Tesla Buys $1.5B in Bitcoin, Will Accept as Payment

[Mattski30]

I would advise anyone to consult a tax accountant before assuming that you don't need to declare a taxable gain when you buy a car (or anything else) for appreciated bitcoins. Generally, the IRS considers everything to be taxable. Of course, bitcoin, being hard to trace, does make tax evasion a bit easier.

From this (CNBC) website:



So, yes: If you buy a Tesla with bitcoins, the law requires you to declare the gain you made on the coins and pay tax on it. You might get away with failing to report, but you might end up paying the tax plus fees and penalties, and you could go to prison if you cannot convince a court that you acted out of well-intentioned ignorance.

Note also that if you "hodl" forever, you never benefit from your gain.

I agree with Daniel...tax law is very complicated and for the IRS tries to get its hands on as much as possible when there is any sort of USA connection. Was told recently that in France, trading between cryptos doesn't trigger a taxable event, but in USA, even barter transactions can be taxable.

There is now a poll at Tesla’s Bitcoin Folies – Smart Solutions for those that want to weigh in on Tesla's bitcoin and potential gold purchases.

 

[Mattski30]

Guess I'm not quite sure either how accepting BTC is going to result in any actual additional purchases - it's all fluff-n-stuff.

In addition, someone needs to explain how someone who owns BitCoin (and let's assume has some profit from it and feels flush), is going to use it to buy their Tesla. They'll trigger a taxable gain, and let's assume, a reportable transaction to the IRS.

So I ask again... where does BTC acceptance = more sales ? Just hype and flash...

Great point! Are there more people who will now buy a Tesla because they can do it in BTC, or more people who might think less of Tesla and hold off on purchasing because they don't see gold and bitcoin as being consistent with energy efficiency and getting to net zero emissions?

 

[Cleo-n-Company]

Great point! Are there more people who will now buy a Tesla because they can do it in BTC, or more people who might think less of Tesla and hold off on purchasing because they don't see gold and bitcoin as being consistent with energy efficiency and getting to net zero emissions

On a similar note - what happens when / if BTC takes a dump ?

I buy my M3 for 50K with BTC -- the price of BTC goes down 10% the next week - suddenly Tesla sold that M3 for 45K. This is sustainable ?

When Tesla has to include notes in their quarterly results that profits were affected by fluctuations in BTC price - I would love to see the analysts' response to that...

 

[daniel]

Bitcoin is 99.9% speculative gamble. It is inappropriate and unacceptable for a publicly held company like Tesla to speculate with what are effectively shareholders' funds. If Tesla has two billion (?) dollars to speculate on bitcoin, that money should be used either to build plant to increase productive capacity, to finance R&D to improve the company's products, to improve customer support, or returned to the stockholders as dividends. Or a combination of the above. Owning bitcoin does nothing to improve Tesla as a company.

 

[Ostrichsak]

Bitcoin is 99.9% speculative gamble. It is inappropriate and unacceptable for a publicly held company like Tesla to speculate with what are effectively shareholders' funds. If Tesla has two billion (?) dollars to speculate on bitcoin, that money should be used either to build plant to increase productive capacity, to finance R&D to improve the company's products, to improve customer support, or returned to the stockholders as dividends. Or a combination of the above. Owning bitcoin does nothing to improve Tesla as a company.

Tesla is in desperate need of this.

 

[Big Dog]

Trading bitcoins doesn't trigger a taxable gain. Trading bitcoins for a commodity doesn't trigger a taxable gain. Only selling bitcoins for cash (USD) for more than someone purchased it for, triggers a taxable gain. Keep in mind taxes are assessed in USD. Government can't tax tulips, seashells, or bitcoins if you trade that for a new car. At least, not yet.

I had to pay almost 10% in taxes when buying a Tesla, which amounted to almost $5,000.00. Now, if I could avoid paying that $5,000.00 by converting cash to bitcoin, then trading the bitcoin for the Tesla, well, that certainly makes it more attractive. And I would certainly do it.

And you would be incorrect. It definitely is a taxable event in the US, and you owe taxes on the capital gain. (Whether you follow the law and report properly is up to you.)

Note, the US tax code does allow exchanges of certain assets in which the tax is deferred, but to quality those need to be a like-for-like exchange, such as swapping real estate parcels, aircraft, franchise licenses.... Bitcoin-Tesla car ain't close.

 

[Exelion]

And what capital gain would that be? A car is not a capital gain just as much as if I bought 5000 seashells and then traded same 5000 seashells for a Model S. Seashells are not USD, and neither are Bitcoin. Now, if I sold such Model S for CASH, then yes, it would be a capital gain. Because that's USD. Selling Bitcoins triggers a taxable gain. TRADING bitcoins for something (other than USD) does not.

This is no different than if I bought a Honus Wagner baseball card, 50 years ago, and then traded it for someone's McLaren. Would I then owe tax? No, I would not. Why? Because there's no capital gain, no CASH, no USD. Again, if I take same McLaren and sold it, yes it would be.

If you want to walk down the path where the IRS starts taxing people for trading common (or uncommon) items, well, the IRS sure has a lot of catching up to do, and we'd live in a pretty awful place.

 

[daniel]

And what capital gain would that be? A car is not a capital gain just as much as if I bought 5000 seashells and then traded same 5000 seashells for a Model S. Seashells are not USD, and neither are Bitcoin. Now, if I sold such Model S for CASH, then yes, it would be a capital gain. Because that's USD. Selling Bitcoins triggers a taxable gain. TRADING bitcoins for something (other than USD) does not.

This is no different than if I bought a Honus Wagner baseball card, 50 years ago, and then traded it for someone's McLaren. Would I then owe tax? No, I would not. Why? Because there's no capital gain, no CASH, no USD. Again, if I take same McLaren and sold it, yes it would be.

If you want to walk down the path where the IRS starts taxing people for trading common (or uncommon) items, well, the IRS sure has a lot of catching up to do, and we'd live in a pretty awful place.

Again, I'd highly recommend you consult a tax accountant before you fill out your taxes if you plan on failing to disclose such a transaction as described in your post.

The Tesla and the McLaren have cash values. In the case of buying a used car from a private individual there is the Kelly Blue Book value. In the eyes of the IRS these cars have cash value, and the exchange of bitcoins or rare trading cards for them is the redemption of an appreciated asset for something of value. Even giving those bitcoins or that rare trading card to a friend is considered by the IRS to be the liquidation of an appreciated asset, and is a taxable event for you. If the market value of the gift is over a certain limit then it's also taxable income for the friend. (You can receive gifts tax-free up to a set amount.)

A lot of people have their own interpretations of tax law and will argue vociferously that the IRS cannot tax this or that. These people are, frankly, cranks. Don't take my word for the above: Consult a tax accountant. Or phone the IRS. They are actually very friendly and helpful. You can find their phone number on their web site, though it may be harder to get through this time of year.

Of course, you can decline to report such events and you might get away with it. But if they catch you you'll have to pay up or maybe go to jail (if they think you acted in bad faith) unless you can convince a court that your interpretation of tax law is the right one. Good luck with that. You'll need a really good lawyer.

 

[Cleo-n-Company]

And what capital gain would that be? A car is not a capital gain just as much as if I bought 5000 seashells and then traded same 5000 seashells for a Model S. Seashells are not USD, and neither are Bitcoin. Now, if I sold such Model S for CASH, then yes, it would be a capital gain. Because that's USD. Selling Bitcoins triggers a taxable gain. TRADING bitcoins for something (other than USD) does not.

This is no different than if I bought a Honus Wagner baseball card, 50 years ago, and then traded it for someone's McLaren. Would I then owe tax? No, I would not. Why? Because there's no capital gain, no CASH, no USD. Again, if I take same McLaren and sold it, yes it would be.

If you want to walk down the path where the IRS starts taxing people for trading common (or uncommon) items, well, the IRS sure has a lot of catching up to do, and we'd live in a pretty awful place.

The IRS has been steadily catching up - and if you're a regular seller on Ebay and the other auction sites -- those sites started reporting larger dollar seller transactions to the IRS a few years ago.

So BTC may be in a bit of an early adopter lullaby period - but who knows for how long. And truth be told - corporate titans with big mouths and big egos like Elon are the ones who are going to speed up the process of the IRS nosing in etc.

 

[Exelion]

Again, I'd highly recommend you consult a tax accountant before you fill out your taxes if you plan on failing to disclose such a transaction as described in your post.

The Tesla and the McLaren have cash values. In the case of buying a used car from a private individual there is the Kelly Blue Book value. In the eyes of the IRS these cars have cash value, and the exchange of bitcoins or rare trading cards for them is the redemption of an appreciated asset for something of value. Even giving those bitcoins or that rare trading card to a friend is considered by the IRS to be the liquidation of an appreciated asset, and is a taxable event for you. If the market value of the gift is over a certain limit then it's also taxable income for the friend. (You can receive gifts tax-free up to a set amount.)

A lot of people have their own interpretations of tax law and will argue vociferously that the IRS cannot tax this or that. These people are, frankly, cranks. Don't take my word for the above: Consult a tax accountant. Or phone the IRS. They are actually very friendly and helpful. You can find their phone number on their web site, though it may be harder to get through this time of year.

Of course, you can decline to report such events and you might get away with it. But if they catch you you'll have to pay up or maybe go to jail (if they think you acted in bad faith) unless you can convince a court that your interpretation of tax law is the right one. Good luck with that. You'll need a really good lawyer.

Whatever,

And I would advise you to do the same.

Then again, can you save us all the time and post the specific tax code you’re talking about rather than telling me to do it myself (which, I’m certainly capable of doing, thanks)?

Better to refrain from posting accusatory things like people will go to jail, or will need good lawyers for doing something you’re not really sure if its illegal or not. That’s not called being helpful, it’s patronizing, its passive-aggressive, and borderline being a bully, and a worse yet, an uninformed one.

But thats better than being a crank, I suppose? (Whatever a crank is)

We’re certainly in a disagreement, and that’s fine. I’ll just leave it as
agreement to disagree.

 

[Cleo-n-Company]

Whatever,

And I would advise you to do the same.

Then again, can you save us all the time and post the specific tax code you’re talking about rather than telling me to do it myself (which, I’m certainly capable of doing, thanks)?

Better to refrain from posting accusatory things like people will go to jail, or will need good lawyers for doing something you’re not really sure if its illegal or not. That’s not called being helpful, it’s patronizing, its passive-aggressive, and borderline being a bully, and a worse yet, an uninformed one.

But thats better than being a crank, I suppose? (Whatever a crank is)

We’re certainly in a disagreement, and that’s fine. I’ll just leave it as
agreement to disagree.

Seems like all the guy was doing was trying to be helpful.

I'd much rather read someone's narrative with a bit of insight, as opposed to reading tax code, which as you note, I can look up if I'm really that enamored with the subject.

Crank kind of fits -- the sun is shining in LA - restaurants are opening back up - so lighten up a bit.

 

[daniel]

Whatever,

And I would advise you to do the same.

Then again, can you save us all the time and post the specific tax code you’re talking about rather than telling me to do it myself (which, I’m certainly capable of doing, thanks)?

Better to refrain from posting accusatory things like people will go to jail, or will need good lawyers for doing something you’re not really sure if its illegal or not. That’s not called being helpful, it’s patronizing, its passive-aggressive, and borderline being a bully, and a worse yet, an uninformed one.

But thats better than being a crank, I suppose? (Whatever a crank is)

We’re certainly in a disagreement, and that’s fine. I’ll just leave it as
agreement to disagree.

I don't need to research specific sections of tax code because my taxes are prepared by a professional and I provide him with all my information. But the IRS is very clear about this: If you dispose of an appreciated asset, you own tax on the gain.

You don't have to believe me. You are free to do as you like. But when you post misinformation that could lead other people to get into big trouble with the IRS and, yes, risk the possibility of going to jail (though more often you just get hit with big fines and penalties in addition to paying the tax you owe) then I will correct your misinformation (if I see it) for the benefit of people who might think you know what you're talking about.

The basic rule is: If anything can possibly be construed to be taxable, the IRS will construe it that way. Tax law, like all law, is not written for laypeople like us to understand. That's why I use a professional to do my taxes. And why I give him all the relevant information. I don't own bitcoin and never have, so I don't need to waste his time asking about it.

Don't be a cheapskate. Pay your damn taxes. Or don't, and take your chances. It's all the same to me. But to everybody else I say: When you see schemes on the internet for evading taxes, be very skeptical.

 

[Cleo-n-Company]

Here's an interesting nugget -- if you buy your Tesla with BTC - Elon and company retain the right to refund you in whatever currency they prefer, should there be any kind of customer refund down the line.

If you walk through a few scenarios - the end result is that Tesla can always twist that refund to their benefit and your detriment. Can't say I surprised... and I'm sure the TSLA investors will remind all of us it's a good thing to maximize profits.

But just add another slimy tactic to Elon's bag. I guess he thinks we're all kinda dense.

 

[daniel]

Here's an interesting nugget -- if you buy your Tesla with BTC - Elon and company retain the right to refund you in whatever currency they prefer, should there be any kind of customer refund down the line.

If you walk through a few scenarios - the end result is that Tesla can always twist that refund to their benefit and your detriment. Can't say I surprised... and I'm sure the TSLA investors will remind all of us it's a good thing to maximize profits.

But just add another slimy tactic to Elon's bag. I guess he thinks we're all kinda dense.

Interesting.

And as someone who holds some TSLA I categorically reject the idea that it's always good to maximize profits. However, I do recognize that maximizing profits is the first goal of any corporation, and Tesla is no different. This is not a good thing. It is just how it is in a free-market economy. Buyer beware!

And this is one more drawback among many of trying to use a highly volatile commodity as currency.

 

[Cleo-n-Company]

Interesting.

And as someone who holds some TSLA I categorically reject the idea that it's always good to maximize profits. However, I do recognize that maximizing profits is the first goal of any corporation, and Tesla is no different. This is not a good thing. It is just how it is in a free-market economy. Buyer beware!

And this is one more drawback among many of trying to use a highly volatile commodity as currency.

Our beloved capitalists also manage to note - In the FAQ's on the Tesla site - that Tesla may not be able to repay / refund you in cases where you pay too much BTC for a purchase or other transaction. So if you make a mistake in Tesla's favor - they get their cake and can devour it while you watch.

On the other hand - the FAQ's also note Tesla has the right to withhold your item purchase should there be a discrepancy where Tesla is underpaid.

This is how we gain consumer trust ?

 

[daniel]

Our beloved capitalists also manage to note - In the FAQ's on the Tesla site - that Tesla may not be able to repay / refund you in cases where you pay too much BTC for a purchase or other transaction. So if you make a mistake in Tesla's favor - they get their cake and can devour it while you watch.

On the other hand - the FAQ's also note Tesla has the right to withhold your item purchase should there be a discrepancy where Tesla is underpaid.

This is how we gain consumer trust ?

That is, well, nuts. Of course, crypto is so volatile that the $55,000 worth of btc that you send Tesla for your car might only be worth $50,000 by the time the transaction goes through. Accepting crypto in payment for anything is crazy. If I had a business and somebody wanted to pay me in crypto, I would say, Okay, I'll accept your coins, but I will immediately convert them to dollars and credit you with the actual amount of dollars I end up with, after any fees and market rate changes, and deliver your item after I have the correct amount in dollars. And if I end up with too many dollars, I'll refund you the difference in dollars.

 

[Cleo-n-Company]

That is, well, nuts. Of course, crypto is so volatile that the $55,000 worth of btc that you send Tesla for your car might only be worth $50,000 by the time the transaction goes through. Accepting crypto in payment for anything is crazy. If I had a business and somebody wanted to pay me in crypto, I would say, Okay, I'll accept your coins, but I will immediately convert them to dollars and credit you with the actual amount of dollars I end up with, after any fees and market rate changes, and deliver your item after I have the correct amount in dollars. And if I end up with too many dollars, I'll refund you the difference in dollars.

And when you finally get to that point - the person who paid you in crypto will wonder why they didn't just slap down their debit card in the first place.

 

[daniel]

And when you finally get to that point - the person who paid you in crypto will wonder why they didn't just slap down their debit card in the first place.

Especially since the odds are that anybody who has enough bitcoin to buy a car with it is probably so certain that it's going to keep going up forever that spending it is sacrilege.

 

[electricar]

Unless, of course, they stored their Bitcoin on a Trezor device and logged onto the bogus app on their iPhone and don't have any anymore.

 

[daniel]

Unless, of course, they stored their Bitcoin on a Trezor device and logged onto the bogus app on their iPhone and don't have any anymore.

In which case they're not going to be buying a car with it.