https://youtu.be/IgETqC3aCpk 1 hour training here Andrew Gordon, JD/CPA explains accounting and tax issues for cryptocurrency investments. Discussion of bitcoin, LIFO/FIFO, 1031, Schedule D, Form 8949, FACTA, Fincen 114, Tax Loss Harvesting, Bitcoin IRA, Charity, Gift, Lost/Stolen, and in depth examples. https://www.gordonlawltd.com/ https://www.zenledger.io/

1. CPA Crypto Training

2. ZenLedger.io
Contact ZenLedger
(w) www.ZenLedger.io
(e) hello@zenledger.io
For CPA’s: www.zenledger.io/cpa

3. ZenLedger.io
Hi, Andrew Gordon
CPA, Attorney
JD - Chicago Kent College of Law
Masters in Accounting - University of Illinois Urbana Champaign
Principal of Gordon Law Group since 2012
Crypto taxation since 2013

4. ZenLedger.io
Basics of Crypto
What is Cryptocurrency? Is it legal?
How is it bought and sold? How is it used to buy services?
How is Crypto Taxed? What is a taxable event? Non-taxable?
Why software is necessary to track everything

5. ZenLedger.io
Types of Activity
Buys and Sells, ICO’s
Purchases using Crypto
Income
Mining
Airdrops, Forks
Gifts, Charity
Lost, Stolen

6. ZenLedger.io
Accounting Treatments
FIFO, LIFO
1031 Exchange
Tax Loss Assets, Wash Rule
IRA investing
FinCen 114 FBAR, FACTA

7. ZenLedger.io
What is Cryptocurrency
Cryptocurrency is a class of digital assets that individuals use for investments and
payments.
Cryptocurrencies are legal. Some states now accept tax payments in Bitcoin. The
IRS and SEC are actively monitoring cryptocurrency so you should expect
additional regulation in the future.
There are thousands of cryptocurrencies just like there are thousands of stocks.
These cryptocurrencies are traded on exchanges around the world.

8. ZenLedger.io
How is Crypto Taxed
Virtual currencies shall be treated as intangible property (IRS Notice 2014-21)
Cryptocurrency is taxed on the capital gains or losses incurred.
There are short and long term capital gains. This is reported on Form 8949,
Schedule D, and Line 13 of the 1040.
Unrealized vs. Realized capital gains/losses
These investments are eligible for tax deferred vehicles like IRAs
2014 IRS Guidance
2018 Tax Bill

9. ZenLedger.io
Transaction Information You Need
Date/Time of Purchase
Date/Time of Sale
Amount of Coins purchased
Price of Purchase in USD or USD FMV of Coin
Amount of Coins sold
Price of Sale in USD or USD FMV of Coin (Proceeds)
Transaction Fees. All trading records from exchanges and wallets

10. ZenLedger.io
Taxable Events
The Sale of Crypto to Fiat
The Sale of Crypto for Crypto
The Sale of Crypto to another entity
The purchase of goods or services with Crypto
Receipt of crypto as Income

11. ZenLedger.io
Trading
The vast majority of activity in crypto is simply the trading of these digital assets.
To minimize the tax burden, you can:
Sell coins that are a long term hold to purchase things
Sell coins that are at a loss to purchase things
Tax loss harvest
Purchase crypto with fiat rather than with other coins

12. ZenLedger.io
Non-Taxable Events
Transferring of coins is not a taxable event
Clients will have coins stored on exchanges or in wallets and they can freely
transfer between their own accounts
Transactions fees should be recorded and added to the cost basis of the coin,
providing a tax benefit
Receiving a Gift in Crypto

13. Jan 1, 2018June 1, 2017 May 1, 2018 Dec 31, 2018
Buy 5 BTC for
$2,000/BTC
Sell 1 BTC for
$10,000
Short term gain:
$8,000
Sell 1 BTC to
Buy 100 LTC
Short term gain:
$8,000
Sell 100 LTC for
$6,000 ($60/LTC)
Loss: $4,000
Sell 1 BTC for
$4,000
Long term gain:
$2,000
End of 2017, there are no taxable events. The client simply owns 4 Bitcoin (BTC)
End of 2018, the client owns 2 BTC.
The client owes $16,000 of short term capital gains (Sale of 2 BTC, Jan 1) and $2,000 of long term
capital gains (Sale of 1 BTC, Dec 31) offset by $4,000 of losses from the sale of Litecoin (LTC).
Total Tax Liability for 2018 is $14,000.
For each transaction, you must consider holding period and fair market value of the assets.
Example Trading History

14. ZenLedger.io
FIFO, LIFO, Specific Identification
Establishing cost basis. Exchange/Transaction fees
Once the decision is made on FIFO/LIFO, you must stay consistent going forward
FIFO is the more conservative and defensible approach because:
- IRS default position for securities
- Generally, requires an “adequate identification” for other methods
- No clear guidance from IRS

15. ZenLedger.io
1031 Exchange
Early IRS guidance
Pre 2018 Tax Bill
Post 2018 Tax Bill
Form 8824

16. ZenLedger.io
Mining, Masternodes, Staking
Mining cryptocurrency involves dedicating computing power to solve intense math
problems and verifying transactions on the network.
Individuals who mine virtual currency realize gross income upon receipt of virtual
currency, as measured by FMV at time of receipt
There may be business expenses incurred while mining such as the purchase and
depreciation of a computer or the electricity used

17. ZenLedger.io
Forks and Airdrops
Proceeds will be treated as ordinary income, measured by the USD value of the
coins upon receipt, with the price at that time becoming your basis for future
trading purposes
Cost Basis is $0
Capital Gains apply going forward on that coin

18. ZenLedger.io
Gifts
As Gifts or Inheritance: Gift recipients receive the giftor’s basis, so if a recipient
receives a batch of coin that was purchased for $1, and sells for $7000 upon
receipt, the recipient is on the hook for the $6999 gain per coin (which would likely
be a capital gain). For inheritances, the recipient can elect to have a “step-up” in
basis to the FMV at the time of inheritance, rather than the decedent's purchase
price.
Receiver inherits original cost basis
There is a limit.

19. ZenLedger.io
Donations to Charity
Donations must be made to a 501(3)(c) organization
You can deduct the Fair Market Value of the coins at time of donation and forgo
any tax on the gains.

20. ZenLedger.io
Tax Loss Assets, Wash Rule
Capital Tax Losses from Cryptocurrency can be applied to gains from equities or
real estate sales.
There is no law that explicitly applies the Wash Rule to cryptocurrency. This does
reset the holding period if the same coins are bought back.
You can deduct up to $3,000 per year of capital losses from your income.
Any losses above $3,000 can be carried forward and applied to capital gains or
income.

21. ZenLedger.io
Lost or Stolen Coins
2018 TCJA limited Casualty Loss deductions
Argument of worthless security
Loss of private keys, Loss of access to your funds
After 2018, only applies to losses from natural disasters

22. ZenLedger.io
Foreign Accounts
Many US based cryptocurrency investors will have foreign accounts on exchanges
such as Binance, Kucoin, and Huboi among many others.
Fincen 114 FBAR: United States person that has a financial interest in or
signature authority over foreign financial accounts must file an FBAR if the
aggregate value of the foreign financial accounts exceeds $10,000 at any time
during the calendar year.
FACTA: U.S. taxpayers who hold foreign financial assets with an aggregate value
of more than the reporting threshold (at least $50,000) to report information about
those assets on Form 8938

23. ZenLedger.io
Common Questions and Errors
Clients will often not be able to supply full transaction history. They will omit their
wallet holdings, which are critical to establishing cost basis.
Clients often assume that coin to coin trades are non-taxable events. That is
incorrect. They are taxable events.
Clients lose track of the transaction classifications
Trading on behalf of others. Co-mingled funds.

24. ZenLedger.io
Advice to Clients
Keep good records
Store your information in safe places with backups
Consider long term vs short term gains
Consider cash vs tax liabilities
Consider paper gains/losses vs realized gains/losses

25. ZenLedger.io
ZenLedger CPA Suite
CPA’s can expand their practice while reducing the hours it takes to prepare
returns using ZenLedger.
With a CPA account, there is no annual subscription fee and CPA’s can manage
the workflow for multiple clients.
Schedule D, Form 8949, Tax Loss Harvesting, and Grand Unified Accounting.
Sample outputs:
http://bit.ly/zenledger-taxloss
http://bit.ly/zenledger-GUA

26. ZenLedger.io
ZenLedger Tax Loss Harvesting Tool

27. ZenLedger.io
ZenLedger Grand Unified Accounting

28. ZenLedger.io
Contact ZenLedger
(w) www.ZenLedger.io
(e) hello@zenledger.io
For CPA’s: www.zenledger.io/cpa

29. ZenLedger.io
Helpful Links
IRS Virtual Currency Guidance, 2014
https://www.irs.gov/pub/irs-drop/n-14-21.pdf
IRS 2018 Tax Brackets
https://www.irs.com/articles/2018-federal-tax-rates-personal-exemptions-and-
standard-deductions
IRS reminder to pay taxes on Cryptocurrency Investments, March 2018
https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report-virtual-currency-
transactions

30. ZenLedger.io
Helpful Links
Cryptocurrency Glossary
https://www.zenledger.io/crypto-glossary