Constructive Receipt with Block Rewards

How does the IRS define constructive receipt with regards to mining? 

In TUSC, the block producers have to manually claim rewards after they have vested, they are not automatically deposited in the user’s account. At what point is the basis set, when the funds are available to be claimed, or when they are actually claimed and the funds moved in the the user’s account?

Comments

  • Crypto, the accounting nightmare.

    Crypto must be recognized as some form of currency. If you can use it to make a purchase, then it should be considered currency.

    The current method of treating it like a stock, or a building, or a 100 acre farm is insane.

    On Overstock.com you can buy furniture for your deck and pay with bitcoin. You cannot pay for it with 2.68 shares of CVS stock. You cannot pay for it with .61 acres of farmland. It is time to recognize crypto for what it is. In most cases it is a currency. Nobody should have to calculate their capital gains/loss if they buy deck furniture from Overstock, and pay with bitcoin.

    And by extension, using TUSC to by a new scope for your rifle.

  • And how can you determine basis prior to any exchange establishing value?

    Does it matter if rewards are claimed, or not claimed if it is not possible to sell? If no buyers, is basis = $0

    I realize your question is directed at the future when an exchange will establish value. My guess would be basis is established when the rewards become available to you. That would be when they are vested. At that point you become owner of it. Whether you choose to leave it or move it would not matter.

    So every minute or so, a reward you received previously becomes vested. When it becomes vested, record your basis. One minute later, repeat that process. Be sure to keep good records because when you sell, you will have to have a capital gains/loss transaction for each reward you received that became vested. No problem. Just sell your accumulated rewards once a year and give the IRS the 525,600 individual cap. gains transactions that you have been keeping record of.


    🤬

  • TL:DR

    Constructive receipt of income in the case of TUSC BPs is when the rewards are vested.

    Per IRS Code Section 1.451-2 "Income...is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given."

    The IRS simplifies this legalese by saying in IRS Publication 538 "Income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations."

    In other words, @happyiguana is correct in saying keep good records because every reward you receive is constructive income. Your basis will be set at the time the reward is vested, not when it is claimed.

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