How to justify cryptocurrency gains?

[Hegemon]

I bought a few obscure alts a few years ago.
Problem is I don't know how to justify the money I earned.
I have access to the wallet they've been all that time, so I can prove ownership of that.
But I didn't buy them using an exchange account under my name.

What happens if I create an exchange account now under my name, sell, withdraw to my bank and pay my taxes?

I can justify where I got the money to buy bitcoin in the first place, but the move from bitcoin to the alt I don't have any evidence of that.

 

[troubled soul]

Create Multiple exchange accounts.
Do not use one exchange.

Is it a high amount or‌ a small amount? For a small amount, You can easily cash out without worry. There‍ are so many exchanges and Methods for it.
Here is the Thread

https://www.offshorecorptalk.com/threads/list-of-method-to-spend-bitcoin-without-trace.32478/

This will⁠ help

 

[UAETrader454]

Just withdraw and pay your taxes and you'll be fine, technically if you have no‌ proof of purchase you may be liable for capital gains tax on 100% of the‍ funds as you cant prove that you can deduct your purchase cost from the total⁠ but whether that will be checked or not I am unsure

 

[JohnLocke]

I would highly recommend to consult a tax advisor to help you. Depending on the‌ amount you have there you may get something out of it to speak with a‍ professional.

 

[Hegemon]

Middle 6 figures.
Thing is it's all legal, I⁠ don't mind paying taxes (I mean, I mind, but I don't have a legal way⁤ to avoid it that doesn't involve moving and I can't).
But I'm afraid I might⁣ be treated like a criminal because I did have the money to justify buying it⁢ but I paid cash.
Then I converted to the alts on an account not under︀ my name (which I can't even find anyway). I do have the wallet with the︁ alts from 2018 sitting there though.

 

[troubled soul]

Simply buy a Prepaid Card loaded with Bitcoin.

 

[Martin Everson]

Like admin said speak to a tax professional.

You should not be treated like a criminal⁠ if you are the one coming forward to declare your crypto and the taxman did⁤ not have to knock on your door.

 

[12345]

I think what he was referring to is that⁠ authorities might conclude that his crypto funds were obtained from shady activities, unfortunately bitcoin still⁤ has this type of reputation in many countries

If he comes and says hi taxman⁣ I have 500 K $ worth of crypto please tax me. I made it by⁢ investing but I don't have any proof because I bought it with cash many years︀ ago.

This indeed looks suspicious in my opinion but im no expert

 

[Martin Everson]

Shady activity people don't generally come forward to⁠ declare crypto. Thats like a drug dealer selling meth in the lobby of a police⁤ station.

 

[12345]

Maybe you are right but it seems like hassle free way to put dirty money‌ into circulation.

Crypto market is booming so you just exchange dirty cash into crypto and‍ say you made it by investing.

This is what taxman might assume in my opionion⁠ if OP doesn't have any proof that he bought the crypto years ago

 

[Hegemon]

I do have proof I bought the alt, I don't have a way to prove‌ how I got to that alt from dollars.
Normally who does the audit? Is it‍ the banks or the tax agency? Or both?

Most posts I've seen were about people⁠ trying to convince banks about the origin of funds, do tax agencies normally are thorough⁤ about that also?

 

[UAETrader454]

I had a similar situation, I lost⁣ my proof of purchase as some bitcoin was purchased with cash from a friend and⁢ some via an exchange that does not exist anymore, I withdrew the Fiat via a︀ respectable exchange in one lump sum to my bank account,I declared the cost basis as︁ £0 and paid the full tax, I wrote in the description that it was from︂ Bitcoin, paid the tax and all has been ok since, this was 4 years ago︃ now.

This was for mid range 5 figures, 6-7 may be different.

 

[Hegemon]

That's good to know!
In my︀ case I think I could claim that the price I paid was the alts price︁ in USD at the time of purchase. It's gone 20X, so it will not make︂ much of a difference, but still.

 

[FastPony]

It depends on your jurisdiction. If you are in America, then you don't need "proof"‌ of your transaction. It's typically OK if you provide a plausible record of your own‍ (that doesn't contradict anything else that you submit). An Excel sheet would be fine. The⁠ record doesn't have to be 100% accurate, you can explain that you estimated it and⁤ how.

If you talk to one of the crypto CPAs, they can tell you exactly⁣ what works vs. what doesn't work. (Note that CPAs don't have to keep confidential what⁢ you tell them, unless they are also attorneys and you are their client.)

 

[369]

Like above said everything depends on your jurisdiction and legal possibilities depending on the amount‌ earned.