Extremely difficult tax question ...

[daddy]

Say at the start of the year a man is in possession of x amount of some lawful material on US soil. During the year he makes a series of trades, bartering, though never trading any currency, and ends up with x+y amount of the material.

Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

Good luck! You'll need it!

[Famspear]

Say at the start of the year a man is in possession of x amount of some lawful material on US soil. During the year he makes a series of trades, bartering, though never trading any currency, and end up with x+y amount of the material.

Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

Good luck! You'll need it!

No, we don't need "luck."

And, no, we don't need to show "proof." And, no, if we did need to show "proof," the "proof" would not need to "show a clear nexus between laws and the man and his actions."

For Federal income tax purposes, the answer to your question does not depend on whether the "material" is "lawful" or not. It also does not depend on whether the "material" is located on "US soil."

Also, whether the man bartered and never "traded any currency" will not necessarily change the result.

Since your hypothetical is so riddled with misconceptions, I'll help you out.

Suppose the man in your example is John. Suppose that John's father is Robert. Now, suppose that Robert bought an asset for $50,000, and then gave that asset to his son John in January of 2018. Let's assume that John now has an asset with a current value of $50,000. John goes out and engages in various barters during 2018 with various third parties -- never involving money or currency of any kind. As a result, John ends up with an asset worth $85,000 during 2018.

What John has done is to realize gross income of $35,000 during 2018. If John is a U.S. citizen, he is generally required to file a 2018 U.S. Federal income tax return and to report $35,000 of gross income. It doesn't matter whether John lives within the geographical area of the United States or not.

Now, suppose that John is not a U.S. citizen, but was a U.S. resident for all of 2018 (to make it simple). Same result. John has realized gross income of $35,000 during 2018. He is generally required to file a 2018 U.S. Federal income tax return and to report $35,000 of gross income.

How is the tax to be paid? I don't know, and I don't care. And neither do you. That's John's problem.

[Famspear]

And, no, "daddy's" question is not an "extremely difficult tax question".

[Arthur Rubin]

Suppose the man in your example is John. Suppose that John's father is Robert. Now, suppose that Robert bought an asset for $50,000, and then gave that asset to his son John in January of 2018. Let's assume that John now has an asset with a current value of $50,000. John goes out and engages in various barters during 2018 with various third parties -- never involving money or currency of any kind. As a result, John ends up with an asset worth $85,000 during 2018.

What John has done is to realize gross income of $35,000 during 2018.

I know we like to make things simple for the simple-minded (or those pretending to be simple-minded), and I may be confusing "realized" income and "recognized" income, but isn't the income to be reported usually the difference between the value of the next-to-last asset owned at the time of trade and the basis, rather the difference between the value of the last asset at the end of the year and the basis? Canadian law is different, but....

[wserra]

What Famspear wrote is of course correct, but I see some "gotcha" weasel room here.

Say at the start of the year a man is in possession of x amount of some lawful material on US soil. During the year he makes a series of trades, bartering, though never trading any currency, and ends up with x+y amount of the material.

So, in other words, I have 10 bricks, and wind up with 15. If I acquired the other five in exchange for services or for other items of lesser fair market value, I owe tax to the extent of the FMV of 5 bricks (in case of services) or the difference in FMVs (in case of swaps). 26 CFR § 1.61-2. If not in exchange for either, the 5 bricks are a gift, and the donor may owe gift tax.

Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

As discussed above, you don't give enough information.

Good luck! You'll need it!

Hardly.

[Jeffrey]

May I raise a common law argument?

The taxman is unlikely to notice this form of income. As long as you don’t get caught, you’re fine.

[Gregg]

May I raise a common law argument?

The taxman is unlikely to notice this form of income. As long as you don’t get caught, you’re fine.

The question wasn't "How to commit tax evasion" or "How hard would it be to commit tax evasion", you had income, you owe the tax subject to all the normal deductions and exemptions and whatever else you can find in the few thousand pages of rules.

But what I think he really asks is best answered "You have to pay taxes on your Bitcoin, really"

[notorial dissent]

To simplify it even further, the law(s) of the land apply equally to EVERYONE, with certain exceptions that are irrelevant to the instant discussion. Therefore the Tax laws apply to EVERYONE within the land, and possibly otherwise as defined. Basically, if you have income, from whatever source, as defined in the Tax code(s), that meets specific criteria, then you owe tax. There is NO concept in US law about having to prove a law applies. The individual affected has to prove it doesn't. There is a particular moron tax guru out there whose stock in trade is insisting that the laws have to be "proven" to apply to an individual in court, where he is spectacularly and consistently wrong and his track record for getting his "clients" in even deeper trouble in court is spectacular. So have a nice day and thank you for playing.

[Chaos]

May I raise a common law argument?

The taxman is unlikely to notice this form of income. As long as you don’t get caught, you’re fine.

The question wasn't "How to commit tax evasion" or "How hard would it be to commit tax evasion", you had income, you owe the tax subject to all the normal deductions and exemptions and whatever else you can find in the few thousand pages of rules.

But what I think he really asks is best answered "You have to pay taxes on your Bitcoin, really"

not even. you are a mechanic and I'm a mason hypothetically. I need you to fix my mason dump and you need a wall built. we exchange services. someone would have to prove we did that. that's the 'gotcha'

[jcolvin2]

May I raise a common law argument?

The taxman is unlikely to notice this form of income. As long as you don’t get caught, you’re fine.

The question wasn't "How to commit tax evasion" or "How hard would it be to commit tax evasion", you had income, you owe the tax subject to all the normal deductions and exemptions and whatever else you can find in the few thousand pages of rules.

But what I think he really asks is best answered "You have to pay taxes on your Bitcoin, really"

not even. you are a mechanic and I'm a mason hypothetically. I need you to fix my mason dump and you need a wall built. we exchange services. someone would have to prove we did that. that's the 'gotcha'

With respect to any particular exchange, it may be difficult for the government to figure out that two taxpayers engaged in a barter. However, in cases like this (where little in the way of records may be available), the Supreme Court has blessed the "net worth" method of proof (even for use in criminal cases), where the government's proof of income is based on the year over year increase in the amount of assets held by the taxpayer.

[Chaos]

The question wasn't "How to commit tax evasion" or "How hard would it be to commit tax evasion", you had income, you owe the tax subject to all the normal deductions and exemptions and whatever else you can find in the few thousand pages of rules.

But what I think he really asks is best answered "You have to pay taxes on your Bitcoin, really"

not even. you are a mechanic and I'm a mason hypothetically. I need you to fix my mason dump and you need a wall built. we exchange services. someone would have to prove we did that. that's the 'gotcha'

With respect to any particular exchange, it may be difficult for the government to figure out that two taxpayers engaged in a barter. However, in cases like this (where little in the way of records may be available), the Supreme Court has blessed the "net worth" method of proof (even for use in criminal cases), where the government's proof of income is based on the year over year increase in the amount of assets held by the taxpayer.

but you're talking about honest taxpayers. I'm pretty sure the OP is anything but hence the ridiculous trolling question to begin with.

[eric]

The law in Canada is a little bit different. Income is income, even if under a barter agreement, unless under certain instances. In the example above, the barter agreement is that you are carrying out a normal part of your business except that the exchange is in services, rather than cash. In this instance income tax and GST/HST is payable although you can argue for reduced taxes since sometimes the barter value is at a reduced value than what you would normally charge.

Here is an extreme case - My next door neighbour helps me build a fence. I give him a couple of cases of Pil in exchange for his labours. The tax man is happy since I'm not a brewer and he's not a carpenter. That being said if I trade him a pig for a couple of whole prosciutto legs they would be upset since that is our trades (honest truth here). There is even a tax interpretation bulletin for members of barter clubs that allow you to skip paying GST/HST. Bitcoin is treated roughly the same as trading any other form of financial instrument and there may be tax implications.

[Famspear]

Suppose the man in your example is John. Suppose that John's father is Robert. Now, suppose that Robert bought an asset for $50,000, and then gave that asset to his son John in January of 2018. Let's assume that John now has an asset with a current value of $50,000. John goes out and engages in various barters during 2018 with various third parties -- never involving money or currency of any kind. As a result, John ends up with an asset worth $85,000 during 2018.

What John has done is to realize gross income of $35,000 during 2018.

I know we like to make things simple for the simple-minded (or those pretending to be simple-minded), and I may be confusing "realized" income and "recognized" income, but isn't the income to be reported usually the difference between the value of the next-to-last asset owned at the time of trade and the basis, rather the difference between the value of the last asset at the end of the year and the basis? Canadian law is different, but....

Because Robert purchased the original asset for $50,000, Robert has a basis of $50,000. When Robert transfers the asset to John by gift, the receipt by John is non-taxable to John for Federal income tax purposes (Code section 102), and John has a carryover basis in that asset of $50,000.

John then barters that asset away in one or more transactions and, by the end of the year, ends up with an asset with a value of $85,000. The difference of $35,000 ($85,000 minus $50,000) is the total gain (or gains) John has realized. In this example, the $35,000 realized gain is also the recognized gain, since we haven't posited any additional facts that would make the gain be non-taxable.

In this case, $35,000 excess of the value of the last asset held at the end of the year over John's basis in the asset he acquired from Robert also happens to be equal to the total gain (or gains) John realized. (It is also equal to John's recognized gain.)

[daddy]

Well well, as expected, that was a bunch of weak responses, and of course, ZERO proof.

And poor wserra shot himself in the foot by referencing a code related to tax on corporations.

This is gonna be so easy!

[noblepa]

Here we go again.

Another day, another troll who thinks he has found a surefire way to avoid taxes.

There is nothing we can possibly do to "prove" to this moron that bartered income is taxable. Don't bother.

I'm sure that there are relevant tax court or federal court cases, on point, that ruled unequivocably that barter income is taxable, but that won't convince Daddy.

[Famspear]

Well well, as expected, that was a bunch of weak responses, and of course, ZERO proof.

And poor wserra shot himself in the foot by referencing a code related to tax on corporations.

This is gonna be so easy!

No.

Wserra referenced 26 CFR § 1.61-2, which is a Treasury regulation related to Internal Revenue Code section 61 -- the basic rule on gross income for Federal income tax purposes. Its scope is not limited to taxation of "corporations."

A common trait of tax protesters is to make the false argument that the U.S. federal income tax applies only to corporations. If that's what you're thinking, don't even try to go there.

Another common trait of tax protesters is the request for "proof."

The rest of the world is not here to "prove" something to you. We're not here to persuade you about what the tax law is. We're here to teach.

We know the tax law. You do not.

[Famspear]

The law in Canada is a little bit different. Income is income, even if under a barter agreement, unless under certain instances.

Under U.S. Federal income tax law, income is income -- even if under a barter agreement. So, it sounds like Canadian law and U.S. law are basically the same on this point.

Under U.S. Internal Revenue Code section 61, gross income is all income from whatever source derived, except as otherwise provided somewhere else in the U.S. law.

The only real exception to this "except as otherwise provided" rule is the result of drafting error regarding alimony income, in the "Tax Cuts and Jobs Act" from 2017. In that case, the Congress simply removed the references to alimony income (in two different Code sections) without providing a provision expressly making that income be non-taxable. The bill was rushed through the House Ways and Means Committee in the fall of 2017, then it was rushed through the full House of Representatives and Senate, and then it was rushed to the President for his signature. The intent was indeed to make alimony income be non-taxable. It is unlikely that the Internal Revenue Service will seize upon the drafting error and argue that alimony is still taxable, so the sloppy drafting work isn't being noticed much.

[Famspear]

[ . . . ] Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

As noted above, we're not here to "prove" anything to you. We're not here to persuade you of anything. We're here to expose and explain scams, including tax scams.

YOU started this thread. It is YOUR job to FIRST come up with your own statement of what you claim the law is -- with your own citations to actual provisions of the law.

The rest of the world does not have to provide "proof" for you. You are not a Special Snowflake. You need to learn more about how life works. Here, start with this:

And when he entered the temple, the chief priests and the elders of the people came up to him as he was teaching, and said, "By what authority are you doing these things, and who gave you this authority?" Jesus answered them, "I also will ask you a question; and if you tell me the answer, then I also will tell you by what authority I do these things. The baptism of John, whence was it? From heaven or from men?" And they argued with one another, "If we say, 'From heaven,' he will say to us, 'Why then did you not believe him?' But if we say, 'From men,' we are afraid of the multitude; for all hold that John was a prophet." So they answered Jesus, "We do not know." And he said to them, "Neither will I tell you by what authority I do these things."

--Matthew 21:23-27 (Rev. Stand. Vers.) (emphasis added).

I already had my citations -- to the actual law -- lined up and ready to go before you even started this thread. I have no need to show my hand yet.

Again, you started this thread. Grow up, kid.

[eric]

The law in Canada is a little bit different. Income is income, even if under a barter agreement, unless under certain instances.

Under U.S. Federal income tax law, income is income -- even if under a barter agreement. So, it sounds like Canadian law and U.S. law are basically the same on this point.

I must admit that the only reason I replied to this obvious troll is that I had time on my hands. I was attempting to do a remake of "Alberta Lawnmower Man" (the original was half an hour north of me)
https://www.cbc.ca/news/canada/calgary/ ... -1.4989692
We had the tornado(s) ( five funnels), I was pantless per Quatloos tradition, but I wrapped up a little early before the perfect photo opportunity. I then thought it would be appropriate to trim my roses but it started to rain so I decided to come in and check out Quatloos.

[Judge Roy Bean]

In a real-world sense, values are purely speculative unless or until a documentable sale or exchange occurs and a taxing authority becomes aware of it.

If I loan a skid-steer loader to a neighbor for a couple of weeks and he lets me store some extra hay in his barn, we're not exactly going to write it up and report it.

Yea, he could have rented it for a few hundred bucks and I could pay him a few hundred for storing the hay over the season but that would have been absurd, let alone unneighborly.