I am not a tax advisor.
I am not giving any kind of tax advice, nor am I presenting any kind of how to’s or what to do’s.
You must engage your own “tax advisor” in your jurisdiction. This Composition only offers several explanations of operations in the CRYPTOCOSM WORLD.
I was a certified financial planner and also a certified note broker. I have made contacts over the years with many professionals in the arena of offshore investments and accounts and been to many outside country conferences seminars on asset protection and types of constructs. Yes, certificates have expired.
Your DEX account and your CDAP account are Primarily WALLETS. That is they are a holding place in your name for the assets that you have produced. Nothing in those wallets are but the things you have produced or bought (say via buying BTS), Nevertheless, they are all the assets that you have produced through the Compumatrix system or bought with post-tax money and so as long as they are in those wallets they are not taxable events.
Let me give you an example:
YOU are an artisan – a painter artist….or – a woodworking crafts-person
You have painted several beautiful watercolor or oil paintings; OR
you have made with your hands and tools many small wood products, for example, wood picture frames or beautifully carved boxes for storing jewelry or even exceptional wood carvings to hang on a wall or set on a mantle.
OKAY, hopefully you get what I am saying, you see the picture.
Now you work out of a very limited space area so you go and rent a storage unit in which to store all those paintings or wood crafts.
There they stay in storage…..oh yes you have had expenses and the products do have value..….but absolutely no gain or profit at this point in time.
To get a gain or profit you will have to open your storage unit to someone else invite them in to shop and then “SELL” one of those stored items. (A PEER TO PEER transaction… at a price you determine. (a barter transaction)
NOW you have made a taxable event but only if you have exchanged the item with the shopper(buyer) for “fiat”. However, you do have the cost of the product and storage to deduct before you have the amount from that sale that is taxable.
I hope you get the picture here
BECAUSE both your WALLETS (DEX and CDAP) are just like that storage unit….while your assets remain in the WALLET there is no taxable event!!!
Now you can choose to take out of your wallet a certain amount of any asset and convert to a “fiat” transaction. Now you have created a taxable event per that particular amount of that asset.
ALSO IMPORTANT TO REMEMBER if you “send any part of your asset from your wallet to another person’s wallet (in our example above move from your storage place to another person’s storage place) that is not a taxable event either…..BECAUSE you did not convert it to any “FIAT currency”.*** Also good to always remember the word “decentralized” (no go-between agent or agency especially government).
Just like your “storage place” it was between you and storage place owner – no government interference.
Now if someone helps you manage your wallets, then you have a contract with them, and if at a cost then that is a deductible amount in the tax world. What we all need to do is to keep ACCURATE and good records WHEN we move our assets outside of the “wallet” to a designated value of other products or fiat conversion.
This is all part of the CRYPTO-ECO-SYSTEM world
It is not to be feared or become stressed out by.
Do not let professionals not well informed about this NEW ECO WORLD make you afraid because they lack real comprehension. Today the IRS and TRADE Commission still does not have a real grasp of it all.
This is what I would say to you hold on to your assets in your “STORAGE COMPARTMENT”. Do not take a huge loss because of fear. We will always be here to help you through any hurdles of misunderstanding
If any big hidden liability were to present itself to maybe cause members to fear and be threatened by be assured we would give an alert to everyone.
To clarify again….. I am not talking about “trades of crypto assets or loss and gain” because when you trade you are establishing value. Basically, you are conducting certain business activities.
AGAIN THIS IS ONLY A SCENARIO – to help understand the world of tax implications and/or events in the crypto eco-world. You still need to find a professional person (tax or such) in your jurisdiction that is knowledgeable in this eco world from whom to get advice.
Okay, hopefully, you are gleaning enough from my posting to understand the “strict” venue of “wallets” or “storage”.
Basically, you first store your product from which the only first engaged activity is the production of the asset and the cost thereof.
At this stage, there is not a taxable event because there is no establish event value. It is just inventory on your shelf. It is only at this moment in time, on paper, with only an ascribed supposed value. Because in time it can add or subtract value to itself in theory in your “wallet”. This is called “volatility”. This is basically a status for now on your inventory checklist.
However a business activity, that is, what one would call, a taxable event is if you do any kind of exchange, of any asset in your storage place, your wallet, to someone else for any kind of agreed compensation thus ascribing a market value at that moment to the asset. It could be “fiat” or any other item that has an understood acceptable market value. This activity is defined as a trade, a sale, a negotiated value, with gain(profit) or loss. “Gain(profit) or loss” is the differential between production and acquired cost to the sale invoice or receipt.
For example, you sell, exchange, convert any of your assets, paintings, or woodwork carvings to another person or their wallet for an agreed-upon value between the two of you.
Is this a P to P transaction, yes, ..is it a taxable transaction? yes. Why, because there was an attributed value to the asset and the other party agreed to that value and made the exchange. It can still be a “Gain or Loss”
I have used a company that will accept BTC for silver or gold coins or even platinum. I then do a transaction with them from my wallet to their wallet. They get some BTC and I get some metal.
This is a P2P transaction (NO MIDDLE MAN) –yet it does have tax implications. P2P never meant no tax implication in its definition. It is only that it goes back to the similitude of the ancient times barter system. Today because it is blockchain related in the Crypto asset system and decentralized the only place of record-keeping is the blockchain – P2P and of course your infallible personal records. Why? Because some P2P do not have tax implications of any kind and then others do. And yet even others have the “gift” definition attached to them.
So in the strictest sense, P2P does not confer upon a transaction nullification of tax implication.
It simply cuts out the middle man, primarily the go-between entities. Therefore everyone must be responsible for their actions and be diligent in personal record keeping. Today it has become easier since you can take “snap it” pictures or other pictures right from your computer and then assemble that into the proper folder. When you do it this way though remember to take backups of the folder to store offline.
Also, be careful of any “tit for tat” negotiations. If the market value, the REAL market value not one you assume, of “tit” is the same as that of “tat” so that there is not a “gain” or a “loss”. Then it is a “zero” taxable activity. But if there is a loss or a gain then it does become a taxable event. However, in both cases, it should have a record showing on your ledger.
I know for many this may seem to be complicated and taxing on the brain. But the reality is that it is not. One just needs to always remember the door you are opening and to which room you are entering.
Why else would we be admonishing everyone to do very accurate paperwork on and offline? Do not make assumptions that in the end can cost money.
So the bottom line is that P2P and decentralization do not in any way remove the personal responsibility that any person has to manage with intelligence and understanding all their assets in the Crypto Eco World, the CryptoCosm**. It is a very real world of “Finance” just not the one we have been accustomed to because we have been so used to and accepting of the control that reserve banks, other banks, and financial institutions have for so long asserted their control of and over, especially all of us the peons.
With all this said, I trust for most you are getting a better picture of the cryptocosm dynamic.
Definition provided by online search pathway:
**Cryptocosm refers to the network of organizations, systems, companies, and individuals powered by blockchain technologies in which security and decentralization are primary features.
Compumatrix is part of the cryptocosm market