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The IRS wants to tax every penny of your crypto, US government memorandum says

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A recent memorandum from the U.S.’ tax authority, the Internal Revenue Service, or IRS, attempted to clarify taxation rules around receiving crypto assets as payment. 

“Is convertible virtual currency received by an individual for performing a microtask through a crowdsourcing or similar platform taxable income?” said a document released on Aug. 28, adding: 

“Yes, a taxpayer who receives convertible virtual currency in exchange for performing a microtask through a crowdsourcing platform has received consideration in exchange for performing a service, and the convertible virtual currency received is taxable as ordinary income.”

Crowdsourcing — calling on a number of participants to work on a project or task — is a common business model in the Blockchain space. The memorandum described microtasks as smaller bits of work dished out to multiple workers as part of a larger task.

Regardless of the makeup, the memorandum pushes one main point — that payment in cryptocurrency, however large or small, is taxable income. “The convertible virtual currency received must be reported on the taxpayer’s income tax return as ordinary income and may be subject to self-employment tax,” the document concluded.

The memorandum surfaced as an internal IRS document on June 29, but was not made public until months later on Aug. 28. 

The IRS has increasingly tightened its overwatch on crypto in recent years. One of the latest developments sees 2020 U.S. tax forms asking citizens to disclose if they have interacted with digital assets at all over the course of the most recent year.



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Brad Garlinghouse’s lawyers file request for Binance documents in ‘international’ challenge to SEC lawsuit

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The lawsuit between Ripple Labs and the U.S. Securities and Exchange Commission, or SEC, now involves major crypto exchange Binance after a recent filing on behalf of Ripple CEO Brad Garlinghouse.

According to court documents filed in the Southern District of New York on Monday, Garlinghouse’s legal team has requested documents “relevant to the case and unobtainable through other means” from Binance Holdings Limited, the Cayman Islands-based subsidiary of the major cryptocurrency exchange. The filing cited U.S. laws concerning the Department of State and the Hague Convention and asked the court to issue a letter of request for the Central Authority of the Cayman Island to compel evidence from Binance.

“Mr. Garlinghouse seeks foreign discovery on the basis of his good faith belief that [Binance Holdings Limited] possesses unique documents and information concerning this case, and specifically, concerning the process by which transactions in XRP allegedly conducted by Mr. Garlinghouse on foreign digital asset trading platforms were conducted,” said the filing.

Specifically, the lawyers seem to be challenging claims from the SEC that the Ripple CEO sold more than 357 million XRP tokens on “worldwide” crypto trading platforms to investors “all over the world.” The team cited Section Five of the Securities Act of 1933, stating the alleged illegal XRP sales applied only to domestic sales and offers of securities. The documents requested of Binance may contain evidence in support of that claim.

“As the SEC knows, Mr. Garlinghouse’s sales of XRP were overwhelmingly made on digital asset trading platforms outside of the United States […] the discovery that Mr. Garlinghouse seeks will be relevant to demonstrating that the offers and sales that the SEC challenges did not occur in this country and are not subject to the law that the SEC has invoked in this case.”

Related: Judge allows Ripple to depose SEC official who decided ETH is not a security

The request is part of a lawsuit the SEC filed against Ripple in December, alleging the firm, Garlinghouse and co-founder Chris Larsen had been conducting an “unregistered, ongoing digital asset securities offering” with their XRP token sales. Ripple’s legal team had previously claimed that XRP is more like Bitcoin (BTC) or Ether (ETH) — which the regulatory body has classified as commodities rather than securities.

However, the firm seems to be switching gears — or trying to augment its case — by challenging allegations of domestic versus international token sales. Garlinghouse and Larsen filed a motion in June petitioning international authorities to request documents from several non-U.S.-based crypto exchanges including Bitstamp, Huobi, and Upbit. The case will reportedly end the pre-trial discovery process on Oct. 15.