Taxes on Bitcoin – crypto expert warns investors against transactions and sales
Cathie Wood warns that „the taxman still has something to say“ when crypto investors want to offload or transfer their profits.
Cathie Wood, the founder and managing director of Ark Invest, advises crypto investors not to sell or transfer their Bitcoin (BTC) until the US Internal Revenue Service (IRS) has formulated clearer guidelines for the tax treatment of cryptocurrencies.
This warning also applies to Bitcoin Blueprint investors in other countries, who also face an uncertain legal situation regarding the taxation of cryptocurrencies.
Wood made the relevant remarks during a web conference hosted by options exchange CBOE, pointing out that bitcoin transactions could lead to massive tax liability if necessary.
„The IRS still has something to say if you’ve made large profits on bitcoin. I wouldn’t dare make any transactions until we see some significant changes in tax law in that regard,“ as quoted by Markets Insider Wood in this context.
At the moment, it is particularly tempting for long-term investors to sell off their Bitcoin assets to potentially book out significant gains, as the market-leading cryptocurrency has climbed to a new record high of more than US$61,000 in recent weeks. Although it has been on a downward trend since then, it has nevertheless posted a year-to-date gain of 80%.
Bitcoin investors in the US don’t even have to write off their crypto assets, but can even buy some goods directly with them. Tesla, for example, makes it possible to buy cars with Bitcoin. At the current price, a Tesla Model 3 would be available for just under 0.72 BTC.
However, Wood also warns against such transactions, because whether the profits made with Bitcoin are directly booked out or used for the direct purchase of goods is irrelevant, because both cases are relevant for tax purposes. As long as there is no change in the law that provides more legal clarity or removes this circumstance.
Although Wood’s warning is aimed specifically at investors who have made massive gains, it arguably applies to many other crypto investors as well, as the vast majority of them are likely to have made a profit from Bitcoin’s record run. According to an estimate from November 2020, around 98% of all wallets were in the black at that time. Since then, the market-leading cryptocurrency has made further significant gains.