Tax lawyer finds major loophole for crypto investors

06 Jul, 2019 | Updated: 06 Jul, 2019
by David Robb
Regulation
Tax lawyer finds major loophole for crypto investors

A tax attorney has recently discovered a tax loophole that may prove interesting for many crypto investors. Robert R Wood, of San Francisco-based Wood LLP, found precedent in a ruling on trust income. 

In a CoinTelegraph article, Wood points to the case of North Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, where the U.S. Supreme Court unanimously said that a state could not tax out-of-state residents on trust income without minimum contacts. 

The lawyer suggests that crypto holders could transfer their digital assets into a living trust meant for estate planning. This transfer would not be taxable, and it could help many traders and investors with avoiding the often complex and hefty tax deductions they may be subject to.

The issue of tax as related to the crypto space is currently a tricky one. Some observers have pointed out that fluctuations in crypto prices, leading to returns on investment, may need to be reported in order to comply with tax rules. This could apply to even the smallest transactions, meaning that mass adoption of BTC and other tokens as a payment method would be restricted.

As of this year, most retail traders are exempt from laws regarding the reporting of capital gains and subsequent taxes, although there could be changes in rules that may classify some cryptos as securities. Tax evasion as a potential use for crypto is also a major concern for many legislators.

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