Bulletin: Cypherpunks say no taxes owed by moneychangers!

At 1:23 AM 4/8/96, jim bell wrote:
>At 12:53 PM 4/7/96 PDT, Jim Gillogly wrote:
>>
>>jim bell <jimbell@pacifier.com> writes:
>>>FWIW, I think that there is no capital-gains-type tax on currency
>>>conversions.  In other words, if I take dollars and buy yen today, and the
>>
>>I bounced this off a CPA, who said she would be very suprised if this is
>>really the case: in general the IRS considers increases in wealth to be
>>taxable, and unless there's a specific exclusion for currency transactions
>>that she doesn't know about, she suspects this is not the case.  As a
>>conceptual counterexample she points out that you are responsible for any
>>profit you make from selling your car for more than you pay for it (but,
>>as you might expect, you don't get to take a loss if you sell it for less).
>
>That assumes that there is "profit" from exchanging currencies.  On any
>given transaction, there is never any "profit."  The only thing that might
>be called a profit is a difference in exchange rates, and that really isn't
>an increase in wealth at any point.   Ask that CPA to look it up.

There are people and companies who make a nice business in currency
exchange, ranging from the large companies one finds in international
airline terminals and banks to the smaller, "Mom and Pop" moneychangers one
finds in barrios and other such places.

These moneychangers attempt to make a "profit" on each exchange (else
they'd hardly stay in business).

It will probably come as a surprise to them that, according to both a CPA
and Jim Bell, no taxes are owed on their businesses, as "no wealth was
created."

Don't believe everything you read on this list, folks.

--Tim May


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Timothy C. May wrote:
> >That assumes that there is "profit" from exchanging currencies.  On any
> >given transaction, there is never any "profit."  The only thing that might
> >be called a profit is a difference in exchange rates, and that really isn't
> >an increase in wealth at any point.   Ask that CPA to look it up.
> 
> There are people and companies who make a nice business in currency
> exchange, ranging from the large companies one finds in international
> airline terminals and banks to the smaller, "Mom and Pop" moneychangers one
> finds in barrios and other such places.
> 
> These moneychangers attempt to make a "profit" on each exchange (else
> they'd hardly stay in business).
> 
> It will probably come as a surprise to them that, according to both a CPA
> and Jim Bell, no taxes are owed on their businesses, as "no wealth was
> created."

This sounds like the kind of thing that the mysterious "Alternative
Minimum Tax" was designed for.  One area that I *know* it applies
to is incentive stock options offered to employees of a company.
If you have such things (like, let's say you were hired to clean
the monitors at Netscape last January, and they gave you a thousand
options because your limp and stutter were so cute), and you exercise
the options but don't immediately sell the stock, then your taxable 
income is figured based on the "paper" gain you made by transforming
your $0.10/share options into $100/share stock.  You get to deduct
the taxes you pay now when you decide to sell your stock and realize
actual gain, but AMT is real and it can bite (particularly if you're
unwise enough to exercise while you're in the post-IPO lockout period
and that period overlaps April 15th).

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