A very interesting article was published by Coindesk titled How a 15-Year-Old’s $1000 Bitcoin Investment Led to Startup Success. It was the story about a 15-year-old who invested his Easter present into Bitcoin and cashed out $100,000 at the very top back in December 2013. It’s a feel good story, with some luck involved since he clams to have cashed out at $1,200 and that implies Mt. Gox at a time when it was no longer allowed in the US financial system, so I’m really curious how he actually got the cash out. Minor details aside, it’s more important what the IRS thinks about this and it is unfortunate we have come to that.
The Bitcoin economy is at a major dilemma; we live in a world where any individual success is to be re-distributed because somehow you used government resources to achieve it. The Bitcoin ecosystem takes this absurdity to the next level and for the first time those in favor of wealth confiscation can be put on the spot in a debate. Governments have done NOTHING to assist in the adoptions of Bitcoin, an argument can even be made that they hinder it. As the adoption grows so will the price because of its limited supply and network affect. Yet for some reason the confiscation arm of bureaucracy puts out a ruling that it is to be taxed like property. So if someone risks their life saving on something and profits they now have to give some of it away. In the case of a House for example where if it goes up in value and you have to give up some of your gains the ‘Tax Lovers’ always point out things that contribute to your profit like the police in the area to keep you safe, the government roads that make your home convenient and even the Sewers to make sure it’s livable. Most of the time everyone just accepts the direct theft of your productivity.
Clearly this young man has a better understanding of economics than 99% of finance professors, and not because he believed in Bitcoin. Look at what he is doing with the money, he created the start up Botangle.com which is an educational website. Somehow everyone would benefit if he only gave up 20% or more of his money as oppose to investing all of it in his company, which is already creating jobs. This is the irony, those who are sitting on fortunes in bitcoins might be afraid to re-invest it into something productive because of the insane world of Government compliance and taxation, while those that cause this situation are complaining that bitcoins are being hoarded and controlled by a small minority.
So let’s get back to this young 15-year-old man, who I kind of feel sorry for if he did not fill out the right paperwork of how he is able to help society on a global scale. If he did not pay his share, then I hope his mom is keeping that cup of coffee warm for the IRS agents about to knock on that door. Of course there is also the mistake of saying you turned $1,000 into bitcoins from around Easter 2012, which would put the price of 1BTC at under $10. Assuming he only cashed out $100K at the very top that puts him at least at $25K in bitcoins remaining assuming of course he got them out of Mt. Gox. That’s basic math even an IRS can do, and in addition, he also put his brother on IRS’s radar. The ideal thing is to claim you lost the rest at Mt. Gox, but if that’s not true you are facing up to 5 years for “lying to federal officials”.
It’s hard to play this game, sometimes it’s better to stay under the radar, stay out of the news about your success, and just do what you can to benefit society. Always remember: they can’t confiscate, what they don’t know you have.