Bitcoin Mining by Minors

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Mrs. Drysdale
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Joined: Sat Jan 09, 2021 7:08 pm

Bitcoin Mining by Minors

Post by Mrs. Drysdale »

Hello . How would a minor sell the bitcoin that they have mined on their own personal gaming computer at home over the last few years? My understanding is that most of the exchanges require one to be age 18. Any information on selling and tax ramifications would be helpful. Thanks in advance.
dru808
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Re: Bitcoin Mining by Minors

Post by dru808 »

As a miner I’d expect they’d know of exchanges that do not require any personal information.
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Register44
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Re: Bitcoin Mining by Minors

Post by Register44 »

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Last edited by Register44 on Mon Jan 11, 2021 8:48 pm, edited 1 time in total.
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hagridshut
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Re: Bitcoin Mining by Minors

Post by hagridshut »

Mrs. Drysdale wrote: Sat Jan 09, 2021 7:23 pm Hello . How would a minor sell the bitcoin that they have mined on their own personal gaming computer at home over the last few years? My understanding is that most of the exchanges require one to be age 18. Any information on selling and tax ramifications would be helpful. Thanks in advance.
A Bitcoin owner doesn't necessarily need to sell Bitcoin on an exchange. They could sell it to people they know and get cash, check, or other form of direct payment.

From what I understand, Bitcoin is taxable as ordinary income as soon as it is mined. So if your child spent $1,000 to mine $2,000, they would have $2,000 - $1,000 = $1,000 in ordinary income to report to the IRS.

Sale of Bitcoin also counts as a taxable realization of capital gains (or losses).

Record keeping is critically important. Keep track of equipment purchased and electricity used to mine. Also keep track of the basis for all units of BTC mined.

It is best to consult the IRS website for all the most recent regulations and not run afoul of the law.
First Principles: (1) Diversify (2) Low Cost (3) Stay the Course | 3-Fund Index Portfolio
alpha88
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Re: Bitcoin Mining by Minors

Post by alpha88 »

How much BTC are we talking (you can send me a PM if needed).
I'd imagine if on a single GPU it wouldn't be that large of an amount.
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Mrs. Drysdale
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Re: Bitcoin Mining by Minors

Post by Mrs. Drysdale »

Thanks for the replies. The amount is less than two btc. We are now talking to CPA about this to be sure everything is above board No crypto in our portfolio so never really followed. It will be interesting to see where this leads.
ccf
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Re: Bitcoin Mining by Minors

Post by ccf »

Mrs. Drysdale wrote: Sat Jan 09, 2021 7:23 pm Hello . How would a minor sell the bitcoin that they have mined on their own personal gaming computer at home over the last few years? My understanding is that most of the exchanges require one to be age 18. Any information on selling and tax ramifications would be helpful. Thanks in advance.
How about - exchange the BTC for USD Coin using ShapeShift (no KYC or personal info required) so that they have an asset with a stable price, and then sit on it or sell the USD Coin to someone who can cash it out.
Prahasaurus
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Re: Bitcoin Mining by Minors

Post by Prahasaurus »

Mrs. Drysdale wrote: Tue Jan 12, 2021 9:03 pm Thanks for the replies. The amount is less than two btc. We are now talking to CPA about this to be sure everything is above board No crypto in our portfolio so never really followed. It will be interesting to see where this leads.
Less than 2 BTC is still around 50k USD. Not bad for mining BTC, I would assume he did this some time ago, as it’s very hard to mine BTC from a home computer or laptop now, those days are long gone...

Also, there is no rule that says you must sell all or any part of this. Not selling also has the advantage of avoiding a taxable event. My suggestion would be to hold at least a part of this for the future, perhaps 1 BTC. But only if you understand Bitcoin, and are comfortable holding it. Your son seems to be, as he’s likely held this for some time.
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go140point6
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Re: Bitcoin Mining by Minors

Post by go140point6 »

Prahasaurus wrote: Wed Jan 13, 2021 12:47 am Not bad for mining BTC, I would assume he did this some time ago, as it’s very hard to mine BTC from a home computer or laptop now, those days are long gone...
Yeah, no doubt. I can't see anyway this is even remotely possible in the last few years. Perhaps talking about some other crypto that's been exchanged for BTC over time? Even that is a stretch, but suppose it's more likely than mining that amount of BTC directly. That gets even harder to track for tax purposes if so...
killjoy2012
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Re: Bitcoin Mining by Minors

Post by killjoy2012 »

Mrs. Drysdale wrote: Tue Jan 12, 2021 9:03 pm The amount is less than two btc. We are now talking to CPA about this to be sure everything is above board No crypto in our portfolio so never really followed. It will be interesting to see where this leads.
I'd also discuss tax implications with that CPA, as I do believe, and I am not a CPA or a tax expert, that those 2 BTCs were supposed to be declared on income taxes. 2 BTC is like $70k, so you may be looking at submitting amended returns, paying taxes, etc.
morbo
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Re: Bitcoin Mining by Minors

Post by morbo »

ccf wrote: Tue Jan 12, 2021 9:29 pmHow about - exchange the BTC for USD Coin using ShapeShift (no KYC or personal info required) so that they have an asset with a stable price, and then sit on it or sell the USD Coin to someone who can cash it out.
Just so the OP is aware, exchanging one cryptocurrency for another is a taxable event.
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