Crypto Re-investing into Real Estate

16 Replies

Hello everyone, I’ve made a substantial amount of gains on crypto, I would like to re-invest that money into real estate. Is it possible to put that money into properties without capital gains tax? Thank you. 

Originally posted by @Rayan Perez :

Hello everyone, I’ve made a substantial amount of gains on crypto, I would like to re-invest that money into real estate. Is it possible to put that money into properties without capital gains tax? Thank you. 

 I think transferring gains from crypto to real estate is smart. Unfortunately, you must pay capital gains taxes. Crypto is not a currency, it is a speculative investment, like buying gold or buying baseball cards. The good news is once you own real estate, it can be exchanged tax free for other real estate using a like kind exchange.

It's treated exactly like stock to the IRS. 

So there's not really a way to "funnel this" legally. 


You can potentially get a little benefit with qualfiied opportunity zones. 

Or if held in/ done in a self directed IRA you can potentially buy real estate in there tax free

Crypto is still a grey area.

Sell your crypto to real people, for cash

Deposit cash slowly over x months, no cap gains tax

Daddy govt asks where the 2k 7k 1k 4k deposits are coming from, say you sold a guitar, car, baseball cards, etc

Noone is tracking crypto exchanges.

Ryan,

Congrats on the gains. An important question for your strategy has to be- what are your objectives? Is this a hedge while you let your runners run? Or are you getting off the roller-coaster? What is your time horizon? Syndications will provide a very good tax advantage throughout the project and into the next. And more importantly, can provide risk-mitigation associated with real estate ownership. Opportunity Zones might be an alternative, but will they address the risk? Can they be a solid hegde? Not sure. 

Good Luck,

Joe

Originally posted by @Maksu Ize :

Crypto is still a grey area.

Sell your crypto to real people, for cash

Deposit cash slowly over x months, no cap gains tax

Daddy govt asks where the 2k 7k 1k 4k deposits are coming from, say you sold a guitar, car, baseball cards, etc

Noone is tracking crypto exchanges.

It is actually not a gray area. 

How does the IRS view trading? In other words, if you found a unique seller that would trade property for crypto, would the IRS come after any taxes? 

Originally posted by @Maksu Ize :

Crypto is still a grey area.

Sell your crypto to real people, for cash

Deposit cash slowly over x months, no cap gains tax

Daddy govt asks where the 2k 7k 1k 4k deposits are coming from, say you sold a guitar, car, baseball cards, etc

Noone is tracking crypto exchanges.

 This is not a grey area at all. What you are suggesting is tax fraud and you are just proposing a scheme to not get caught. You are also required to pay gains on baseball cards, guitar or anything you sell for more than you purchased it for. 

The current administration is increasing reporting requirements specifically to catch tax cheats and they know crypto is an area where this happens. This is not a good time to do as you suggest.

Originally posted by @Dustin Beam :

How does the IRS view trading? In other words, if you found a unique seller that would trade property for crypto, would the IRS come after any taxes? 

 This is considered bartering, which is taxable at the fair market value of the item exchanged. Just Google barter and IRS to find the relevant details and forms. 

There is no "like kind exchange", so even buying and selling different crypto doesn't shield you from taxes either. 

Originally posted by @Joe Splitrock :
Originally posted by @Dustin Beam:

How does the IRS view trading? In other words, if you found a unique seller that would trade property for crypto, would the IRS come after any taxes? 

 This is considered bartering, which is taxable at the fair market value of the item exchanged. Just Google barter and IRS to find the relevant details and forms. 

There is no "like kind exchange", so even buying and selling different crypto doesn't shield you from taxes either. 

 I kind of figured, but never really thought about it. Uncle Sam always wants his slice haha

You could possibly hedge your Crypto Holdings. Find a forward thinking private lender or organization that will let you borrow against your crypto. Just like accessing equity in an asset. I'm sure there is someone out that is willing to do it, it wont be a cheap rate but if you get creative enough I'm sure someone would. You will avoid Cap Gains and still hold your crypto. Only downside risk is if your holdings lose to much value and your forced to sell to cover what's borrowed.