“He isn’t the crypto messiah, he’s a very naughty boy” (IRS 2024)

Introduction

Ever thought What Would Bitcoin Jesus Do?

Well, in Roger Ver’s case, the IRS are more concerned with what so-called Bitcoin Jesus didn’t do.

Roger Ver, was undoubtedly an influential figure in the early days of crypto and his evangelism for the nascent asset. Hence the name – Bitcoin Jesus” – obvs.

But he is in deep doo-do.

List of allegations

 

Ver has been accused of engaging in mail fraud, tax evasion, and filing false returns to evade paying approximately $48 million in #taxes to the US government.

Quite a list, eh?

He was arrested in Spain over the weekend and potential future extradition.

But what happened… or didn’t happen?

What’s the problem?

 

A quick warning that I’m not a US tax expert by any means.

The issue stems from the fact that if one renounces your US citizenship, like Ver reportedly did in 2014, then there is an ‘exit tax’. A punishment for having the temerity to hand in your US tax club membership badge. Leaving the Tufty Club it aint.

This tax is formally known as the “Expatriation Tax” and was introduced to prevent individuals from renouncing citizenship or long term residency primarily for tax avoidance purposes. Surely no one would stoop so low?

The exit tax is calculated based on the net unrealised gains on certain assets owned by the individual. This gain is deemed to be realised on the day before expatriation.

So, potentially, one has a filthy great capital gains bill on leaving. Ouch!

As you might guess, the #IRS avers that Ver’s unrealised gains on Bitcoin should have suffered the tax.

The indictment states that the IRS is short to the tune of the $48m of capital gains mentioned above.

The lens of hindsight?

 

I have seen a number of commentators saying that Ver ‘should know better’ and believed himself ‘to be above the law’.

Obviously, I don’t know him so cannot comment on his mindset at the time. By the same token (pardon the pun), I don’t condone tax evasion either.

But 2014 is a striking date.

If Ver had incurred the reported gains in the UK around that time and not reported them, would we be hearing the same gnashing of teeth?

Probably.

But let’s rewind.

What did Blighty’s version of the IRS, HMRC, think about #Bitcoin way back in 2014?

Well, we know. Cos they wrote it down. In a 2014 pamphlet.

They said:

“… a transaction may be so highly speculative that it is not taxable or any losses relievable.”

They also said in the same threadbare guidance that Bitcoin profits and losses might be treated as FX gains and losses.

History judges both these statements as poppycock.

So, would really be able to criticise someone like Ver not paying UK tax at that time with those public pronouncements?

You might say the IRS were probably more on the money and had a better understanding and guidance.

Now, I criticise HMRC occasionally, but in this regard they’ve led the way when it comes to international authorities around the world seeking to understand AND put out guidance for taxpayers. So I think you’d be wrong. More poppycock.

This is hypothetical because, certainly under the UK system, they could have made a later disclosure as the technical thinking slowly evolved. A good adviser, with thorough knowledge, might have encouraged this.

However, my point is that it is easy to look back at past events through a prism of 20/20 hindsight.

It’s easy to do. After all, I’ve just done it. In 2014 I wouldn’t have called HMRC’s view poppycock. I hadn’t given it much thought to be honest. But now I’m here, the years later, saying it was poppycock.

Messes with the mind.

Conclusion

For now, however, with the blockchain messiah facing his day of reckoning, I will leave you with the eleventh commandment…

“Thou shalt pay thine #crypto taxes.”

If you have any queries about this article, or crypto taxes, then please get in touch.