Yeah, every trade is a taxable event to US persons. Whether that is buying coffee or litecoin. It is property according to the IRS.
Even if you thought you could get away with the like kind exchange rule, you still have to report every trade individually on the exemption form.
If it were classified as a stock, you could just report net gains and losses but not so with property.
They have made compliance nearly impossible so unless someone passes a law to exempt transactions prior to a certain date, a lot of people are going to owe back taxes and penalties if not jail time.
Simple solution: Become an expat.
Not so easy or simple, unfortunately. Have you heard of the Exit Tax? Capital gains are realized for high net worth individuals upon renouncing.
You still owe cap gains if you don't renounce and just expat. Unless you plan on just hiding and never setting foot in US again nor using any international banks cooperating with FinCen rules.
Puerto Rico offers tax free cap gains for residents, but you still owe on any gains realized up to the date you become a resident.
https://www.forbes.com/sites/robertwood/2017/02/27/renounce-u-s-heres-how-irs-computes-exit-tax/#45c8627287d4No, I actually haven't heard of the exit tax. It does make sense to some degree, or at least it would if taxes were legitimate in the first place. But regardless of whether or not you'd choose to pay what you "owe" before renouncing, it still doesn't sound like anyone who expects any significant profits should be staying in the US any longer than absolutely necessary for whatever individual circumstances.
Agreed. However, I'm suspecting you're not married or have many close family relations in the US? The moment I brought up renouncing to my wife, and that she would need to apply for visas to visit family, friends, etc., well... you can imagine the response. Although she's warming up to it proportionally to crypto value.
Which begs the question, how much is US citizenship worth? A US passport gets you in a lot of places without visas or trouble. Attaining citizenship in another country takes time and often a good deal of (traceable, taxable) fiat. Although being stateless is an option, it's not recommended for long. You have no rights, anywhere.
I think you can buy New Zealand citizenship and that will get you anywhere US citizenship will. You can go buy mountain in Queenstown with all the hedge fund billionaires.