A college student who invested $5k in cryptocurrency trading and made $880, is lamenting over how cryptocurrency trading ruined his life leaving him with taxes worth $400k. The student, whose identity remained anonymous, posted his predicament on Reddit. Seeking advice from readers, the student said that he has been slammed with huge tax over his cryptocurrency trading earnings from 2017.
The California based student allegedly invested $5,000 on Coinbase last year after his friend introduced him to trading Ethereum. The $5k investment eventually turned into $880k in December 2017. Unfortunately, gambling and the high volatility in the industry reduced the investment portfolio to $125k but left the student with task worth $400k.
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According to the post, the student didn’t know about cryptocurrency taxes at the time of investment. He said that he made and lost his investments on cryptocurrency to cryptocurrency trades. He never cashed out or transfered fiat into any bank account from his trades. The student is working overtime and hasn’t paid any taxes for 2017. Various readers had their opinion on the issue. While some tried to empathize with the student, some others didn’t. One of the commenters asked the student to seek advice from a task professional and save everyone the time.
Initially, earnings from cryptocurrency investments were not taxable by law. However, the government noticed how profitable the industry is and decided to impose taxes on these digital assets. While cryptocurrencies are generally seen as currencies, there is an ongoing debate about whether they are securities, currencies or commodities.
The Canadian Revenue Agency, in 2013, said that cryptocurrencies are not currencies but commodities. They are not issued by a country’s government so they should not be viewed like fiat money. Since they are viewed as commodity, they are taxed as commodities. Cryptocurrencies have not been officially recognized as a legal tender in any country. However, this may change soon. Until such a time, it is important that you know your taxes while trading cryptocurrencies or making other cryptocurrency investments.