November 5, 2024 • 29 mins
In today's fast-evolving financial landscape, understanding tax reporting for digital assets is crucial. Tune into our latest podcast episode for information on your tax reporting obligations. #DigitalAssets #Finance #Podcast
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:30):
Well, good afternoon, Michiganers. It is Tuesday, November fifth, twenty
twenty four, otherwise known as election Day. So if you
haven't made it out to the polls, I encourage you
get out there and vote so that your voice can
(00:51):
be heard.
Speaker 2 (00:51):
Of course, this.
Speaker 1 (00:52):
Is Tuesday with Tom, Michigan's only weekly intern at show
where we do answer your questions about estate planning and
a state settlement in Michigan. I'm your host, Tom Doyle,
a state planning attorney, lifelong Michigan resident, an ambassador for
all things good in this great state of Michigan. Welcome,
(01:13):
Welcome to today's program. And I know, at least here in
the Grand Rapids area, it's kind of a misty, rainy,
gloomy kind of day. But don't let that stop you
from getting out and having your voices heard by voting.
Last episode, I talked about the twenty twenty five increase
(01:38):
in federal estate tax and gift exemption. So as you're
looking for what's going to happen next year, I've talked
about this almost a year ago, and I talked about
it again the last episode.
Speaker 2 (01:50):
There's going to be some potential.
Speaker 1 (01:52):
Changes on the there's certainly going to be some increases
in federal estate tax gift exempt for twenty twenty five. Also,
though it's important to remember, there's going to be some
dramatic potential changes in those same amounts in twenty twenty six.
So I encourage you listen to last week's episode so
(02:15):
that you have a better understanding about what the new
exemptions are in twenty twenty five and what's going to
be at least on the table right now in twenty
twenty six. Today today we're going to talk about a
little bit something we're going to talk about as understanding
digital asset reporting requirements.
Speaker 2 (02:35):
But please remember what I'm.
Speaker 1 (02:37):
About to discuss, as always during the program, is for
educational purposes only. It is not intended to be legal advice.
You need to work with your attorney and certainly in
the case of digital asset reporting, with your tax advisor
to determine what is appropriate for you and your planning.
(03:10):
Understanding digital asset reporting requirements, well, if you're asking what's
a digital asset, then this probably isn't anything that's going
to be relevant to you, because if you own them,
you will know what they are. But quite frankly, if
you're looking at your tax forms, your ten ninety nine
(03:32):
ten forty forms, you're going to notice a checkbox on there,
and in that box you do have to indicate whether
or not you received digital assets. So having some idea
of what a digital asset is and what the reporting
requirements might apply to you, but essentially, if you have
a digital asset, you're likely.
Speaker 2 (03:54):
Going to know that you have it.
Speaker 1 (03:55):
So what are they? Well, digital assets, And before I
go there, you know a lot of people get, well,
let's go there first. Digital assets a form of value.
It's like cash, but they exist only in a digital form,
only in a computer form, and they're protected by strong cryptography.
(04:16):
So the idea is is that you have this digital money.
Think of it in those terms. It exists only in
a computer. It doesn't exist in the actual real physical world,
but it's protected by cryptography so that it can be
transferred to other people. People can't supposedly hack into it,
(04:36):
steal it, all those good.
Speaker 2 (04:37):
Kinds of things.
Speaker 1 (04:38):
They're going to be operated on what they oftentimes call
a blockchain or distributed ledger or some sort of similar technology.
And you don't really need to understand blockchain technology, just
stibuted ledger. But it exists. It's all part of the
digital world that's designed to manage and allow for the
(05:00):
protection of and transfer of this digital assets. Oftentimes you
might have heard of things like this a virtual currency
or cryptocurrency or what they call ntfs and NFTs non
fudgible token. So for example, you probably heard about bitcoin.
(05:22):
Bitcoin is a type of cryptocurrency. Bitcoin is actually a
type of digital currency. And when I talk about NFTs,
perhaps you've heard about these in particular because at some
point in time over the last number of years, Donald
Trump has sold if you will, NFTs. But in most situations,
(05:45):
what an NFT is is, for example, I create a
piece of art and it exists only in a computer.
It's not on paper, it's not on you can't put
it on my wall.
Speaker 2 (05:59):
It is totally in the digital world.
Speaker 1 (06:03):
Well an NFT, and if I want that to be protected,
I put it out there as an NFT, which because
of cryptography that's being involved, it only exists in this
partitical digital world. It cannot be copied, so somebody can't
just make a copy. Right now, if I just take
(06:24):
a photo and I put a photo out on the internet,
so may can make a copy of that photo. Well,
if I'm creating a unique piece of art, think about
in those terms. I don't want someone to seem to
be able to make a copy of it, because the
value to me perhaps is because there is only one
of them, or ten of them, or however number there
happened to be of them. So I want it to
(06:46):
be protected where it can't be copied, it can't be substituted,
it can't be divided, and they can represent a number
of items, but oftentimes it's artwork. And you perhaps have
heard in the new use over the last year, it's
kind of hard to avoid it that the Trump family,
apparently along with others, is starting up what they call
(07:08):
a cryptocurrency exchange. And a cryptocurrency exchange is simply a
place that you go online on your computer or on
your phone where you can buy and sell cryptocurrency, for example,
where you can buy and sell bitcoin. So that's a
kind of basic rundown of what we're talking about when
(07:30):
we talk about digital assets. But the truth of the
matter is you have likely been involved in some sort
of digital currency for most of your life and didn't
even know. So think about this. If you write a check,
a check is not cash. A check is not dollar bills,
(07:52):
five dollar bills, ten dollar bills. It's a written iou.
Speaker 2 (07:57):
If you will.
Speaker 1 (07:58):
And when that check gets too as it did, it's
becomes digital currency, meaning what the check itself today doesn't
go from your bank to somebody else's bank. They simply
process it, turn it into internally in the banking system,
if you think about it, digital currency that then gets
(08:20):
transferred someplace else. Or another example, let's say you're going
to do a wire transfer. You've got let's say you've
got a daughter who's in Florida and you want to
send her some money, or you have a grandchild who
might be traveling somewhere and you want to send them
some money. Well, you don't normally put thousands of dollars
in a box and you send it off to them.
(08:42):
You're going to go to your bank and you're going
to say to your bank, I want to send my
son some money once send my daughter somebody and they
can do that. It'll be done digitally. You're not they're
going to take money out of your bank account. But
think about this. In reality, your bank account at the bank,
it doesn't have five thousand dollars in cash sitting in it.
Speaker 2 (09:05):
Okay, it's digital.
Speaker 1 (09:08):
Okay, it's backed up by other cash, but it's truly digital.
And then they're going to take your digital money that's
saved at the bank and they're going to send that
through the through the internal banking system to the bank
account for your son or grandchild. So you're already involved
in much of a digital world. But really what we're
(09:30):
talking about here, this whole idea of digital assets, is
where you're not involved with a bank. There is no
bank involved, there is no When banks are involved in theory,
there's cash, there's money, literally money that backs up what
that bank has to have. But in a digital world,
(09:53):
there is no bank, there is no cash, there's nothing
backing up this digital asset. It's simply a form of
assets that can be transferred back and forth between individuals
for different things. And because there's no bank involved, because
(10:16):
there's no government involved, the reason that the IRS requires
you to check that box on your tax return is
because there is no physical record that somebody can go
look at to see did you own it?
Speaker 2 (10:31):
What did you do with it.
Speaker 1 (10:33):
Now, with that having been said, digital asset digital transactions,
a few will So we're talking about certain things are
going to happen where you're going to have to have
certain reporting requirements. So among digital asset transaction, things are
like selling digital asset. I own bitcoin, and I sell
(10:53):
my bitcoin to somebody else. Or I create that artwork
online and I sell my artwork to somebody else.
Speaker 2 (11:03):
I have sold a digital asset.
Speaker 1 (11:07):
Maybe somebody is going to give me a digital asset
as payment for goods or services. Maybe somebody is going
to pay me in bitcoin for work that I did
for them. Now, our office doesn't currently accept bitcoin or
digital assets cryptocurrency for.
Speaker 2 (11:26):
Work that we do. I know there are some law
firms that are beginning to do that.
Speaker 1 (11:30):
There are some other companies out there that are beginning
to accept cryptocurrency.
Speaker 2 (11:35):
If you will, as payment.
Speaker 1 (11:37):
So if you receive them as payment for goods or services,
that's going to be an asset transaction, or perhaps acquiring
new ones through what they call mining or staking. And
that's really the process by which and it gets very
perhaps kind of complicated, but that's the process by which
new cryptocurrency gets created. It's not a bank that creates it.
(12:02):
There's a computer process that goes through where new digital
currency can be created. So if you acquire one through
this process of creating digital currency, that's an asset transaction,
or perhaps obtaining one through what's called a hard fork,
(12:24):
and that's simply where cryptocurrency splits in two.
Speaker 2 (12:27):
So think about stock.
Speaker 1 (12:28):
You probably have heard about this, at least I might
own stock in a company and then the stock split.
So where I had one hundred shares, now it's going
to split, and now I have two hundred shares, Okay.
It doesn't mean suddenly it's worth one hundred percent more.
It usually means, okay, my hundred shares is now two
(12:50):
hundred shares, where they're all total the same amount that
I owned before. Same thing with cryptocurrency. There can be
situations where the currency splits, if you will, and in
that case, you are obtaining additional cryptocurrency as a result
of that split. Another dig digital asset transaction would be
(13:14):
something like where you are exchanging them for property, good services,
or other digital assets. So whenever they're being exchanged for
if you will, services or perhaps actual property, maybe you're
gonna buy a car and you're gonna use bitcoin to
(13:35):
buy the car, okay, or you're gonna use them to
buy other digital assets. Maybe I'm gonna take my bitcoin
and I'm gonna use my bitcoin to buy that piece
of artwork that NFT is at out there. Again, another
example of a digital asset transaction, and quite frankly, any
(13:55):
other disposition of a financial interest in a digital asset,
that's kind of a catch all broad any dist disposition
of any interest that you had in a digital asset. Now,
so those are all examples of digital asset transactions that
(14:19):
we're really talking about here today. So the reporting requirements,
that's what we really want to have a conversation a
little bit about today. If you're involved in any of
those sorts of transactions, you have to report all income related.
Speaker 2 (14:34):
To the transaction.
Speaker 1 (14:37):
And the way you go about then determining calculating your
gainer loss because there might be capital gains tax. Just
like owning stock. If I own stock and I sell
my stock for more.
Speaker 2 (14:50):
Than I bought it for, I might be subject to
a capital gain.
Speaker 1 (14:54):
Same thing if I go out and buy bitcoin as
an investment, think about it, and I sell my bitcoin
for more than I bought it, same concept, or I'm
going to have capital gains And so the way you're
going to calculate your gainer loss or the tax form
you're going to use reporting all of these different transactions
is really going to depend upon what type of transaction
(15:17):
you are involved in. So, for example, gainer loss from
selling digital assets, well, gainer loss from selling digital assets
is just like gainer loss from selling stock, gainer loss
from selling gold, gainer loss from selling other physical assets.
So there's an IRS Form eighty nine forty nine which
(15:37):
has to do with sales and other dispositions of capital assets.
That's going to be the form that you will have
to report the gain or loss that you receive from
selling the digital asset. If you received a digital asset
is a gift. If somebody gave you a digital asset
(15:59):
as a gift, the IRS says on form seven oh nine,
you would have to report the gift that you received
that was a digital asset. So somebody gives you a
bitcoin or gives you an NFT, you have to report
that to on form seven o nine. According to the IRS,
(16:22):
if you receive any sort of digital asset as compensation
for services or disposed of any digital assets that you
held for sale to customers in a trader business, then
they have to be reported as income just like any
other income gets reported.
Speaker 2 (16:43):
So if I my office decided, hey.
Speaker 1 (16:48):
We are going to receive payment of out for our
services with bitcoin, if we could set ourselves up to
do that, somebody could use bitcoin to pay the.
Speaker 2 (16:59):
Bill that we send them.
Speaker 1 (17:01):
If we do that, that's going to be income, just
like any other income that we have, and it's going
to have to be appropriately reported on the correct IRS
form where all of our income gets reported as part
of our tax return. If it's for services and I'm
not a company, it might be some sort of ten
(17:23):
ninety nine that or tenth it's going to get reported
on my ten forty. I think that's going to be
on schedule. See if I'm not mistaken as part of
the ten forty that I do. Now, if you're an
employee and you were an employee who got paid with
digital assets, maybe I decide to pay staff by using bitcoin.
I'm not going to write them a check. I'm just
(17:44):
going to use bitcoin to pay the staff. Well, in
that case, the staff that's income. Those are wages that
have to be reported. And similarly, if they worked as
an independent contractor and got paid, So the guys who's
doing plumbing work for me at my condo and I
pay that plumbing.
Speaker 2 (18:05):
Work with bitcoin.
Speaker 1 (18:07):
That would be compensation that would be paid. They would
have to, depending upon how they are structured, might have
to report on schedule ce of income that they received
or profit and loss. If it's a solo proprietorship, what
sort of tax return You're going to have all of
those kinds of things, and the employee has to report
(18:30):
it as income and wages. That's their responsibility. So you
can have these transactions. There is nothing illegal on its
face about using bitcoin. There's nothing illegal on its face
about using NFTs or using different types of digital assets.
(18:56):
Because bitcoin isn't the only one that's out there. It's
not the only cryptocurrency. There are a number of other
cryptocurrencies being created, but bitcoin is the one that you
probably are the most familiar. It's not illegal to use it,
but you do have reporting obligations, and obviously if you
(19:17):
don't fulfill your reporting obligations to it, that's the problem
that you are creating. That is the problem that you're
creating for yourself because you haven't appropriately addressed the income
or report the income that you receive. Just like anything else,
I mean, it happens every day right. We have people
(19:38):
every day out there that are in a cash economy.
They only receive payment for their services in cash. They
have an obligation to report that income that they get.
If they don't, they have a problem with the IRS
because they're potentially engaging in tax fraud. Same kind of
(20:00):
it's just a different type of if you will asset
that's being involved.
Speaker 2 (20:06):
So if.
Speaker 1 (20:09):
If you are involved in any of those transactions, then
you have to report them and you're going to.
Speaker 2 (20:18):
Have to look at the different forms that you do this.
Speaker 1 (20:20):
So the bottom line of all of that, of all
of that is to understand that you're going to have
to report it on your tax return.
Speaker 2 (20:28):
There's a box there. If you don't report on your.
Speaker 1 (20:32):
Tax return and you are engaging in different transactions relative
to these digital assets, and you fail to check that box,
you are potentially going to have problems with the IRS
because the law requires that box to be checked and
(20:52):
you didn't check it, that's going to create problems for you. So,
no matter what you've done, no matter what digitalizet you're
engaged in, always check with your tax and financial advisor
to be sure that you are complying with the.
Speaker 2 (21:08):
Latest IRS guidelines.
Speaker 1 (21:10):
And again, as I said, nothing illegal about using digital assets,
just like there's nothing illegal about using cash. There's nothing
illegal about writing checks. There's nothing illegal about doing online transfers.
Many of us today on our phones today, on my phone,
I've got Apple Cash. I have an Apple phone. My
(21:32):
son who's off in Saint Louis might need some money
to do something that I have him doing for me.
Speaker 2 (21:38):
I use Apple Cash to transfer the money to him.
Speaker 1 (21:41):
Okay, there's nothing illegal about all of these different endeavors.
The problem you come into is when you have reporting
requirements and those parting parents also have tax.
Speaker 2 (21:55):
Considerations with them.
Speaker 1 (21:57):
So you've got the reporting requirement one, you also have
the potential tax issue that goes along with that that
you will have potential problems if you're not fulfilling those obligations.
(22:34):
Of course, amand and I are not your tax advisors,
so you need to work with your financial advisor tax
advisor if you're going to be involved in digital assets. Now, obviously,
from an estate planning standpoint, if you do own digital assets,
they need to be accounted for in your estate plan.
How are those assets going to be transferred to somebody else?
(22:56):
We're going to have a whole conversation about that. But
a man and I would be to have the opportunity
to have that discussion with you if you have digital
assets as part of your state plan, or simply to
protect your loved ones by putting together your state plan,
a mending a current plan, or.
Speaker 2 (23:13):
Assisting you in settling in a state.
Speaker 1 (23:18):
All that information about consulting with us, whether it's going
to be a zoom call, or whether it's going to
be an in office consultation at either our Grand Rapids
headquarters or our East Lansing meeting location, all of that
information can be found at our website, Doyle LAWPC dot com.
Speaker 2 (23:38):
So head to Doyle LAWPC dot com.
Speaker 1 (23:40):
You'll find all that information on how to schedule a consultation,
what information to send us.
Speaker 2 (23:45):
Et cetera, et cetera.
Speaker 1 (23:46):
While you're there. If all you are looking for is
an individual document, let me just give you an example.
Someone contact the office the other day they had a
parcel of real estate that was being sold.
Speaker 2 (23:58):
The title company was saying.
Speaker 1 (24:00):
Hey, you needed an updated certificate of trust so that
the trust can sell that real estate. You can actually
go to our legal store where you have the ability
to order different legal documents online, such as a certificate
of trust. It'll walk you through what information needs to
be sent, how you make payment. We can prepare the
(24:22):
document and we can send it to you via email
so you can print it at your end. Of course,
once you receive your information, if we have a conflict
in representing you, we'll let you know that. Or if
we need more additional information or we're unable to meet requests,
we're certainly going to do that. It's not that you
just put information in and a document comes out. When
(24:44):
you submit information through the legal store, it is coming
to us. It is coming to the attorneys in the
office who we are reviewing it and making sure it
is something that we can do for you before any
work gets done.
Speaker 2 (24:58):
But it is a it is an option for you.
Speaker 1 (25:01):
Folks who are looking for individual legal documents as well. Again,
all of that is available at Doyle LAWPC dot com. Well,
(25:23):
I think that's going to be it for today's show. Again,
just a reminder I start out the program. If you're
still with me, reminder, don't forget to vote. Get out there,
make your voice heard. That's a great thing about living
in this country. Not every country that's out there has
the opportunity for the citizens to be involved in electing
(25:46):
the people who are going to be running the country.
Speaker 2 (25:50):
Well.
Speaker 1 (25:50):
As always, if you have a comment about the program,
perhaps a topic that you'd like to have me discuss,
or questions that you'd like to have answered, head over
to Tuesday with Tom dot com. If you haven't been there,
go take a look at it. It's been a while
if you haven't looked at Tuesday at Tom dot com for.
Speaker 2 (26:07):
Quite a while.
Speaker 1 (26:09):
Over the last year, major changes to the website much improved,
much easier to locate information. You actually have the ability
to search the website for a topic. So maybe you're
looking for information on I don't know, pick something certificate
of trust.
Speaker 2 (26:25):
Type in certificate of Trust.
Speaker 1 (26:27):
It'll give you the list of the dates and podcasts
where I talked about different certificates of trust. You're also
going to find at the website that there's now a
little microphone icon. If you click on that microphone icon,
you can actually leave me a voicemail, So you can
do that if you have a question or a topic
(26:47):
that you'd like it to have me discuss, or you
can always send me an email, and that would be
Tom at Tuesday with Tom dot com.
Speaker 2 (26:55):
Please to follow us.
Speaker 1 (26:56):
On Facebook and invite your friends and family to follow
us on face Book as well.
Speaker 2 (27:01):
That's going to be Tuesday with Tom while they're at it.
While you're at it, you might as well.
Speaker 1 (27:06):
Also filed follow the Doyle Law PC Facebook page. We
use that to provide regular updates about things that we
think might be important for you to know Tuesday with Tom.
We're also normally providing frequent updates and things that are
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(27:27):
as well, and don't forget join our email list subscribe
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that goes out with different topics that we think are
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(27:51):
financial planning, or just general life issues. As things go forward,
remember too. Tuesday with Tom is available in many locations.
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and if wherever you choose to listen to your podcast,
(28:14):
we're probably already there, and if we're not, let me
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smart speaker to play Tuesday with Tom. Well, thanks again
for spending some of your Tuesday with us today and
(28:37):
as always, I have hope that you have an awesome
day and an awesome week in Michigan.
Speaker 2 (28:45):
Please vote and stay safe.
Speaker 1 (28:52):
Tuesday with Tom has been brought to you by the
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settling a loved one's estate, please call us today at
five one seven three two three seven three sixty six.
That's five one seven three two three seven three six
six
Well, good afternoon, Michiganers. It is Tuesday, November fifth, twenty
twenty four, otherwise known as election Day. So if you
haven't made it out to the polls, I encourage you
get out there and vote so that your voice can
(00:51):
be heard.
Speaker 2 (00:51):
Of course, this.
Speaker 1 (00:52):
Is Tuesday with Tom, Michigan's only weekly intern at show
where we do answer your questions about estate planning and
a state settlement in Michigan. I'm your host, Tom Doyle,
a state planning attorney, lifelong Michigan resident, an ambassador for
all things good in this great state of Michigan. Welcome,
(01:13):
Welcome to today's program. And I know, at least here in
the Grand Rapids area, it's kind of a misty, rainy,
gloomy kind of day. But don't let that stop you
from getting out and having your voices heard by voting.
Last episode, I talked about the twenty twenty five increase
(01:38):
in federal estate tax and gift exemption. So as you're
looking for what's going to happen next year, I've talked
about this almost a year ago, and I talked about
it again the last episode.
Speaker 2 (01:50):
There's going to be some potential.
Speaker 1 (01:52):
Changes on the there's certainly going to be some increases
in federal estate tax gift exempt for twenty twenty five. Also,
though it's important to remember, there's going to be some
dramatic potential changes in those same amounts in twenty twenty six.
So I encourage you listen to last week's episode so
(02:15):
that you have a better understanding about what the new
exemptions are in twenty twenty five and what's going to
be at least on the table right now in twenty
twenty six. Today today we're going to talk about a
little bit something we're going to talk about as understanding
digital asset reporting requirements.
Speaker 2 (02:35):
But please remember what I'm.
Speaker 1 (02:37):
About to discuss, as always during the program, is for
educational purposes only. It is not intended to be legal advice.
You need to work with your attorney and certainly in
the case of digital asset reporting, with your tax advisor
to determine what is appropriate for you and your planning.
(03:10):
Understanding digital asset reporting requirements, well, if you're asking what's
a digital asset, then this probably isn't anything that's going
to be relevant to you, because if you own them,
you will know what they are. But quite frankly, if
you're looking at your tax forms, your ten ninety nine
(03:32):
ten forty forms, you're going to notice a checkbox on there,
and in that box you do have to indicate whether
or not you received digital assets. So having some idea
of what a digital asset is and what the reporting
requirements might apply to you, but essentially, if you have
a digital asset, you're likely.
Speaker 2 (03:54):
Going to know that you have it.
Speaker 1 (03:55):
So what are they? Well, digital assets, And before I
go there, you know a lot of people get, well,
let's go there first. Digital assets a form of value.
It's like cash, but they exist only in a digital form,
only in a computer form, and they're protected by strong cryptography.
(04:16):
So the idea is is that you have this digital money.
Think of it in those terms. It exists only in
a computer. It doesn't exist in the actual real physical world,
but it's protected by cryptography so that it can be
transferred to other people. People can't supposedly hack into it,
(04:36):
steal it, all those good.
Speaker 2 (04:37):
Kinds of things.
Speaker 1 (04:38):
They're going to be operated on what they oftentimes call
a blockchain or distributed ledger or some sort of similar technology.
And you don't really need to understand blockchain technology, just
stibuted ledger. But it exists. It's all part of the
digital world that's designed to manage and allow for the
(05:00):
protection of and transfer of this digital assets. Oftentimes you
might have heard of things like this a virtual currency
or cryptocurrency or what they call ntfs and NFTs non
fudgible token. So for example, you probably heard about bitcoin.
(05:22):
Bitcoin is a type of cryptocurrency. Bitcoin is actually a
type of digital currency. And when I talk about NFTs,
perhaps you've heard about these in particular because at some
point in time over the last number of years, Donald
Trump has sold if you will, NFTs. But in most situations,
(05:45):
what an NFT is is, for example, I create a
piece of art and it exists only in a computer.
It's not on paper, it's not on you can't put
it on my wall.
Speaker 2 (05:59):
It is totally in the digital world.
Speaker 1 (06:03):
Well an NFT, and if I want that to be protected,
I put it out there as an NFT, which because
of cryptography that's being involved, it only exists in this
partitical digital world. It cannot be copied, so somebody can't
just make a copy. Right now, if I just take
(06:24):
a photo and I put a photo out on the internet,
so may can make a copy of that photo. Well,
if I'm creating a unique piece of art, think about
in those terms. I don't want someone to seem to
be able to make a copy of it, because the
value to me perhaps is because there is only one
of them, or ten of them, or however number there
happened to be of them. So I want it to
(06:46):
be protected where it can't be copied, it can't be substituted,
it can't be divided, and they can represent a number
of items, but oftentimes it's artwork. And you perhaps have
heard in the new use over the last year, it's
kind of hard to avoid it that the Trump family,
apparently along with others, is starting up what they call
(07:08):
a cryptocurrency exchange. And a cryptocurrency exchange is simply a
place that you go online on your computer or on
your phone where you can buy and sell cryptocurrency, for example,
where you can buy and sell bitcoin. So that's a
kind of basic rundown of what we're talking about when
(07:30):
we talk about digital assets. But the truth of the
matter is you have likely been involved in some sort
of digital currency for most of your life and didn't
even know. So think about this. If you write a check,
a check is not cash. A check is not dollar bills,
(07:52):
five dollar bills, ten dollar bills. It's a written iou.
Speaker 2 (07:57):
If you will.
Speaker 1 (07:58):
And when that check gets too as it did, it's
becomes digital currency, meaning what the check itself today doesn't
go from your bank to somebody else's bank. They simply
process it, turn it into internally in the banking system,
if you think about it, digital currency that then gets
(08:20):
transferred someplace else. Or another example, let's say you're going
to do a wire transfer. You've got let's say you've
got a daughter who's in Florida and you want to
send her some money, or you have a grandchild who
might be traveling somewhere and you want to send them
some money. Well, you don't normally put thousands of dollars
in a box and you send it off to them.
(08:42):
You're going to go to your bank and you're going
to say to your bank, I want to send my
son some money once send my daughter somebody and they
can do that. It'll be done digitally. You're not they're
going to take money out of your bank account. But
think about this. In reality, your bank account at the bank,
it doesn't have five thousand dollars in cash sitting in it.
Speaker 2 (09:05):
Okay, it's digital.
Speaker 1 (09:08):
Okay, it's backed up by other cash, but it's truly digital.
And then they're going to take your digital money that's
saved at the bank and they're going to send that
through the through the internal banking system to the bank
account for your son or grandchild. So you're already involved
in much of a digital world. But really what we're
(09:30):
talking about here, this whole idea of digital assets, is
where you're not involved with a bank. There is no
bank involved, there is no When banks are involved in theory,
there's cash, there's money, literally money that backs up what
that bank has to have. But in a digital world,
(09:53):
there is no bank, there is no cash, there's nothing
backing up this digital asset. It's simply a form of
assets that can be transferred back and forth between individuals
for different things. And because there's no bank involved, because
(10:16):
there's no government involved, the reason that the IRS requires
you to check that box on your tax return is
because there is no physical record that somebody can go
look at to see did you own it?
Speaker 2 (10:31):
What did you do with it.
Speaker 1 (10:33):
Now, with that having been said, digital asset digital transactions,
a few will So we're talking about certain things are
going to happen where you're going to have to have
certain reporting requirements. So among digital asset transaction, things are
like selling digital asset. I own bitcoin, and I sell
(10:53):
my bitcoin to somebody else. Or I create that artwork
online and I sell my artwork to somebody else.
Speaker 2 (11:03):
I have sold a digital asset.
Speaker 1 (11:07):
Maybe somebody is going to give me a digital asset
as payment for goods or services. Maybe somebody is going
to pay me in bitcoin for work that I did
for them. Now, our office doesn't currently accept bitcoin or
digital assets cryptocurrency for.
Speaker 2 (11:26):
Work that we do. I know there are some law
firms that are beginning to do that.
Speaker 1 (11:30):
There are some other companies out there that are beginning
to accept cryptocurrency.
Speaker 2 (11:35):
If you will, as payment.
Speaker 1 (11:37):
So if you receive them as payment for goods or services,
that's going to be an asset transaction, or perhaps acquiring
new ones through what they call mining or staking. And
that's really the process by which and it gets very
perhaps kind of complicated, but that's the process by which
new cryptocurrency gets created. It's not a bank that creates it.
(12:02):
There's a computer process that goes through where new digital
currency can be created. So if you acquire one through
this process of creating digital currency, that's an asset transaction,
or perhaps obtaining one through what's called a hard fork,
(12:24):
and that's simply where cryptocurrency splits in two.
Speaker 2 (12:27):
So think about stock.
Speaker 1 (12:28):
You probably have heard about this, at least I might
own stock in a company and then the stock split.
So where I had one hundred shares, now it's going
to split, and now I have two hundred shares, Okay.
It doesn't mean suddenly it's worth one hundred percent more.
It usually means, okay, my hundred shares is now two
(12:50):
hundred shares, where they're all total the same amount that
I owned before. Same thing with cryptocurrency. There can be
situations where the currency splits, if you will, and in
that case, you are obtaining additional cryptocurrency as a result
of that split. Another dig digital asset transaction would be
(13:14):
something like where you are exchanging them for property, good services,
or other digital assets. So whenever they're being exchanged for
if you will, services or perhaps actual property, maybe you're
gonna buy a car and you're gonna use bitcoin to
(13:35):
buy the car, okay, or you're gonna use them to
buy other digital assets. Maybe I'm gonna take my bitcoin
and I'm gonna use my bitcoin to buy that piece
of artwork that NFT is at out there. Again, another
example of a digital asset transaction, and quite frankly, any
(13:55):
other disposition of a financial interest in a digital asset,
that's kind of a catch all broad any dist disposition
of any interest that you had in a digital asset. Now,
so those are all examples of digital asset transactions that
(14:19):
we're really talking about here today. So the reporting requirements,
that's what we really want to have a conversation a
little bit about today. If you're involved in any of
those sorts of transactions, you have to report all income related.
Speaker 2 (14:34):
To the transaction.
Speaker 1 (14:37):
And the way you go about then determining calculating your
gainer loss because there might be capital gains tax. Just
like owning stock. If I own stock and I sell
my stock for more.
Speaker 2 (14:50):
Than I bought it for, I might be subject to
a capital gain.
Speaker 1 (14:54):
Same thing if I go out and buy bitcoin as
an investment, think about it, and I sell my bitcoin
for more than I bought it, same concept, or I'm
going to have capital gains And so the way you're
going to calculate your gainer loss or the tax form
you're going to use reporting all of these different transactions
is really going to depend upon what type of transaction
(15:17):
you are involved in. So, for example, gainer loss from
selling digital assets, well, gainer loss from selling digital assets
is just like gainer loss from selling stock, gainer loss
from selling gold, gainer loss from selling other physical assets.
So there's an IRS Form eighty nine forty nine which
(15:37):
has to do with sales and other dispositions of capital assets.
That's going to be the form that you will have
to report the gain or loss that you receive from
selling the digital asset. If you received a digital asset
is a gift. If somebody gave you a digital asset
(15:59):
as a gift, the IRS says on form seven oh nine,
you would have to report the gift that you received
that was a digital asset. So somebody gives you a
bitcoin or gives you an NFT, you have to report
that to on form seven o nine. According to the IRS,
(16:22):
if you receive any sort of digital asset as compensation
for services or disposed of any digital assets that you
held for sale to customers in a trader business, then
they have to be reported as income just like any
other income gets reported.
Speaker 2 (16:43):
So if I my office decided, hey.
Speaker 1 (16:48):
We are going to receive payment of out for our
services with bitcoin, if we could set ourselves up to
do that, somebody could use bitcoin to pay the.
Speaker 2 (16:59):
Bill that we send them.
Speaker 1 (17:01):
If we do that, that's going to be income, just
like any other income that we have, and it's going
to have to be appropriately reported on the correct IRS
form where all of our income gets reported as part
of our tax return. If it's for services and I'm
not a company, it might be some sort of ten
(17:23):
ninety nine that or tenth it's going to get reported
on my ten forty. I think that's going to be
on schedule. See if I'm not mistaken as part of
the ten forty that I do. Now, if you're an
employee and you were an employee who got paid with
digital assets, maybe I decide to pay staff by using bitcoin.
I'm not going to write them a check. I'm just
(17:44):
going to use bitcoin to pay the staff. Well, in
that case, the staff that's income. Those are wages that
have to be reported. And similarly, if they worked as
an independent contractor and got paid, So the guys who's
doing plumbing work for me at my condo and I
pay that plumbing.
Speaker 2 (18:05):
Work with bitcoin.
Speaker 1 (18:07):
That would be compensation that would be paid. They would
have to, depending upon how they are structured, might have
to report on schedule ce of income that they received
or profit and loss. If it's a solo proprietorship, what
sort of tax return You're going to have all of
those kinds of things, and the employee has to report
(18:30):
it as income and wages. That's their responsibility. So you
can have these transactions. There is nothing illegal on its
face about using bitcoin. There's nothing illegal on its face
about using NFTs or using different types of digital assets.
(18:56):
Because bitcoin isn't the only one that's out there. It's
not the only cryptocurrency. There are a number of other
cryptocurrencies being created, but bitcoin is the one that you
probably are the most familiar. It's not illegal to use it,
but you do have reporting obligations, and obviously if you
(19:17):
don't fulfill your reporting obligations to it, that's the problem
that you are creating. That is the problem that you're
creating for yourself because you haven't appropriately addressed the income
or report the income that you receive. Just like anything else,
I mean, it happens every day right. We have people
(19:38):
every day out there that are in a cash economy.
They only receive payment for their services in cash. They
have an obligation to report that income that they get.
If they don't, they have a problem with the IRS
because they're potentially engaging in tax fraud. Same kind of
(20:00):
it's just a different type of if you will asset
that's being involved.
Speaker 2 (20:06):
So if.
Speaker 1 (20:09):
If you are involved in any of those transactions, then
you have to report them and you're going to.
Speaker 2 (20:18):
Have to look at the different forms that you do this.
Speaker 1 (20:20):
So the bottom line of all of that, of all
of that is to understand that you're going to have
to report it on your tax return.
Speaker 2 (20:28):
There's a box there. If you don't report on your.
Speaker 1 (20:32):
Tax return and you are engaging in different transactions relative
to these digital assets, and you fail to check that box,
you are potentially going to have problems with the IRS
because the law requires that box to be checked and
(20:52):
you didn't check it, that's going to create problems for you. So,
no matter what you've done, no matter what digitalizet you're
engaged in, always check with your tax and financial advisor
to be sure that you are complying with the.
Speaker 2 (21:08):
Latest IRS guidelines.
Speaker 1 (21:10):
And again, as I said, nothing illegal about using digital assets,
just like there's nothing illegal about using cash. There's nothing
illegal about writing checks. There's nothing illegal about doing online transfers.
Many of us today on our phones today, on my phone,
I've got Apple Cash. I have an Apple phone. My
(21:32):
son who's off in Saint Louis might need some money
to do something that I have him doing for me.
Speaker 2 (21:38):
I use Apple Cash to transfer the money to him.
Speaker 1 (21:41):
Okay, there's nothing illegal about all of these different endeavors.
The problem you come into is when you have reporting
requirements and those parting parents also have tax.
Speaker 2 (21:55):
Considerations with them.
Speaker 1 (21:57):
So you've got the reporting requirement one, you also have
the potential tax issue that goes along with that that
you will have potential problems if you're not fulfilling those obligations.
(22:34):
Of course, amand and I are not your tax advisors,
so you need to work with your financial advisor tax
advisor if you're going to be involved in digital assets. Now, obviously,
from an estate planning standpoint, if you do own digital assets,
they need to be accounted for in your estate plan.
How are those assets going to be transferred to somebody else?
(22:56):
We're going to have a whole conversation about that. But
a man and I would be to have the opportunity
to have that discussion with you if you have digital
assets as part of your state plan, or simply to
protect your loved ones by putting together your state plan,
a mending a current plan, or.
Speaker 2 (23:13):
Assisting you in settling in a state.
Speaker 1 (23:18):
All that information about consulting with us, whether it's going
to be a zoom call, or whether it's going to
be an in office consultation at either our Grand Rapids
headquarters or our East Lansing meeting location, all of that
information can be found at our website, Doyle LAWPC dot com.
Speaker 2 (23:38):
So head to Doyle LAWPC dot com.
Speaker 1 (23:40):
You'll find all that information on how to schedule a consultation,
what information to send us.
Speaker 2 (23:45):
Et cetera, et cetera.
Speaker 1 (23:46):
While you're there. If all you are looking for is
an individual document, let me just give you an example.
Someone contact the office the other day they had a
parcel of real estate that was being sold.
Speaker 2 (23:58):
The title company was saying.
Speaker 1 (24:00):
Hey, you needed an updated certificate of trust so that
the trust can sell that real estate. You can actually
go to our legal store where you have the ability
to order different legal documents online, such as a certificate
of trust. It'll walk you through what information needs to
be sent, how you make payment. We can prepare the
(24:22):
document and we can send it to you via email
so you can print it at your end. Of course,
once you receive your information, if we have a conflict
in representing you, we'll let you know that. Or if
we need more additional information or we're unable to meet requests,
we're certainly going to do that. It's not that you
just put information in and a document comes out. When
(24:44):
you submit information through the legal store, it is coming
to us. It is coming to the attorneys in the
office who we are reviewing it and making sure it
is something that we can do for you before any
work gets done.
Speaker 2 (24:58):
But it is a it is an option for you.
Speaker 1 (25:01):
Folks who are looking for individual legal documents as well. Again,
all of that is available at Doyle LAWPC dot com. Well,
(25:23):
I think that's going to be it for today's show. Again,
just a reminder I start out the program. If you're
still with me, reminder, don't forget to vote. Get out there,
make your voice heard. That's a great thing about living
in this country. Not every country that's out there has
the opportunity for the citizens to be involved in electing
(25:46):
the people who are going to be running the country.
Speaker 2 (25:50):
Well.
Speaker 1 (25:50):
As always, if you have a comment about the program,
perhaps a topic that you'd like to have me discuss,
or questions that you'd like to have answered, head over
to Tuesday with Tom dot com. If you haven't been there,
go take a look at it. It's been a while
if you haven't looked at Tuesday at Tom dot com for.
Speaker 2 (26:07):
Quite a while.
Speaker 1 (26:09):
Over the last year, major changes to the website much improved,
much easier to locate information. You actually have the ability
to search the website for a topic. So maybe you're
looking for information on I don't know, pick something certificate
of trust.
Speaker 2 (26:25):
Type in certificate of Trust.
Speaker 1 (26:27):
It'll give you the list of the dates and podcasts
where I talked about different certificates of trust. You're also
going to find at the website that there's now a
little microphone icon. If you click on that microphone icon,
you can actually leave me a voicemail, So you can
do that if you have a question or a topic
(26:47):
that you'd like it to have me discuss, or you
can always send me an email, and that would be
Tom at Tuesday with Tom dot com.
Speaker 2 (26:55):
Please to follow us.
Speaker 1 (26:56):
On Facebook and invite your friends and family to follow
us on face Book as well.
Speaker 2 (27:01):
That's going to be Tuesday with Tom while they're at it.
While you're at it, you might as well.
Speaker 1 (27:06):
Also filed follow the Doyle Law PC Facebook page. We
use that to provide regular updates about things that we
think might be important for you to know Tuesday with Tom.
We're also normally providing frequent updates and things that are
just going on in the state of Michigan. Places to visit,
things that you might want to look at doing here
(27:27):
as well, and don't forget join our email list subscribe
at Tuesday with Tom. You can do that there, or
if you go to DOYLELAWPC dot com, you can subscribe
to our news letter where we have a monthly newsletter
that goes out with different topics that we think are
helpful and relevant to estate planning, or tax planning, or
(27:51):
financial planning, or just general life issues. As things go forward,
remember too. Tuesday with Tom is available in many locations.
We're available on Apple podcast and Spotify, Amazon Music, Google Podcast, iHeartRadio, Speaker,
and if wherever you choose to listen to your podcast,
(28:14):
we're probably already there, and if we're not, let me
know that and we'll see if we can't manage to
have the broadcast distribute on that channel that you prefer
to use. And of course you can always ask your
smart speaker to play Tuesday with Tom. Well, thanks again
for spending some of your Tuesday with us today and
(28:37):
as always, I have hope that you have an awesome
day and an awesome week in Michigan.
Speaker 2 (28:45):
Please vote and stay safe.
Speaker 1 (28:52):
Tuesday with Tom has been brought to you by the
estate planning attorneys at Doyle Law PC. To learn how
we can help you with your estate plan or was
settling a loved one's estate, please call us today at
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