Tax Hacks: White Elephant Airdrop
From the story that the kings of Siam gave such animals as a gift to courtiers they disliked, in order to ruin the recipient by the great expense incurred in maintaining the animal.
Indeed, while the white elephant was a sacred animal, owning one would incur quite the fee, as you aren't allowed to put them to work (because sacred) and they eat hundreds of pounds of food a day. How's that for eating one out of house and home?
In the context of crypto and regulation I'm quite certain that we are going to see these kinds of "white elephant" airdrops get sent out as either a practical joke or a practical attack against those who think they can control these emergent communities.
The thing about regulators is that they want to control everything within their power. They want to tax it, they want to bend it to their will. Crypto is having none of that, and the nerds and revolutionaries programming out these protocols can run circles around the regulators. I guarantee it.
For example, imagine a token that's designed to rugpull everyone on purpose at the end of the year so they can declare all that money as a loss, only for that value to pop up somewhere else on January 1st. All the on-chain metrics would indicate that the rugpull occurred. For all intents and purposes, it happened. However the value wasn't actually lost, but it gets declared as a loss anyway due to the timeframes of how taxes are reported (Jan 1 to Dec 31). More on this in another post.
The real point of this post is the White Elephant airdrop. This is where a regulator or a judge or anyone in a position of power that opposes crypto officially gets airdropped "millions of dollars" of a fully illiquid token. It's very easy to make it look like a cryptocurrency has a market cap of trillions of dollars if it only has $1 worth of liquidity on the buy and sell order bids. It is in this way that anyone who opposes crypto (or just anyone in general) will be attacked with this flaw in the system.
The government will then have no other option but to create regulations that acknowledge that liquidity in markets is indeed a factor when calculating taxes. But this in turn becomes a very slippery slope, because where does one draw the line? Whereever the line is drawn exploiters will move in to exploit the rule new rule and dance around the edge-cases.
And these are just the things I come with off the top of my head.
Surely there are smarter and more creative people in crypto than I. There will be inventions that people had never even considered before that come in to throw a monkey-wrench into this completely broken legal system. Considering our loop-holed legal swiss cheese of a government, this will be incredibly easy to do as crypto infrastructure increases and becomes more accepted over time.
Conclusion
The regulators are in over their heads. Already congress has admitted to owning crypto. They don't own much, but imagine how that changes as the price goes up and mainstream adoption gets stronger. Remember that these people serve the richest master. If that master is crypto, we are going to be for a wild ride over the next ten years.
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Electronic-terrorism, voice to skull and neuro monitoring on Hive and Steem. You can ignore this, but your going to wish you didnt soon. This is happening whether you believe it or not. https://ecency.com/fyrstikken/@fairandbalanced/i-am-the-only-motherfucker-on-the-internet-pointing-to-a-direct-source-for-voice-to-skull-electronic-terrorism
This worries me quite a bit.
If they'll be able to regulate, they'll also want to manipulate. I don't see how that can be possible with Bitcoin or Hive though, but with a lot of other cryptos, probably yes.
However, if we follow thoroughly, maybe we can make some money too.
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"The White Elephant airdrop"
Sounds interesting, thanks for this information! 🤔
I don't know what the future will bring. I think that the people in congress think they are very smart and they know what they are doing.. I don't think that to many of them have any clue as to how crypto works. I think the people in congress will try to fight change by making all kinds of rules. Time will tell what will happen.
US taxation is pretty harsh, I don't know why they don't simply tax the overall profits rather than tracking each transaction one by one. I think Europe is better in this regard as even if there are regulations, they don't put so much pressure on the people to present atomic transactions. It is crazy if you ask me what US requires from the residents in matters of taxation.
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I believe you, regulation Means they want to control everything and impose tax on crypto user. Government don't do what does not benefit them.
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Imposing tax on n crypto, well that sounds funny and I don't think that can be realized.
I wish my elephant pooped wrapped presents!
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I wish I had an elephant...
well played Sir
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They are going to be shocked what they get steamrolled with.
If the industry can do a doubling each of the next two years, after a 3X in 2021, that will be close to 1.5 billion people globally.
That is a number that is impossible to stop. Hopefully the developers keep the ball rolling bringing out a ton of applications that people can use.
Come on Khal, get us #ProjectBlank so we can start running around promoting that.
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If that airdrop gets taxed, I think it will be fairly crazy. However I would be surprised if the IRS did not go after an airdrop like that because that is a lot of tax revenue down the line. It just makes you wonder how outdated the current legal and political system really is.
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The regulators are in over their heads.
It is sad, most of those regulators are not exposed or very new to blockchain technology.
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This sounds like a fun and dangerous game to play with the people that control the methods of violence, like the police, guns, and armies.
never underestimate the stupidity, overreach, and failure of broke governments..!
I dont think it works like this in the USA. If something is air dropped to you and you can immediately undertake it and move it that's one thing. If it has a power down cycle that isnt instant that's another.
It only counts for a taxable event in the USA, I am not a lawyer talk to one, if you can freely sell or move it.
If it was locked and you cant move or sell it it doesnt count. If indont claim my sps air drop ever it's like I didnt get it for a tax event. It counts once i claim it. That's what I've read in a few places and on irs website.
Define "claim".
If you fork Bitcoin, there is no "claim".
Everyone with Bitcoin just gets the coins and has immediate access to them with the same keys.
This logic makes more sense with something like Ethereum, where claim-drops are common.
If what you say is true that's legit just another attack vector that can be exploited:
Literally exploit this "claim" logic to create a new token that has massive value and you never have to pay taxes on it. In fact you could destroy assets in one place, and then exploit the claim-drop into another asset. See how this works? It doesn't matter what the rules are. Crypto is going to be able to easily dance around them with ease.
When I say "claim" for the staking thing I mean "it says claim SPS" and if you don't hit "claim" you can't do anything with that balance until you do.
Let's say its 10,000 SPS sitting there you accumulated over a year and you never hit "claim". It's not able to be moved or sold until you hit "claim button" to move it to be under your control.
Yeah they can still exploit it by making it so it is air dropped to you on Dec 31st for example and it's locked until 11:59:58 and at 11:59:59 it unlocks and creates a taxable event, and THEN they can troll you even more by then making it so it locks again 1 second after it was unlocked, and then it's locked for infinite years lol.
So they air drop you 10k usd of some shitcoin that you can't even actually claim to sell and it causes you a tax burden.
See you just brought up yet another attack vector.
Can you see how ridiculous it is that the way the frontend works determine how the taxes works?
What if the frontends of two platforms with the same backend were totally different?
What if two completely different backends had the same frontend?
There are SO MANY WAYS to exploit these rules.
I had the same thought… signing up for a rug pull only to get your funds back a few days later (when it matters). Hilarious times ahead!
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STOPCheck out the last post from @hivebuzz:
A comforting guarantee. The political and bureaucratic will is restrictive and domineering. It strangles innovation. Its fun to see the regulators chasing the unchasable. Their craving for control betrays their lack of knowledge of the thing they want to regulate.
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I wish I had the money for an elephant, I would spend in on motorcycles.
Is it true that crypto taxes come with a 40k a year threshold?
Or, do I have pay on every dime of profit no matter how few?