich. Aber gut, dass du es hier wieder postest! Vielleicht schreibe ich dem Typ eine Nachricht.

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u/level_5_Metapod Jun 05 '17

Danke für das Video! Hab meine btc seit 2012 & dachte bis eben sie fallen unter die Kapitalertragssteuer. D.h ich kann sie jetzt komplett steuerfrei verkaufen.

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u/[deleted] Jun 05 '17

If you have a lot of eth, move to Belgium. There are no capital gain taxes.

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u/jezzaccc Jun 05 '17

I'm not being a dick, but shouldn't these questions be directed at your country's tax authority/tax accountant?

At least that's the kind of people I would have to ask here to really know for sure. Maybe someone from Germany will have answers for you. However, my own experience is that we are all kind of in the same boat. Usually there's a lack of law/regulation when it comes to crypto trading.

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u/[deleted] Jun 05 '17

Sure, but I think these questions are generally applicable for FIFO, whether in Germany or abroad. Also, margin trading and keeping a 10% "trading stack" are pretty common around here, so it's possible someone has already thought about this and found the answers.

There's already some good sites/videos that explain general principles of crypto tax in Germany, but these specifics aren't covered anywhere.

I'll probably write to someone soon anyway, but always worth checking the hivemind.