WEBVTT 1 00:00:00.160 --> 00:00:04.360 In the crypto ecosystem, stuff just shows up, you know, just air 2 00:00:04.440 --> 00:00:07.480 drops happen, and you're like, I didn't want this until you kind of 3 00:00:07.559 --> 00:00:09.759 get this question. I didn't even know I got it eeo, and now 4 00:00:09.759 --> 00:00:14.199 I have income I didn't know I had those through a little bit. I 5 00:00:14.720 --> 00:00:17.120 think, like I said, objectively can look at taxl and say, hey, 6 00:00:17.160 --> 00:00:19.640 the tax alaw kind of says this is the outcome. Now there's a 7 00:00:19.640 --> 00:00:23.640 different question about like, yeah, is there maybe a policy discussion we had 8 00:00:23.679 --> 00:00:26.559 about is that the right answer? Should the law be augmented a little bit 9 00:00:26.640 --> 00:00:38.079 to accommodate some of this stuff. This content is brought to you by Uphold, 10 00:00:38.119 --> 00:00:41.479 which is one of the top crypto platforms out there, which allows you 11 00:00:41.520 --> 00:00:45.600 to easily buy and sell trade bitcoin and the top all coins in the market. 12 00:00:45.880 --> 00:00:50.520 Uphold lists two hundred and sixty plus cryptocurrencies. They also allow you to 13 00:00:50.520 --> 00:00:54.280 trade precious metals such as gold, silver, palladium, and platinum. I've 14 00:00:54.280 --> 00:00:57.079 been a user of Uphold since twenty eighteen, so I can vouch it this 15 00:00:57.159 --> 00:01:00.799 platform. They have full transparency reports and they don't commingle or lend out your 16 00:01:00.840 --> 00:01:06.079 funds. They also have a great product called Vault, which is an assisted 17 00:01:06.200 --> 00:01:11.799 self custody product. A vault allows you to maintain custody of your funds and 18 00:01:11.879 --> 00:01:15.680 the keys are split, so Uphold holds one and you hold two, and 19 00:01:15.719 --> 00:01:19.799 if there's any issues, if you lose one of your keys, Uphold will 20 00:01:19.799 --> 00:01:26.519 help restore these keys and you can maintain access to your funds. It's twenty 21 00:01:26.560 --> 00:01:30.680 four to seven instant trading. It's trustless, so this is a great feature 22 00:01:30.959 --> 00:01:34.239 that can give you peace of mind where you don't have to worry about if 23 00:01:34.319 --> 00:01:38.959 you lose your private keys and much more so. If you'd like to learn 24 00:01:38.959 --> 00:01:42.079 more about Uphold, please visit the link in the description. Welcome to the 25 00:01:42.120 --> 00:01:47.719 Thinking Crypto Podcast, your home for cryptocurrency news and interviews. With me today 26 00:01:47.799 --> 00:01:52.840 is Miles Fuller, who's the senior director of Government Solutions at Taxbit. Miles, 27 00:01:52.840 --> 00:01:56.680 great to have you on. Yeah, thanks for having me, Miles. 28 00:01:56.760 --> 00:01:59.599 I've been a user of tax bit for years when you guys are more 29 00:01:59.599 --> 00:02:02.840 consumed focus, so I'm very familiar with the product and we're going to talk 30 00:02:02.879 --> 00:02:07.159 a bit about you know, tax bit and as well as what the IRS 31 00:02:07.239 --> 00:02:09.439 is doing with crypto. But tell us about yourself, your background. I 32 00:02:09.479 --> 00:02:14.039 know you spent some time with the IRS. Yeah, sure, so my 33 00:02:14.080 --> 00:02:19.159 background I did. I came out of school. My background from educationally is 34 00:02:19.439 --> 00:02:21.800 finance economics. That's kind of where I started. But then I went to 35 00:02:21.879 --> 00:02:24.319 law school, came out of law school, landed a job as a lawyer 36 00:02:24.360 --> 00:02:28.039 for the IRS. So like two things people don't want to hear about being 37 00:02:28.039 --> 00:02:31.039 a lawyer working for the IRS, but I did that for fifteen or sixteen 38 00:02:31.120 --> 00:02:35.479 years, and I did. IRS. Lawyers kind of come in two flavors. 39 00:02:35.759 --> 00:02:38.639 There's normally one that's the Washington d C type rights like rights, guidance, 40 00:02:38.719 --> 00:02:42.159 rights regulations, that stuff, and then there's the kind that's out in 41 00:02:42.199 --> 00:02:46.479 the field working with examiners and doing stuff and doing litigation for the IRS. 42 00:02:46.560 --> 00:02:50.240 I was the latter. I was in the field doing stuff. But through 43 00:02:50.280 --> 00:02:53.000 that job is where i've kind of I used to tackle a lot of abusive 44 00:02:53.039 --> 00:02:58.000 tax stuff, but and I got to know a lot of people. But 45 00:02:58.039 --> 00:03:00.000 through that is where I kind of came first in contact with crypto. Although 46 00:03:00.000 --> 00:03:05.599 it wasn't through tax, it was more of doing investigations the IRS does relating 47 00:03:05.639 --> 00:03:09.439 to anti money laundering that kind of stuff, And through that I had someone 48 00:03:09.439 --> 00:03:12.080 I know. They reached out and they're like, Hey, we got this 49 00:03:12.080 --> 00:03:14.680 thing we're doing and involves this thing called bitcoin. Do you anything about that? 50 00:03:14.719 --> 00:03:16.800 And I'm always happy for a challenge, So I was like, I'm 51 00:03:16.800 --> 00:03:19.680 not sure, I know a little bit, but let me get in. 52 00:03:19.680 --> 00:03:22.280 And that was like seven or eight years ago, and now here we are. 53 00:03:23.159 --> 00:03:27.879 Wow. And was your first entry into the crypto industry via taxbit? 54 00:03:28.680 --> 00:03:31.719 Yes? So officially so well through the IRS side, but to the actual 55 00:03:31.719 --> 00:03:35.479 industry side was through Taxbit. I was at the IRS and I came over. 56 00:03:36.520 --> 00:03:38.719 You may know the history there. Obviously, tax Bit does calculation related 57 00:03:38.719 --> 00:03:42.479 stuff. You sound like you're a customer of that service. We had for 58 00:03:42.560 --> 00:03:46.639 years. The IRS sort of had the same problem, right They were doing 59 00:03:46.800 --> 00:03:50.000 investigations, They started doing examinations of people that had it, and they needed 60 00:03:50.319 --> 00:03:54.199 assistance doing those calculations. They sought out a couple vendors that they could test 61 00:03:54.280 --> 00:04:00.439 run, and they ultimately awarded a contract to tax Fit through that on tract 62 00:04:00.479 --> 00:04:01.639 I got to know the folks at Taxment very well, and I liked what 63 00:04:01.680 --> 00:04:05.080 they were doing, and I liked their their approach to the ecosystem and trying 64 00:04:05.120 --> 00:04:10.560 to go grow the ecosystem in a positive way and became friends with them and 65 00:04:10.680 --> 00:04:15.159 opted to jump jump ship and help them kind of grow their company. So, 66 00:04:15.240 --> 00:04:17.319 Miles, I hope you don't mind me asking what was like the most 67 00:04:17.360 --> 00:04:20.560 egregious thing you saw at the I R S as it relates to crypto. 68 00:04:21.000 --> 00:04:25.680 Was it just people not trying to pay their capital gains or they're you know, 69 00:04:26.079 --> 00:04:30.399 trying to put into stable coins and not report it. What wasn't the 70 00:04:30.399 --> 00:04:33.000 most egregious thing you saw? Yeah, I think I think it was probably 71 00:04:33.079 --> 00:04:36.199 the first thing there was. It's weird because this is where you know, 72 00:04:36.199 --> 00:04:40.399 people in the crypto space get a bad I said, kind of a bad 73 00:04:40.480 --> 00:04:43.160 rap. There's definitely people in the crypto space that are that are doing bad 74 00:04:43.160 --> 00:04:46.399 things. But there's people in all financial spaces doing bad things of course, 75 00:04:46.720 --> 00:04:49.399 so but in the crypto space, yeah, I think early on there would 76 00:04:49.439 --> 00:04:54.959 be some people who just weren't paying taxes. And it's hard because you would 77 00:04:55.000 --> 00:04:57.560 talk to people and you really try to figure out when you talk to them, 78 00:04:57.600 --> 00:05:00.560 like, Okay, you're not pain because you know you're supposed to be 79 00:05:00.600 --> 00:05:03.000 paying and you're not paying, or are you're just not paying because you legitimately 80 00:05:03.040 --> 00:05:06.120 are confused about like Okay, what's the rules here, or I can't get 81 00:05:06.120 --> 00:05:12.160 the data together to like do it accurately. But yeah, we did see 82 00:05:12.160 --> 00:05:15.879 some very I came across a few very high dollar ones where it's like, 83 00:05:15.920 --> 00:05:19.920 Okay, you you made a lot a lot of money, you probably knew 84 00:05:19.959 --> 00:05:25.279 you needed to report something, but but yeah, it's it's interesting because there's 85 00:05:25.279 --> 00:05:27.800 a but I think there's a lot of a lot, like a lot of 86 00:05:27.839 --> 00:05:30.360 forgiveness there because there are people who are trying to do it right and they're 87 00:05:30.399 --> 00:05:31.439 like, hey, I'm trying to do this, but I don't have all 88 00:05:31.480 --> 00:05:34.360 the right data and I can't get the like it to work out correctly. 89 00:05:34.519 --> 00:05:39.279 So just kind of bear with me here. And I my experience was the 90 00:05:39.279 --> 00:05:42.160 IRS a lot of times was somewhat forgiving, like people are trying to do 91 00:05:42.160 --> 00:05:46.079 it right. The IRS understood the problems with data problems that still sort of 92 00:05:46.120 --> 00:05:49.000 exist today, and so they would sort of try to work with people and 93 00:05:49.000 --> 00:05:51.000 talk through and as long as everyone was on the same state of like, 94 00:05:51.000 --> 00:05:53.959 look, we're trying to get to the right answer. We're trying to pay 95 00:05:53.959 --> 00:05:56.480 a taxis accuratey, let's just figure it out, and that was a good 96 00:05:56.480 --> 00:06:00.160 approach. Well, that's good to hear that the irs was forgiving because this 97 00:06:00.279 --> 00:06:04.279 was all new for everybody, whether you're in government or you're just a retail 98 00:06:04.360 --> 00:06:10.120 investor or institution. And that's where I guess tax Bit comes in, which 99 00:06:10.160 --> 00:06:13.959 is trying to help make that simpler. If you can give us an overview 100 00:06:14.079 --> 00:06:16.519 tax bit in the services, Yeah, for sure. So as you mentioned, 101 00:06:16.560 --> 00:06:19.079 if you were a customer for a long time, tax Bit started off 102 00:06:20.000 --> 00:06:25.000 like six years or so. Now the main focus was helping individual taxpayers just 103 00:06:25.000 --> 00:06:27.600 be able to crunch their numbers, get them on a tax return with respect 104 00:06:27.600 --> 00:06:31.959 to crypto, whether that was centralized exchanges or on change activity. We recently 105 00:06:32.040 --> 00:06:35.399 exited that space to sort of move the company a little bit away from that, 106 00:06:35.959 --> 00:06:40.120 and we've refocused the company. And this actually was I think the original 107 00:06:40.160 --> 00:06:43.480 founders of our company that it was one of their ideas at the beginning was 108 00:06:43.519 --> 00:06:46.360 not always to be in that retail investor space. But knowing that, hey, 109 00:06:46.399 --> 00:06:49.519 look, this doesn't make sense. Why is crypto the only asset where 110 00:06:49.519 --> 00:06:51.720 you don't get some sort of at the end of the year, you don't 111 00:06:51.759 --> 00:06:56.000 get something from the service you're using. That kind of tells you this is 112 00:06:56.040 --> 00:06:58.199 what you need to put on your tax return. I mean, is what 113 00:06:58.279 --> 00:07:00.879 you get in TRADFI. You'll get your statements at the end of the year, 114 00:07:00.920 --> 00:07:02.720 says hey, just put this information on your tax return. So they 115 00:07:02.800 --> 00:07:08.439 saw that years ago and reached out and wanted to start working with exchanges and 116 00:07:08.480 --> 00:07:12.319 stuff to enable that type of reporting for customers. Is like a customer service 117 00:07:12.360 --> 00:07:15.959 element, and they've been doing that for a long time, and then ultimately 118 00:07:15.000 --> 00:07:18.720 the government kind of caught up and now there's rules that are supposed to be 119 00:07:18.720 --> 00:07:23.759 coming into place the next year or two for that precisely think and so tax 120 00:07:23.800 --> 00:07:27.800 bit is really refocused its effort on enabling that type of reporting to make sure 121 00:07:27.839 --> 00:07:30.000 people are able to do their taxes correctly. Now, in addition to that 122 00:07:30.040 --> 00:07:34.480 tax side stuff, taxbit also does financial accounting services. So if you're a 123 00:07:34.480 --> 00:07:39.279 company that has crypto on your balance sheet, you need to report either internally 124 00:07:39.399 --> 00:07:43.279 or externally. Re enable that type of reporting. And then finally, the 125 00:07:43.319 --> 00:07:46.079 place like based on my title, right, sid is on the government side. 126 00:07:46.120 --> 00:07:48.240 And so like I said, tax bit has this stuff where our software 127 00:07:48.279 --> 00:07:53.160 helps enable the government to be able to do these calculations when they're doing examinations 128 00:07:53.199 --> 00:07:55.279 and stuff, and that's sort of the part of the company overseas. So 129 00:07:55.279 --> 00:07:58.839 those are our main three areas today. We've kind of moved out of the 130 00:07:58.839 --> 00:08:01.519 consumer space a little bit. And what do you guys have planned for this 131 00:08:01.639 --> 00:08:05.439 year? You know, are there any special initiatives or is just you know, 132 00:08:05.519 --> 00:08:09.839 continue to grow the business. I think it's just continued to grow the 133 00:08:09.879 --> 00:08:13.759 business, and it's trying to just keep engaging customers and getting customers ready. 134 00:08:13.759 --> 00:08:18.279 On the enterprise side, there's a lot of brokers. There's these regulations that 135 00:08:18.480 --> 00:08:20.600 are I'm going to say in flux there's proposed regulations, but they haven't been 136 00:08:20.600 --> 00:08:24.639 finalized yet, and the goal is just trying to keep in communication with our 137 00:08:24.680 --> 00:08:28.680 customers there on like okay, here's what's coming, keep them updated, to 138 00:08:28.720 --> 00:08:31.159 help them build to be ready to implement those regulations when they go into effect. 139 00:08:31.480 --> 00:08:33.639 And then on the government side, yeah, it's just trying to keep 140 00:08:33.639 --> 00:08:41.159 We're actually expanding into the European area. We just recently hired a head of 141 00:08:41.200 --> 00:08:46.559 operations over in Europe, so we're working with some European governments and European exchanges 142 00:08:46.600 --> 00:08:50.440 to expand over in that part of the world as well. Now you mentioned 143 00:08:50.440 --> 00:08:56.360 some proposed regulations and rules around taxes for crypto. There was some crypto tax 144 00:08:56.360 --> 00:09:01.039 reporting requirements proposed by the Treasury last year. Can you tell us about that. 145 00:09:01.279 --> 00:09:03.919 What are the details there and when do you think that might go into 146 00:09:03.960 --> 00:09:07.279 effect? Okay, so, yeah, the details there. So those the 147 00:09:07.320 --> 00:09:13.000 proposed regulations that came out last fall actually were the result of a law that 148 00:09:13.039 --> 00:09:16.679 Congress passed all the way back in twenty twenty one. And that law was 149 00:09:16.720 --> 00:09:20.960 passed and the concept of that law is really to make the crypto space a 150 00:09:20.960 --> 00:09:26.120 little more analogous from what we would call in a tax space tax information reporting. 151 00:09:26.480 --> 00:09:28.759 The way I describe that to people is like I would think about, 152 00:09:28.759 --> 00:09:31.360 hey, you get a W two from your employer that says, hey, 153 00:09:31.360 --> 00:09:33.759 this is what you got as a salary, or if you do traditional investments, 154 00:09:35.440 --> 00:09:37.600 you know you might Merrill Lynch or Charles Schwab. At the end of 155 00:09:37.600 --> 00:09:39.799 the year, it gives you that ten ninety nine document that says, hey, 156 00:09:39.840 --> 00:09:41.279 this is the stocks you bought and sold. So it's that kind of 157 00:09:41.320 --> 00:09:46.120 that's tax information reporting. It helps the taxpayer get information know what to put 158 00:09:46.159 --> 00:09:48.600 on their tax return, so it can be accurate, and then it helps 159 00:09:48.600 --> 00:09:50.679 the irs see the same information so they can say like, hey, this 160 00:09:50.759 --> 00:09:54.039 is this just like check the box, like they did this right. It's 161 00:09:54.080 --> 00:09:56.519 good. We don't have to bother people. So that's what Congress was after. 162 00:09:58.039 --> 00:10:00.799 The problem is crypto is a little bit different, Like you know, 163 00:10:00.799 --> 00:10:05.360 there's different data elements there and the functionality and crypto's difference. Right, it's 164 00:10:05.360 --> 00:10:09.840 easy to bounce units of an asset around from exchange one to exchange two to 165 00:10:09.919 --> 00:10:13.120 a personal like on chain wallet, so you have this slightly different stuff. 166 00:10:13.120 --> 00:10:16.360 And that's why Treasure I think took a little bit of time to get those 167 00:10:16.399 --> 00:10:18.039 proposed regulations out. They were trying to get their head around about, Okay, 168 00:10:18.080 --> 00:10:20.919 how's this really going to work? So those are out. The proposed 169 00:10:20.960 --> 00:10:26.039 rigs indicate that they would go into effect for the twenty twenty five tax here, 170 00:10:26.240 --> 00:10:28.720 So it means at the end of twenty twenty five, early twenty twenty 171 00:10:28.759 --> 00:10:33.879 six is when you would get those returns, like those information returns relating D 172 00:10:33.039 --> 00:10:35.639 twenty twenty five, So you'd be able to get your twenty twenty five taxes 173 00:10:35.720 --> 00:10:41.559 more accurate than what you may be doing today. But they haven't been finalized 174 00:10:41.600 --> 00:10:45.320 yet, so everyone's waiting for them to be finalized with what the rules are 175 00:10:45.360 --> 00:10:46.919 going to be. And so that's kind of what's on the rise. And 176 00:10:46.960 --> 00:10:50.000 now that's going to let people know like hey, if I bought bitcoin at 177 00:10:50.000 --> 00:10:52.559 a certain price and re sold it at a different price, this is my 178 00:10:52.639 --> 00:10:56.679 gain or loss. That's the kind of information they're looking for, as well 179 00:10:56.840 --> 00:11:01.399 as if you move something. And there's some stuff that's not covered by the 180 00:11:01.480 --> 00:11:03.919 rakes today, but conceptually it would be like oh, if Miles had something 181 00:11:05.000 --> 00:11:07.360 on an exchange. So the way they're doing this is what they're calling brokers. 182 00:11:07.600 --> 00:11:11.480 We think for us most most of the reality is most of that's going 183 00:11:11.559 --> 00:11:13.919 to be like your coin bases, your crackings, you're geminized sort of centralized 184 00:11:13.919 --> 00:11:18.399 exchanges. But the other concept there is if I have something there and I 185 00:11:18.440 --> 00:11:22.159 move it to my personal wallet, they're gonna I'm gonna get in some information 186 00:11:22.200 --> 00:11:24.480 about like, hey, what was the cost basis of that, so I 187 00:11:24.559 --> 00:11:28.440 know into the irs knows. So then if I sell it for my personal 188 00:11:28.480 --> 00:11:31.080 wallet, maybe you and I meet up at Starbucks and we do ap peer 189 00:11:31.120 --> 00:11:33.480 to peer exchange or something, you know, we have the right information that 190 00:11:33.519 --> 00:11:35.799 we can report accurately and the IRS can say, Okay, we don't have 191 00:11:35.840 --> 00:11:39.720 to bother those people's that's kind of what they're after. But that's it's twenty 192 00:11:39.720 --> 00:11:43.919 twenty five is the first year, and then there's some additional reporting they're getting, 193 00:11:43.960 --> 00:11:46.559 like a little more granular level reporting that would go into effect in twenty 194 00:11:46.600 --> 00:11:48.879 twenty six, so you get that in twenty twenty seven, so they're kind 195 00:11:48.879 --> 00:11:52.519 of phasing it in a little bit. So do you think they're going to 196 00:11:52.639 --> 00:11:58.399 retroactively go after people who maybe didn't do miss somebody steps like you said, 197 00:11:58.440 --> 00:12:03.000 like you and I met out, but maybe you know there's something called local 198 00:12:03.039 --> 00:12:07.000 bitcoins, right or local bitcoin and you know we exchange. Uh, do 199 00:12:07.080 --> 00:12:09.200 you think the IRUs is going to go after you know, years of misreporting? 200 00:12:11.360 --> 00:12:13.440 I don't know generally, So from when you think about, like from 201 00:12:13.480 --> 00:12:16.679 an IRS examination standpoint, generally, if you file your tax fiaturing, the 202 00:12:16.759 --> 00:12:18.799 IRS actually only has three years to go back. That's like sort of the 203 00:12:18.799 --> 00:12:22.480 standard rule. Now, there are some exceptions to that rule. There's always 204 00:12:22.519 --> 00:12:26.200 exceptions to every rule, but generally that's it. And in this space, 205 00:12:26.279 --> 00:12:28.399 I don't you know, it's hard to see what you know, to get 206 00:12:28.399 --> 00:12:31.720 your head around like the IRS is gonna do. I think when they go 207 00:12:31.759 --> 00:12:35.320 in effect, they're gonna have a lot on their plate anyway, so they're 208 00:12:35.360 --> 00:12:39.159 not necessarily they're not gonna make My prediction would be they're not gonna make like 209 00:12:39.200 --> 00:12:41.960 some sort of targeted effort. But as they stumble into people, I tend 210 00:12:41.960 --> 00:12:46.120 to think like if they if they stumble with someone in sort of in more 211 00:12:46.159 --> 00:12:48.159 current years and the IRIS. Keep mind, the IRS always exudits people in 212 00:12:48.279 --> 00:12:50.879 arrears, right you know, it's like this is twenty twenty four. They're 213 00:12:50.879 --> 00:12:54.639 probably doing audits to people right now, twenty twenty one or something that's you 214 00:12:54.679 --> 00:12:56.879 know, because they always they're not they're not as fast as what you might 215 00:12:56.879 --> 00:13:01.399 think they are. But in the those situations they might be doing, you 216 00:13:01.440 --> 00:13:03.840 know, doing an audit, say of like, hey we're doing an audit 217 00:13:03.840 --> 00:13:05.679 of someone and it seems like they didn't report, and then they might say, 218 00:13:05.720 --> 00:13:09.120 okay, well you're not reporting this year. Then we'll start going back, 219 00:13:09.559 --> 00:13:11.519 you know, we'll go back and to see if you didn't report in 220 00:13:11.559 --> 00:13:15.440 priors. But again, they're still oftentimes blocked by this what we call like 221 00:13:15.440 --> 00:13:18.039 a statute limitation. They can only go back so far. But I also 222 00:13:18.039 --> 00:13:22.240 think there's gonna be some shift, Like I think the IRS has an understanding 223 00:13:22.320 --> 00:13:26.159 that this information reporting coming online is going to have an impact where people who 224 00:13:26.240 --> 00:13:30.480 might have been using tools like our tax bit consumer tool that we have that 225 00:13:30.519 --> 00:13:33.159 you're familiar with, or some of the other ones out there. There may 226 00:13:33.200 --> 00:13:37.279 be some discrepancies, but what those tools we're doing versus what this information is 227 00:13:37.320 --> 00:13:39.960 showing now, and so they're cognizant of that, I think, and that's 228 00:13:39.960 --> 00:13:41.159 going to help. You know, there'll be some smoothing out. I might 229 00:13:41.200 --> 00:13:43.600 call it a little bit of grace given where like, Okay, everyone's getting 230 00:13:43.600 --> 00:13:48.360 in line, just me this shift into this new reporting regime. I don't 231 00:13:48.399 --> 00:13:50.799 know if you can give share any thoughts on this, but I know one 232 00:13:50.799 --> 00:13:56.159 of the complications within cryptos, for example, like free air drops and how 233 00:13:56.200 --> 00:14:01.600 that is counted towards income even let's say you don't cash it out. What 234 00:14:01.639 --> 00:14:05.320 are your thoughts on that and how the I R S may treat that. 235 00:14:05.159 --> 00:14:07.759 Yeah, so the current rule. The IRS actually put out guidance on this 236 00:14:09.919 --> 00:14:15.120 some years ago that essentially said that if you're you get an air drop of 237 00:14:15.120 --> 00:14:18.639 some sort, that's that's I'm gonna just describe it as a gratuitous receipt of 238 00:14:18.679 --> 00:14:26.120 property. And from a peer tax standpoint, the gratuitous receipt of property is 239 00:14:26.159 --> 00:14:28.519 income. Like if I showed up, you know, it seems a little 240 00:14:28.600 --> 00:14:31.000 silly at a low level, but it's like if I showed up and dropped 241 00:14:31.000 --> 00:14:35.440 on your lap, you know, a twelve pack of beer, that's you 242 00:14:35.480 --> 00:14:37.480 know, that's you got income. Now, no one cares about the value 243 00:14:37.519 --> 00:14:39.639 of a twelve pack of beer, Like, no one's really worried about that. 244 00:14:39.679 --> 00:14:43.360 And maybe it's a gift, which then has its own rule that would 245 00:14:43.360 --> 00:14:46.159 say like, hey, it's exempted from being taxable. But that's the IRS's 246 00:14:46.200 --> 00:14:50.960 approach. Just from a peer like objective legal analysis, they say, hey, 247 00:14:50.960 --> 00:14:54.159 look you got something if it had value. And so this is where 248 00:14:54.159 --> 00:14:58.000 I like, I try to break this conversation down though with people into kind 249 00:14:58.000 --> 00:15:01.720 of two parts. The first step is, hey, you got something gratuitously 250 00:15:01.600 --> 00:15:05.720 given to you, and it wasn't necessarily a gift. Like the reason you're 251 00:15:05.720 --> 00:15:07.360 getting air drops is it's like a marketing thing, right. They're giving you 252 00:15:07.360 --> 00:15:09.200 the air drop because they want you to get on the network. They want 253 00:15:09.240 --> 00:15:13.480 you use the token. It's not a gift. It's really kind of done 254 00:15:13.519 --> 00:15:16.559 for a business intent. So at that moment, you're like, Okay, 255 00:15:16.759 --> 00:15:20.639 you got something. It is income under the tax code. The second question, 256 00:15:20.759 --> 00:15:24.120 though, is what's the value of that income. What's the value of 257 00:15:24.120 --> 00:15:26.200 that air drop. Now there's a lot like we hear about scampoins and other 258 00:15:26.200 --> 00:15:28.440 stuff going on, Like there's a lot of stuff. You get the value 259 00:15:28.559 --> 00:15:31.080 zero, so you can say, hey, I got income. I got 260 00:15:31.080 --> 00:15:35.559 this thing that's income under the tax code, but it was income of zero, 261 00:15:35.759 --> 00:15:37.840 like it was worth nothing. Now you do have stuff though in what 262 00:15:37.879 --> 00:15:41.120 you hear I maybe what we're talking about. You get a lot of people 263 00:15:41.799 --> 00:15:43.639 in my mind that are like, well, yeah, but I got this 264 00:15:43.720 --> 00:15:46.399 thing. It was worth one hundred dollars at the moment I got it, 265 00:15:48.360 --> 00:15:50.519 So the IRIS is saying, I got to take it into income. I 266 00:15:50.519 --> 00:15:52.000 got one hundred dollars, or maybe I have lots of units and maybe it's 267 00:15:52.000 --> 00:15:56.799 one thousand dollars whatever it is. But then like a week later, it 268 00:15:56.879 --> 00:16:00.279 was worth zero. So now I like, ad this thing and then we're 269 00:16:00.399 --> 00:16:03.039 zero, And that's a tough like I think the IRS appreciates that. But 270 00:16:03.279 --> 00:16:06.840 this is where I told you, like my background's like economics, you whatever. 271 00:16:07.000 --> 00:16:10.320 Like, well, but if when you got it and it was worth 272 00:16:10.320 --> 00:16:12.919 one hundred dollars or one thousand dollars, if you pulled the trigger and liquidated 273 00:16:12.960 --> 00:16:18.360 it or sold it, you would have had the thousand dollars. Like you 274 00:16:18.440 --> 00:16:21.159 kind of get this question, people like you didn't sell it because you were 275 00:16:21.200 --> 00:16:23.080 holding it as in it like you wanted it to go up in value. 276 00:16:23.159 --> 00:16:26.600 You maybe didn't do it. So that's like there's a rub there, and 277 00:16:26.639 --> 00:16:32.120 it's hard because it's a novel thing because in unlike other situations where you might 278 00:16:32.159 --> 00:16:36.360 get free, you usually I think one thing people bring up is usually when 279 00:16:36.360 --> 00:16:38.240 I get some sort of free thing, it's because I, like put my 280 00:16:38.320 --> 00:16:41.039 name into a raffle or I did I took some steps to get it. 281 00:16:41.480 --> 00:16:45.080 In the in the crypto ecosystem, stuff just shows up, you know, 282 00:16:45.399 --> 00:16:48.200 just air drops happened, and you're like, I didn't I didn't want this 283 00:16:48.279 --> 00:16:51.600 until you kind of get this question. I didn't even know I got it, 284 00:16:51.720 --> 00:16:52.240 you know, and now I have income I didn't know I had. 285 00:16:53.120 --> 00:16:57.440 Those are a little bit I think, like like I said, objectively, 286 00:16:57.480 --> 00:17:00.480 you can look at tax and say, hey, the tax lock says this 287 00:17:00.519 --> 00:17:03.119 is the outcome. Now there's a different question about like, yeah, is 288 00:17:03.160 --> 00:17:07.200 there maybe a policy discussion to be had about is that the right answer? 289 00:17:07.240 --> 00:17:10.440 Should the law be augmented a little bit to accommodate some of this stuff? 290 00:17:11.079 --> 00:17:14.319 And that's kind of a different question that policy makers should have or people should, 291 00:17:14.400 --> 00:17:15.480 you know, talk to you. You'll write your congressman kind of thing 292 00:17:15.519 --> 00:17:18.359 and say I don't know that this is really fair, but yeah, that 293 00:17:18.440 --> 00:17:21.680 ends up being what it is. But the reality is, yeah, if 294 00:17:21.720 --> 00:17:22.440 you got it, it's worth a lot of money, Like you could sell 295 00:17:22.480 --> 00:17:25.519 it right away that I always ad buys God, Like, hey, if 296 00:17:25.519 --> 00:17:26.200 you're not sure about it and you get it and it's worth money, you 297 00:17:26.279 --> 00:17:30.119 have to take an income, like sell it, give it cash. Yeah, 298 00:17:30.519 --> 00:17:33.960 absolutely agree, Because I've gotten free air drops and I'm like, what 299 00:17:33.200 --> 00:17:37.519 the hell I didn't participate it is but just because I held the token of 300 00:17:37.559 --> 00:17:41.119 a native chain, they air automatically air dropped it. I'm like, okay, 301 00:17:41.119 --> 00:17:45.880 whatever, but you know, is it that the irs? Maybe the 302 00:17:45.960 --> 00:17:49.160 balance of this is a certain threshold if you get x amount of tokens valued 303 00:17:49.200 --> 00:17:53.440 at well valued at x amount kind of like the six hundred dollars rule. 304 00:17:53.519 --> 00:17:57.880 Right, you get a report, then it becomes a taxable event. But 305 00:17:57.960 --> 00:18:02.759 maybe if you got forty bucks of something like, do I really need to 306 00:18:02.799 --> 00:18:07.000 be tax for that reported to the irs? Yeah, And so what you're 307 00:18:07.039 --> 00:18:08.880 looking at as like a diminished murule. Now you mentioned the six hundred dollars 308 00:18:08.880 --> 00:18:14.079 thing. The six hundred dollars it's like weird because that becomes the cross section 309 00:18:14.319 --> 00:18:18.440 of two elements of the tax world. So there's tax like what you and 310 00:18:18.480 --> 00:18:22.000 I as taxpayers, we file our Form ten forty with the federal government. 311 00:18:22.000 --> 00:18:25.799 We put everything on. Conceptually, we file our form ten forty. We're 312 00:18:25.799 --> 00:18:30.799 supposed to put everything on it without limitation. The information return stuff we were 313 00:18:30.839 --> 00:18:33.519 discussing is where well, if it's less than six hundred dollars, the person 314 00:18:33.519 --> 00:18:38.440 that paid it from me is excused from giving me that information return because it's 315 00:18:38.559 --> 00:18:42.720 it's like a pain in the butt to do it. So that like the 316 00:18:42.759 --> 00:18:47.319 discrepancy. But you do raise a very good point about for people like you 317 00:18:47.359 --> 00:18:49.720 and I, like as individual taxpayers, is there kind of this back to 318 00:18:49.720 --> 00:18:52.200 my example with you about like, hey, if I gave you a twelve 319 00:18:52.200 --> 00:18:56.680 pack of beer, would you really be putting the twelve pack of beer value 320 00:18:56.720 --> 00:19:00.960 on your tax return. Probably not. So I think there is a reality 321 00:19:00.039 --> 00:19:03.880 there that if if as an individual and you know, I'd never you know, 322 00:19:04.480 --> 00:19:07.640 yes, you're supposed to be complying or whatever. But I also think 323 00:19:07.640 --> 00:19:11.000 there's a reality that like, hey, if you during the year got some 324 00:19:11.039 --> 00:19:15.240 arror drops and they were worth like forty fifty sixty bucks and you you fail 325 00:19:15.319 --> 00:19:18.440 to put them on the tax return, the irs is probably not. They're 326 00:19:18.440 --> 00:19:22.920 not chasing you down, like that's not worth their effort. You know that 327 00:19:22.960 --> 00:19:25.720 they would go through and because it's what's the tax on the forty or fifty 328 00:19:25.720 --> 00:19:27.240 bucks? You know they're interested in some of these, you know, larger 329 00:19:27.279 --> 00:19:30.319 ones that you hear people you know you did air drop, I got all 330 00:19:30.319 --> 00:19:33.119 these units. It was like two three, four thousand dollars worth. You 331 00:19:33.160 --> 00:19:36.160 know, that's what they're looking for. And the other thing though, to 332 00:19:36.200 --> 00:19:38.559 keep in mind, we have this conversation about if if you take it into 333 00:19:38.559 --> 00:19:42.200 income, then that actually that value that you took an income and paid tax 334 00:19:42.240 --> 00:19:47.799 on then does establish your cost basis in those units. So later if you 335 00:19:47.839 --> 00:19:52.119 do sell them and they went up in value, you know you're only paying 336 00:19:52.279 --> 00:19:55.680 tax on the difference between the income and the higher value, or if they 337 00:19:55.720 --> 00:19:59.119 go down in value, you actually you know you're going to deduct like a 338 00:19:59.160 --> 00:20:00.920 capital loss. You can say I took an income, but I lost money 339 00:20:00.920 --> 00:20:04.200 now on them. So that's something people also, I think sometimes forget about. 340 00:20:04.200 --> 00:20:07.079 It's like no, no, when you pay the income, you get 341 00:20:07.200 --> 00:20:11.880 established like value in those coins. So then you can take advantage that for 342 00:20:11.920 --> 00:20:14.960 tax purposes, because the IRS isn't trying to double TAXI, they are just 343 00:20:15.279 --> 00:20:18.960 trying to capture tax at the moment in time it happens. Yeah. I 344 00:20:18.000 --> 00:20:22.039 mean, look, I don't envy what the IRS has to do here. 345 00:20:22.359 --> 00:20:26.559 It's complicated, man, there's so many layers and just a brave new world 346 00:20:26.559 --> 00:20:33.720 with all these different ways to move into different currencies and digital current assets of 347 00:20:33.839 --> 00:20:38.480 value and so forth. And then the other aspect I think some people are 348 00:20:38.519 --> 00:20:41.759 still trying to figure out, is okay if I cash out. Let's say 349 00:20:41.759 --> 00:20:45.960 I sell some bitcoin, but I put it in stable coins versus fiont. 350 00:20:45.160 --> 00:20:49.680 I still have to report that. But I don't know how does that all 351 00:20:49.759 --> 00:20:53.240 work? Right? Because what if the stable coin goes down or it gets 352 00:20:53.279 --> 00:20:57.200 deepagged, like there's so many layers to this. Yeah, and I think 353 00:20:57.240 --> 00:21:00.880 actually you touched on a very good point. I think it's easy to tackle 354 00:21:00.920 --> 00:21:04.279 it at thinking of at a more like general level. And it's what happened 355 00:21:04.279 --> 00:21:07.880 to people come out and say, oh, the Irs, you know, 356 00:21:07.920 --> 00:21:12.359 classified crypto as property, and that's like true, but I think that kind 357 00:21:12.400 --> 00:21:15.839 of misses the point a little bit. Really. What the IRS said is 358 00:21:15.920 --> 00:21:21.400 like, hey, look in the tax code, there's rules that deal with 359 00:21:21.599 --> 00:21:25.720 certain things. So cash, the cash in your pocket, it's actually property, 360 00:21:25.839 --> 00:21:27.319 right, It's just piece of paper. It's got some value because the 361 00:21:27.319 --> 00:21:32.680 government says it has value. So that's like fiat. But cash is a 362 00:21:32.720 --> 00:21:36.799 special type of property under the tax code that has special treatments. And then 363 00:21:36.839 --> 00:21:40.440 you have stocks like securities, they're also a special type of property that has 364 00:21:40.440 --> 00:21:42.400 a special treatment under the tax code. Same with commodities. So all the 365 00:21:42.400 --> 00:21:45.599 IRS did was come out and say like, hey, all of these things 366 00:21:45.599 --> 00:21:48.759 are property. Crypto is also property. It just isn't one of these other 367 00:21:48.799 --> 00:21:52.160 properties, at least not yet. Maybe someday, right, like maybe things 368 00:21:52.160 --> 00:21:56.000 will change a little bit. But that's where the starting point is for the 369 00:21:56.680 --> 00:21:59.920 question you have, is like, Okay, it's property. So I have 370 00:22:00.079 --> 00:22:04.359 the bitcoin, it's property. I'm gonna sell it or trade it perhaps from 371 00:22:04.359 --> 00:22:08.119 a bit from units of bitcoin into a stable coin. And then you're like, 372 00:22:08.119 --> 00:22:11.039 okay, now I got stable coin. Well, stable coin isn't technically 373 00:22:11.079 --> 00:22:15.759 cash, so it's still this property thing. So now if I'm selling, 374 00:22:15.839 --> 00:22:18.480 like I bought the stable coin for one thousand dollars, I got thousand units 375 00:22:18.519 --> 00:22:22.920 of some some tether or USDC or something, and then I'm holding that forever 376 00:22:23.000 --> 00:22:26.279 and then I sell it and it's still one thousand dollars. But now you're 377 00:22:26.279 --> 00:22:29.119 telling me I got to like put all this on my tax return, but 378 00:22:29.160 --> 00:22:33.240 I didn't make any money on the thing. And that's like a very interesting 379 00:22:33.359 --> 00:22:34.880 question. So for me, I've seen both sides that, because I've seen 380 00:22:34.880 --> 00:22:37.240 people with the exact like thousand dollars they're like, why do I have to 381 00:22:37.240 --> 00:22:40.920 put all this on my tax return? Like I didn't make any money on 382 00:22:40.960 --> 00:22:44.440 it. And it's hard because there is I would describe as what I call 383 00:22:44.480 --> 00:22:48.160 like a misalignment, like if you don't really have any gainer loss, maybe 384 00:22:48.160 --> 00:22:51.000 there is a way to say, like, hey, if it's this this 385 00:22:51.119 --> 00:22:53.279 low level of gainer loss, like you don't actually have to put it on 386 00:22:53.279 --> 00:22:57.440 the tax return. The trade off is I've been in the space long enough 387 00:22:57.480 --> 00:23:03.480 and done enough cases in including people like doing tax returns and stuff or helping 388 00:23:03.519 --> 00:23:06.839 the IRS. On the IRS side, there are people that are arbitrage trade 389 00:23:07.119 --> 00:23:08.319 you know, stable coins, so like you mentioned, they come off the 390 00:23:08.359 --> 00:23:12.920 peg and you get arbitrage traders who even though they got their thousand dollars at 391 00:23:12.960 --> 00:23:15.720 USDC, but maybe they're doing all these transactions back and forth, but they're 392 00:23:15.720 --> 00:23:18.920 actually making money, and so the IRS is like, well, you're making 393 00:23:19.079 --> 00:23:22.119 money, you need to be reporting it then. So that's that's where you 394 00:23:22.200 --> 00:23:26.000 hit like a little bit of a rub that creates like an uncertainty about stuff, 395 00:23:26.039 --> 00:23:29.079 and this is something that's coming up. One of the big questions in 396 00:23:29.119 --> 00:23:32.839 these regulations we talked about was whether or not all these brokers are going to 397 00:23:32.880 --> 00:23:37.279 have to report about the stable coin like the sales, because that's just voluminous. 398 00:23:37.319 --> 00:23:40.279 You know, people that might be doing stuff that has very minimal tax 399 00:23:40.319 --> 00:23:42.000 impact because hey, they bought them then a thousand, they sold them in 400 00:23:42.000 --> 00:23:45.480 a thousand. Why am I reporting about all that? Just creating paper so 401 00:23:45.519 --> 00:23:49.680 to speak. And that's something that I think the Treasury Department got a lot 402 00:23:49.720 --> 00:23:52.920 of feedback from people about that, and maybe that's an area where I think 403 00:23:52.920 --> 00:23:56.200 they the Trade Department's trying to reconsider, like Okay, maybe there will be 404 00:23:56.240 --> 00:24:00.839 some sort of deminimous thing, like hey, if the gain on some transactions 405 00:24:00.880 --> 00:24:03.839 super deminimus, you actually don't have to have to report it on the information 406 00:24:03.920 --> 00:24:07.359 return stuff, So that that could be in the works. Because you raise 407 00:24:07.400 --> 00:24:10.880 a very good point, there's it's a lot. And the last part all 408 00:24:10.920 --> 00:24:14.359 add to that is people do say, like, well, why aren't you 409 00:24:14.400 --> 00:24:17.240 know stable coins are like currencies. Why aren't they just treated like currency. 410 00:24:17.599 --> 00:24:21.839 The difficulty we have in these here in the United States is there is a 411 00:24:21.880 --> 00:24:26.400 federal statute that defines, like the legal tender of the United States, you 412 00:24:26.440 --> 00:24:29.559 know, is the coinage in the dollar notes. It's under Title thirty one. 413 00:24:30.319 --> 00:24:33.680 It says it's these things. And only until that law could change would 414 00:24:33.680 --> 00:24:37.079 you ever be able to include other like crypto related stuff in there. So, 415 00:24:37.119 --> 00:24:40.759 you know, some of Congress changed that law. I don't know if 416 00:24:40.799 --> 00:24:41.720 it would change. But that's where people get hung up. They're like, 417 00:24:41.759 --> 00:24:44.960 well, no, these just function like currency. Dents Like yeah, but 418 00:24:45.000 --> 00:24:48.039 there's a law that says like currency in the United States, is this stuff 419 00:24:48.079 --> 00:24:52.039 specifically? Yeah, I mean, and to your point, a lot of 420 00:24:52.079 --> 00:24:56.079 these things are still up in the year. Congress is trying to figure out. 421 00:24:56.079 --> 00:24:57.920 There's a couple of bills in the House yesterday that was a hearing with 422 00:24:59.039 --> 00:25:02.720 the Senate Bank can come in and the Treasury crypto was brought up. I 423 00:25:02.759 --> 00:25:07.279 know, folks like Elizabeth Warren want to have AML on nodes and validators, 424 00:25:07.440 --> 00:25:11.240 and then you know the reporting requirements. I remember going back to the Infrastructure 425 00:25:11.279 --> 00:25:15.039 bill. So it's there's a lot of back and forth, a lot of 426 00:25:15.079 --> 00:25:19.440 battling here. So hopefully, man, we can get some of these things 427 00:25:19.480 --> 00:25:23.799 clarified, because it's a bit messy right now. Yeah, I think one 428 00:25:23.880 --> 00:25:26.519 hundred percent. I think the first place, and there's been a bill floating 429 00:25:26.559 --> 00:25:30.480 run for you years, a broader you know, sort of regulatory bill, 430 00:25:30.599 --> 00:25:34.519 so less tax specific but more just big picture, and it's maybe setting up 431 00:25:34.559 --> 00:25:37.920 some frameworks for a couple of different things. One is you hear a lot 432 00:25:37.920 --> 00:25:41.400 in the news lately, you know, sort of the debate there was just 433 00:25:41.440 --> 00:25:44.720 a few weeks out, you know, court there's this litigation between the SEC 434 00:25:44.759 --> 00:25:49.119 and coinbase and court ruled on a motion that coinbase is filed. And so 435 00:25:49.279 --> 00:25:52.799 first thing is like in Congress to maybe like, hey, maybe we need 436 00:25:52.839 --> 00:25:57.480 some broader regulatory framework that's helping decide like when is when is a cryptocurrency or 437 00:25:57.519 --> 00:26:02.680 crypto asset like fit in the securities bucket or the commodities bucket or whatever, 438 00:26:02.759 --> 00:26:04.240 and then you know, and then even then but in that same vein there's 439 00:26:04.200 --> 00:26:07.880 also things like stable coins. What bucket do they fit in? Because that's 440 00:26:07.920 --> 00:26:11.359 more if you really think they operate more like a currency. That really puts 441 00:26:11.359 --> 00:26:15.079 it more under like banking whatever you know, control or currency kind of stuff 442 00:26:15.440 --> 00:26:18.799 and how those rule works and what are the rules because I get nervous. 443 00:26:18.880 --> 00:26:22.640 We talk to people about stable coins and you know, you hear about, 444 00:26:22.680 --> 00:26:26.839 okay, there's asset back stable coins. So that's like your USDC and your 445 00:26:26.880 --> 00:26:30.079 tether and stuff that are like peg one to one, but there's actually like 446 00:26:30.160 --> 00:26:33.039 dollars or assets behind them. The other side in the ecosystem, we talk 447 00:26:33.079 --> 00:26:37.160 about stable coins and you think like like Luna, like tea Luna, where 448 00:26:37.160 --> 00:26:41.839 it's like an algorithmic stable coin which isn't backed by anything, and so that's 449 00:26:41.880 --> 00:26:45.039 where you do get a little bit of like the Elizabeth Warren types that consumer 450 00:26:45.079 --> 00:26:48.119 protection. Right, you want people buying these things thinking, oh, this 451 00:26:48.200 --> 00:26:49.440 is just a stable coin. It's cool, it's I'm going to get my 452 00:26:49.480 --> 00:26:52.839 money out and then have it. There's like nothing behind it. So some 453 00:26:52.960 --> 00:26:57.000 clarity for that, which is really focused on like a consumer investor protection kind 454 00:26:57.039 --> 00:27:00.559 of thing, would be helpful as well, so people know what they're into. 455 00:27:00.240 --> 00:27:04.519 Yeah, we definite, absolutely need that balance. We're protecting consumers but 456 00:27:04.559 --> 00:27:10.200 also not stifling the innovation. And I know there's people on both sides of 457 00:27:10.200 --> 00:27:15.440 this the spectrum here, but it's it's the balance regulations meeting in the middle 458 00:27:15.440 --> 00:27:18.680 of the roads. Hopefully they can get that iron dot soon. Do you 459 00:27:18.680 --> 00:27:23.720 think the i r s will integrate I don't know, AI or blockchain. 460 00:27:25.240 --> 00:27:29.599 This is a tough question, and maybe to help them manage all these things 461 00:27:29.640 --> 00:27:33.160 and to keep up with it and to you know, enter this new tech 462 00:27:33.240 --> 00:27:37.039 revolution that's happening. Yes, definitely. I think the first step of those 463 00:27:37.079 --> 00:27:41.759 types of technologies, I think the I r s would move probably first into 464 00:27:41.799 --> 00:27:45.799 maybe like the AI realm before they went into peer like distribute ledger technology to 465 00:27:45.839 --> 00:27:51.079 do stuff they could There could be away from a tax accounting like you and 466 00:27:51.119 --> 00:27:53.279 I. You know, every year we file taxes, we actually have the 467 00:27:53.319 --> 00:27:56.759 IRS runs some huge database that tracks like every year, like you know, 468 00:27:56.799 --> 00:28:00.599 what's my tax would I pay? How much money they give me back or 469 00:28:00.640 --> 00:28:02.559 how much money to have to pay at the end of the year, Like 470 00:28:02.599 --> 00:28:06.359 think like an accounting ledger. They maintain that for every taxpayer out there. 471 00:28:06.400 --> 00:28:08.079 So there's a way we think about distributed ledger technology. Maybe there would be 472 00:28:08.119 --> 00:28:11.839 a way that they could take it and move it there, make it. 473 00:28:11.920 --> 00:28:14.680 You know, you get worried about privacy rights though. Tax information is a 474 00:28:14.759 --> 00:28:18.759 very protected thing here in the United States, but maybe you have some way 475 00:28:18.160 --> 00:28:22.240 of making it not visible. But you or I could go look at our 476 00:28:22.240 --> 00:28:26.279 own information very easily, much easier than what we do today. That could 477 00:28:26.279 --> 00:28:29.599 be one option. I think that's kind of far off. I think the 478 00:28:29.599 --> 00:28:32.880 first step the IRS would take and be moving more into the AI stuff to 479 00:28:32.960 --> 00:28:36.960 really try to automate some of their processes. One of the things they iras 480 00:28:36.960 --> 00:28:40.880 struggle with is you know, I think all governments they have very limited resources. 481 00:28:41.039 --> 00:28:45.200 You know, they always have more work than what they could get through, 482 00:28:45.039 --> 00:28:48.759 So they're probably always looking ways to be more efficient and how they do 483 00:28:48.799 --> 00:28:51.599 stuff. And one of the areas that they struggle with is like they want 484 00:28:51.640 --> 00:28:53.720 to if someone's not paying their taxes, they want to identify who are those 485 00:28:53.720 --> 00:28:56.400 people? And most people you want to go out, you don't want to 486 00:28:56.440 --> 00:28:59.839 identify and do an audit of someone who actually paid all their taxes, Like 487 00:29:00.400 --> 00:29:03.079 that's annoying to that person and then b that's a waste of IRS resources. 488 00:29:03.960 --> 00:29:07.839 So I think that's where the IRS maybe is looking at from an analytics side, 489 00:29:07.880 --> 00:29:11.759 like how could AI and machine learning be used to make better decisions about 490 00:29:11.799 --> 00:29:15.519 stuff? And so I could see that step coming first. You know, 491 00:29:15.519 --> 00:29:19.559 it's fascinating As you're saying that, I was thinking about the other conversations I've 492 00:29:19.559 --> 00:29:26.359 had with digital identity on the blockchain and CBDCs and digital identity, you know, 493 00:29:26.440 --> 00:29:30.039 tying into your driver's license, you're voting and then all that, which 494 00:29:30.119 --> 00:29:33.599 which is not a bad thing, but you know people are worried, like 495 00:29:33.640 --> 00:29:38.680 you know, there might be a dystopian feature with CBDCs, and but it 496 00:29:38.680 --> 00:29:42.519 would make sense if all of this is running on the blockchain where you don't 497 00:29:42.559 --> 00:29:47.039 have to jump through all these hoops, but it's easily accessible I can go 498 00:29:47.160 --> 00:29:51.400 view my tax information straight from the IRS. Because I have my digital identity, 499 00:29:51.480 --> 00:29:55.599 I can easily verify it. But also if I'm spending that digital dollar 500 00:29:55.720 --> 00:30:00.000 CBDC, they can easily track everything I'm doing, and the and the and 501 00:30:00.000 --> 00:30:03.279 the right to privacies of what people are concerned about. Yeah, and like 502 00:30:03.319 --> 00:30:07.599 you mentioned, it becomes like a balancing act at the policy maker level of 503 00:30:07.640 --> 00:30:12.640 like what what level of like technology related efficiencies do we want achieve or to 504 00:30:12.720 --> 00:30:17.559 how to simplify things? But then how do we what's the trade off between 505 00:30:17.599 --> 00:30:21.200 that and things like privacy rights like this? This becomes a very like a 506 00:30:21.240 --> 00:30:25.240 big question. And I do think digital identity stuff could be happy. CBDCs 507 00:30:25.240 --> 00:30:29.599 are an interesting thing in my mind, and I you know, people have 508 00:30:29.640 --> 00:30:33.920 different views, but at some level on CBDCs, there's this idea I in 509 00:30:33.000 --> 00:30:36.759 my head and this is the economist kind of part of me coming out. 510 00:30:36.799 --> 00:30:38.240 It's like, well, if that happened, if that ever happened from the 511 00:30:38.279 --> 00:30:42.240 government, like, it probably would look very different than how we see the 512 00:30:42.240 --> 00:30:47.680 bitcoin network or something. It would be be this idea like a like bitcoin 513 00:30:47.720 --> 00:30:51.599 network being sort of totally open source. Anybody can hop on the network, 514 00:30:51.599 --> 00:30:53.599 and run a node to validate transactions, you know, proof of work, 515 00:30:55.720 --> 00:30:56.960 you know, to compete to do it, Like I don't if they did 516 00:30:57.000 --> 00:31:00.960 CBDCs. I don't know if someone wants to put their entire or financial legal 517 00:31:00.000 --> 00:31:04.400 tender system out where you could have foreign governments or whatever trying to run run 518 00:31:04.480 --> 00:31:10.400 notes and disrupt transactions. So I think the structure of that type of distributed 519 00:31:10.480 --> 00:31:17.319 ledger would look totally different than what as we understand currently like how most distributed 520 00:31:17.359 --> 00:31:19.480 ledgers or blockchains run. But it could be there. But then then there 521 00:31:19.559 --> 00:31:22.880 is and then with that there is the visibility of the ledger, which is 522 00:31:22.880 --> 00:31:26.400 the question you raise. It's like what we really want the rs going to 523 00:31:26.400 --> 00:31:27.480 look at like all, like they can't see all my cash stuff. I 524 00:31:27.559 --> 00:31:30.079 this morning, I'm in New York. I went down the street bought a 525 00:31:30.119 --> 00:31:34.039 bagel coffee. Like no one knows that that how Like I just paid them. 526 00:31:34.039 --> 00:31:37.440 They have their cash register, they have it, but no one's tracking 527 00:31:37.480 --> 00:31:38.599 my cash that I just pulled out of my pocket and paid the person. 528 00:31:38.640 --> 00:31:42.200 That's a like a weird thing to think, like someone could be monitoring what 529 00:31:42.200 --> 00:31:47.240 I'm doing. That raises some interesting questions. Yeah, obviously a big debate 530 00:31:47.359 --> 00:31:51.640 happening. There's political candidates, there's members of Congress who put out bills, 531 00:31:52.319 --> 00:31:56.000 you know, trying to block the FED from doing certain things. But it's 532 00:31:56.079 --> 00:32:00.119 tbd right to see how are they going to roll out these things and if 533 00:32:00.119 --> 00:32:04.680 it's going to align to the Constitution and our right to privacy. So what, 534 00:32:04.759 --> 00:32:07.039 We'll have to wait and see, But at least we have alternatives and 535 00:32:07.680 --> 00:32:12.359 Bitcoin and these other cryptocurrencies. Speaking of Bitcoin, I would love to get 536 00:32:12.400 --> 00:32:16.599 your thoughts on the bitcoins boty TF launch. That was certainly a landmark moment 537 00:32:16.599 --> 00:32:21.799 for the crypto industry, even though we had to beat the SEC in court 538 00:32:21.839 --> 00:32:24.880 for this, but nevertheless, all of Wall Street is here. What are 539 00:32:24.880 --> 00:32:30.359 your thoughts on that? No, I think I think it's huge and it's 540 00:32:30.359 --> 00:32:34.400 gonna be a mass push because I do think somewhere from an investment standpoint, 541 00:32:34.440 --> 00:32:38.200 there's sort of a subset of people that have been tinkering with buying and engaging 542 00:32:38.240 --> 00:32:44.359 in the crypto ecosystem. Uh, the the sort of reaching that point where 543 00:32:44.400 --> 00:32:50.200 now we have, you know, an ETF that's available to really every day 544 00:32:50.480 --> 00:32:52.559 investors. You know that you could go to your your Merrill lynch or Charles 545 00:32:52.559 --> 00:32:55.519 Schwab and be able to buy in these ets. That's gonna be huge for 546 00:32:55.599 --> 00:33:00.000 adoption and also I think huge then for acceptance and people seem like, Okay, 547 00:33:00.000 --> 00:33:02.440 hey, what is this thing? Let me get more engaged. So 548 00:33:02.440 --> 00:33:06.680 it's super interesting. People ask questions like, oh, what's the tax impact 549 00:33:06.720 --> 00:33:07.480 to that? And I'm like, well, at that point, you're really 550 00:33:07.640 --> 00:33:13.920 you're you're you're buying an ETF, You're not buying bitcoin, so you're really 551 00:33:13.920 --> 00:33:16.359 looking at the tax treatment of ETF as an investment vehicle, which could come 552 00:33:16.400 --> 00:33:20.160 in a couple of different flavors. And I think even even right now it's 553 00:33:20.200 --> 00:33:22.640 not totally clear how they're going to do that reporting. Uh there's two kind 554 00:33:22.680 --> 00:33:28.599 of buckets and ETFs, but it's you're you're getting closer, you're getting it 555 00:33:28.640 --> 00:33:31.079 out there, and you're making it more more easily or readily available to the 556 00:33:31.079 --> 00:33:35.720 public at large. You know, they don't have to go to coinbase now 557 00:33:35.799 --> 00:33:37.400 or Gemini even, or they don't have to get some like a meta mask 558 00:33:37.480 --> 00:33:42.319 wallet and start doing squabs. They can just basically go right to their local 559 00:33:42.359 --> 00:33:45.000 broker that they've used where they got retirement accounts at or something and be able 560 00:33:45.000 --> 00:33:50.240 to get access to investing in bitcoins. So that's that's a huge step I 561 00:33:50.240 --> 00:33:54.480 think for sure. Miles. I'm gonna ask you a weird question here because 562 00:33:54.519 --> 00:34:00.119 it's something my own personal feelings, but you may feel different because some one 563 00:34:00.119 --> 00:34:04.640 who worked at the IRS. I feel like capital gains taxes are just wrong. 564 00:34:04.720 --> 00:34:08.320 It's highway robbery by the government because like, I take my already tax 565 00:34:08.519 --> 00:34:12.360 dollars and I invest it, I make a gain, and the government comes 566 00:34:12.360 --> 00:34:15.199 and takes twenty thirty percent. You know, depending on your income bracket. 567 00:34:16.559 --> 00:34:21.079 Do you think there's ever a chance that that capital gains goes away or gets 568 00:34:21.119 --> 00:34:24.360 reduced? I would, I don't know that there's ever a chance. Yeah, 569 00:34:24.440 --> 00:34:28.000 my speculation is probably not a chance that's ever going to go away. 570 00:34:28.079 --> 00:34:30.760 I will say this, keep them on like you do capital gains tax Yeah. 571 00:34:30.960 --> 00:34:37.639 The goal there is that the IRS is taking, not like and this 572 00:34:37.760 --> 00:34:39.360 is back to this question of double taxation. It's like you've taken your one 573 00:34:39.400 --> 00:34:43.719 hundred dollars, you've made you pay tax on your harder money, and then 574 00:34:43.760 --> 00:34:46.119 you take it and you invest it in something well, and then later when 575 00:34:46.159 --> 00:34:50.360 you exit out of your investment, that's the moment that triggers capital gain. 576 00:34:50.480 --> 00:34:53.519 Right, you got to exit or dispose of your investment, you're only paying 577 00:34:53.599 --> 00:34:57.039 tax on the delta, right, You're only paying tax, Like if you 578 00:34:57.079 --> 00:35:00.559 started with one hundred and now it's worth two hundred, you're only or maybe 579 00:35:00.599 --> 00:35:01.599 that's a bad example, like one hundred and no ounce worth one hundred and 580 00:35:01.639 --> 00:35:05.880 fifty, but you're only paying tax on that extra fifty. You're paying tax 581 00:35:05.880 --> 00:35:08.079 on one hundred again, So that's something to keep in mind. What's interesting 582 00:35:08.320 --> 00:35:14.480 is capital gain tax as we understand it today, which is sort of bifurcated 583 00:35:14.480 --> 00:35:16.039 in a way. Right, if you have your investment, if you're engaged 584 00:35:16.039 --> 00:35:20.320 in that investment in less than a year, the income you make from that 585 00:35:20.400 --> 00:35:24.039 investment, that gain that we talk about, is actually subjected to your ordinary 586 00:35:24.079 --> 00:35:28.679 tax rate, same tax rate your salary or whatever wages might be taxed at. 587 00:35:29.079 --> 00:35:31.840 However, if you hold that investment for over a year, it's going 588 00:35:31.920 --> 00:35:36.119 to be taxed at what we call preferential rates, so it's tax at the 589 00:35:36.159 --> 00:35:38.280 lower like the fifteen percent rate. There's some other things that go in there 590 00:35:38.320 --> 00:35:42.000 that could go a little bit up because there's some other surch charge kind of 591 00:35:42.000 --> 00:35:45.760 taxes that come in but just generally people think bad. So what's interesting historically 592 00:35:45.320 --> 00:35:50.559 is that fifteen percent rate hasn't been around for as long like it's probably only 593 00:35:50.800 --> 00:35:52.880 trying to remember the date. I think it's like the late nineties, Like 594 00:35:52.880 --> 00:35:57.320 that preferential rate came into play, not super long ago, and it was 595 00:35:57.400 --> 00:36:00.639 an idea to push people into investing, to give them that tax break. 596 00:36:00.480 --> 00:36:02.400 And where you're going is like, is there a way to give that tax 597 00:36:02.440 --> 00:36:07.159 break even bigger? Like how do we get it even lower? Which actually 598 00:36:07.239 --> 00:36:10.199 is isn't a bad idea. I think it's weird because you hear a lot 599 00:36:10.199 --> 00:36:14.559 of news and that's that's a bigger tax policy question, right, like what 600 00:36:14.639 --> 00:36:17.039 sort of behavior do we want to incentivize by our population? Do we want 601 00:36:17.039 --> 00:36:20.679 them to like invest stuff? And the way we get them to invest is 602 00:36:20.800 --> 00:36:23.320 maybe reducing taxes. The flip side is there's people that say, hey, 603 00:36:24.079 --> 00:36:29.639 low, lower income or marginalized people, they don't have the extra money to 604 00:36:29.679 --> 00:36:32.840 be investing. Only sort of certain demographics have the money to be investing. 605 00:36:32.920 --> 00:36:37.519 And if you're giving those certain demographics a tax break, then you're like you're 606 00:36:37.519 --> 00:36:40.519 creating this like discrepancy or on inequality in our tax system, and that's like 607 00:36:40.519 --> 00:36:45.679 a different policy question that comes up. So this is interesting on this point. 608 00:36:45.719 --> 00:36:50.519 I think it'd be curious as we go into next year. If you 609 00:36:50.599 --> 00:36:54.360 might remember back in twenty eighteen, when we had Donald Trump as the president, 610 00:36:54.440 --> 00:36:58.159 there was a series of tax cuts that got put into place, although 611 00:36:58.199 --> 00:37:00.320 he was the president, was in Congress put in place. Those are all 612 00:37:00.360 --> 00:37:05.239 set to expire in twenty twenty five, and so there's going to be a 613 00:37:05.239 --> 00:37:08.360 big debate in the tax like in Congress next year around tax policy because they're 614 00:37:08.360 --> 00:37:13.079 all supposed to expire. Certainly some of them people don't want to expire, 615 00:37:13.199 --> 00:37:15.199 other ones people maybe do want to expire. So it'd be very curious in 616 00:37:15.239 --> 00:37:20.000 the tax rule to see what happens and what comes out of Congress. Yeah, 617 00:37:20.039 --> 00:37:23.440 and I remember hearing things about wanting to tax unrealized gains as well. 618 00:37:23.480 --> 00:37:27.960 I remember hearing it in passing. So I don't know, is there anything 619 00:37:28.000 --> 00:37:30.760 new with that or is that off the table. I wouldn't say it's like 620 00:37:30.800 --> 00:37:34.360 off the table. I don't think there's anything new. There is some talking 621 00:37:34.400 --> 00:37:36.960 points around and this goes to kind of what I was salkd about, this 622 00:37:36.960 --> 00:37:39.679 idea that you have people who have stuff invested and the normal tax rule is 623 00:37:39.719 --> 00:37:44.599 like, hey, if I invest in something and it's going up up in 624 00:37:44.719 --> 00:37:46.719 value, I don't own any tax on it until I exit that investment, 625 00:37:47.079 --> 00:37:51.920 like it can just sit there. And that's this unrealized concept of unrealized gains. 626 00:37:52.199 --> 00:37:55.519 I think, yeah, what happens is from a policy debate. There's 627 00:37:55.559 --> 00:38:00.719 certain people, certain people in Congress that I think that's more on your Elizabeth 628 00:38:00.760 --> 00:38:04.480 Warren side and that kind of suff I think that's the I say certain people, 629 00:38:04.519 --> 00:38:06.239 not because I'm trying to be quiet, just trying to remember who are 630 00:38:06.239 --> 00:38:08.199 all the ones talking about it. I think it's like Elizabeth warrenside. Yeah, 631 00:38:08.239 --> 00:38:10.519 they have as a tax policy matter, they viewed it as like, 632 00:38:10.559 --> 00:38:14.719 hey, we can increase revenues to the government if we just start taxing these 633 00:38:14.760 --> 00:38:20.159 people every year. And that's a I would say, that's a foundational shift 634 00:38:20.199 --> 00:38:23.079 and what tax policy in this country has been. Whether it'll happen or not, 635 00:38:23.159 --> 00:38:25.880 I don't know, but that's not how it's always worked here, you 636 00:38:25.880 --> 00:38:29.119 know, to then you're getting and their goal is say, well, yeah, 637 00:38:29.119 --> 00:38:30.199 but you have these people stuff invested in it's just going up and they 638 00:38:30.199 --> 00:38:32.840 don't cash out, So they're avoiding tax. But it's like, but they 639 00:38:32.960 --> 00:38:36.880 haven't cashed out either they don't really have the money. It's just paper money 640 00:38:37.480 --> 00:38:39.800 kind of or it's on paper they have these gains. So that's a tough 641 00:38:39.880 --> 00:38:44.559 question. But it would as a historical matter of tax policy be like a 642 00:38:44.679 --> 00:38:49.159 huge shift in how the United States approaches taxation. Yeah. I hope that 643 00:38:49.199 --> 00:38:51.599 doesn't happen, but I guess it goes back to, you know, the 644 00:38:51.719 --> 00:38:57.559 larger government problem of overspending. Right, the government can balance its own books, 645 00:38:58.320 --> 00:39:00.559 they spend too much and then they have to where do you get the 646 00:39:00.599 --> 00:39:02.800 revenue from? Well, got to raise taxes. And this is not just 647 00:39:02.840 --> 00:39:07.119 a US problem, but maybe it goes back to the whole Fiat debt based 648 00:39:07.119 --> 00:39:14.360 system and which is a larger conversation. So uh yeah, thoughts on no, 649 00:39:14.480 --> 00:39:15.920 I mean just yeah, it's a big what you're getting added things that 650 00:39:15.960 --> 00:39:19.840 I don't think there's ultimately or clear answers to. Right. You know, 651 00:39:19.880 --> 00:39:23.239 you have different people have different viewpoints my background and economic stuff. You have 652 00:39:23.280 --> 00:39:28.280 these bigger, like fundamental questions you discuss around tax policy, like what is 653 00:39:28.320 --> 00:39:30.639 it? But there is the idea of from a finance standpoint, it is 654 00:39:30.719 --> 00:39:36.199 very simple. You know, the government has expenses it has to incur and 655 00:39:36.239 --> 00:39:37.239 we can you know, people can have a debate all day long about what 656 00:39:37.280 --> 00:39:42.079 those should be. But then and then in order to pay those expenses, 657 00:39:42.199 --> 00:39:45.559 they have to get generate funding to pay those whether that's through taxation, through 658 00:39:45.840 --> 00:39:52.039 borrowing or something. And these are really deep questions. People can have it. 659 00:39:52.119 --> 00:39:53.400 You can debate all day. We could see it all night it having 660 00:39:53.400 --> 00:39:57.360 some drinks and talking about them, and there's not I don't know at the 661 00:39:57.440 --> 00:40:00.480 end of the day. There's probably some answers that are some in some ways 662 00:40:00.480 --> 00:40:04.119 better than not, but they're often trade offs and and so you got to 663 00:40:04.159 --> 00:40:06.079 sit around and figure it out. And I don't have any good answers for 664 00:40:06.079 --> 00:40:07.840 what the outcome will be. It's I have faith that at some point we 665 00:40:07.880 --> 00:40:10.920 will figure it out and it's going to kind of keep going forward and things 666 00:40:10.920 --> 00:40:15.360 will be okay. But yeah, it's it's super super interesting questions. For 667 00:40:15.400 --> 00:40:20.519 sure. Maybe crypto and blockchain will offer a solution. As you know, 668 00:40:20.920 --> 00:40:23.360 there's future iterations around it, and I look, they're going to tokenize the 669 00:40:23.400 --> 00:40:28.039 money anyway, so maybe there's a solution there. Who knows. Yeah, 670 00:40:28.079 --> 00:40:30.519 you knows where. Yeah, and I do think as blockchain technology and at 671 00:40:30.440 --> 00:40:36.880 a fundamental comes into change how we do things, maybe change how financial transactions 672 00:40:36.880 --> 00:40:39.239 occur, how they're structured, how they're settled. There there could be opportunities 673 00:40:39.280 --> 00:40:44.159 there to have some changes in how the system operates. M all right, 674 00:40:44.199 --> 00:40:45.760 moms, I got some wrap up questions here for you. First, if 675 00:40:45.800 --> 00:40:51.960 you could create your own metaverse, what would the theme be? Oh, 676 00:40:52.320 --> 00:40:55.519 I don't know, that's a tricky one. I it might be like outdoor 677 00:40:55.559 --> 00:41:00.000 ecosystem. I'm like a big like I live in Colorado, like the outdoor 678 00:41:00.079 --> 00:41:02.880 or so kind of be that to be kind of like outdoor oriented. Nice 679 00:41:04.440 --> 00:41:08.360 rapid fire questions. Favorite food. I grew up in southern California, so 680 00:41:08.400 --> 00:41:14.000 I'm gonna go with Mexican Mexican food, particularly Baja California style Mexican food. 681 00:41:14.360 --> 00:41:16.639 I have yet to try that, but on my list. My favorite musician 682 00:41:16.719 --> 00:41:21.480 or band for me, it is a lie. Could be anybody need given 683 00:41:21.519 --> 00:41:22.639 time, but the one that always comes back. That's old school. I 684 00:41:22.639 --> 00:41:27.639 had two older brothers Pink Floyd. So my oldest brother, remember when I 685 00:41:27.639 --> 00:41:30.880 was a kid, he was a huge Pink Floyd fan. So I always 686 00:41:30.920 --> 00:41:34.199 go back to Pink Floyd. It's one of those old school English rock bands 687 00:41:34.639 --> 00:41:40.360 for sure. Favorite movie I would say Shawshank Redemption good. One favorite book 688 00:41:44.000 --> 00:41:47.760 Ivan Home, Sir Walter Scott's like a classic Robin Hood kind of tail in 689 00:41:47.840 --> 00:41:52.320 there, So that's one of my favorites. Nice and when you're not working 690 00:41:52.320 --> 00:41:57.280 at tax Bit, what are you doing for fun? Often mountain bike riding, 691 00:41:57.760 --> 00:42:00.760 being outside in general, stand up paddle board, that kind of stuff. 692 00:42:00.719 --> 00:42:05.159 Well's pleasure chatting with you. I appreciate all the insights and knowledge, 693 00:42:05.239 --> 00:42:07.320 and I definitely have to have you back on because you know, this taxic 694 00:42:07.480 --> 00:42:13.079 thing is only going to continue to get crazier as the government tries to figure 695 00:42:13.079 --> 00:42:15.800 out all of this. But thank you so much for joining me. Yeah, 696 00:42:15.840 --> 00:42:17.679 no, thank you for having me very much. I super appreciate it.