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Court Authorizes Service of John Doe Summons Seeking Identities of U.S. Taxpayers Who Have Used Cryptocurrency
justice.gov ^ | May 5, 2021 | Department of Justice Office of Public Affairs

Posted on 05/08/2021 2:23:09 AM PDT by ransomnote

A federal court in the Northern District of California entered an order today authorizing the IRS to serve a John Doe summons on Payward Ventures Inc., and Subsidiaries d/b/a Kraken (Kraken) seeking information about U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020. The IRS is seeking the records of Americans who engaged in business with or through Kraken, a digital currency exchanger headquartered in San Francisco, California.

“Gathering the information in the summons approved today is an important step to ensure cryptocurrency owners are following the tax laws,” said Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division. “Those who transact with cryptocurrency must meet their tax obligations like any other taxpayer.”

“There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions,” said IRS Commissioner Chuck Rettig. “This John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share.”

Cryptocurrency, as generally defined, is a digital representation of value. Because transactions in cryptocurrencies can be difficult to trace and have an inherently pseudoanonymous aspect, taxpayers may be using them to hide taxable income from the IRS. On April 1, 2021, a federal court in the District of Massachusetts granted an order authorizing the IRS to serve a similar John Doe summons on Circle, a digital currency exchange headquartered in Boston.

Today’s order from the Northern District of California grants the IRS permission to serve what is known as a “John Doe” summons on Kraken. The United States’ petition does not allege that Kraken has engaged in any wrongdoing in connection with its digital currency exchange business. Rather, according to the court’s order, the summons seeks information related to the IRS’s “investigation of an ascertainable group or class of persons” that the IRS has reasonable basis to believe “may have failed to comply with internal revenue laws.” According to the copy of the summons filed with the petition, the IRS directed Kraken to produce records identifying the U.S. taxpayers described above, along with other documents relating to their cryptocurrency transactions.

The IRS has issued guidance regarding the tax consequences on the use of virtual currencies in IRS Notice 2014-21,which provides that virtual currencies that can be converted into traditional currency are property for tax purposes, and a taxpayer can have a gain or loss on the sale or exchange of a virtual currency, depending on the taxpayer’s cost to purchase the virtual currency (that is, the taxpayer’s tax basis).

Topic(s): 
Tax
Component(s): 
Press Release Number: 
21-410


TOPICS: Miscellaneous
KEYWORDS: ndcalifornia
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1 posted on 05/08/2021 2:23:09 AM PDT by ransomnote
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To: ransomnote
There was a case by the same name but with a different defendent on April 1:

Court Authorizes Service of John Doe Summons Seeking Identities of U.S. Taxpayers Who Have Used Cryptocurrency
justice.gov ^ | April 1, 2021 | Department of Justice

Posted on 4/2/2021, 1:36:37 AM by ransomnote

2 posted on 05/08/2021 2:28:52 AM PDT by ransomnote (IN GOD WE TRUST)
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To: ransomnote

Great news! Now crypto cannot avoid sharing our tax burden.


3 posted on 05/08/2021 2:30:06 AM PDT by entropy12
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To: ransomnote

won’t people just go to foreign based exchanges which might not share their data with the IRS?


4 posted on 05/08/2021 2:40:53 AM PDT by FLT-bird
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To: ransomnote

They did it originally to Coinbase. Now they are moving to Kraken Exchange.

Of course they are looking for people that never reported selling crypto.


5 posted on 05/08/2021 2:44:40 AM PDT by Enlightened1 ( )
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To: ransomnote

No probable cause. Unconstitutional


6 posted on 05/08/2021 2:49:00 AM PDT by faithhopecharity ("Politicians are not born, they are excreted." Marcus Tullius Cicero (106 to 43 BCE))
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To: FLT-bird
That’s true of many foreign assets — not just cryptocurrency.

The problem arises when you need to convert the asset into U.S. dollars to make it useful for you here in the U.S. If you bought $5,000 worth of Bitcoin and it’s now worth $1 million, there are no tax implications as long as you just hold onto it. But as soon as you convert the Bitcoin back to U.S. dollars it’s going to show up as a transaction the IRS can trace.

7 posted on 05/08/2021 2:49:12 AM PDT by Alberta's Child ("And once in a night I dreamed you were there; I canceled my flight from going nowhere.")
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To: faithhopecharity

It gets more complicated when you are dealing with a third party. Your home and property are protected under the Constitution, but when you have records and possessions in the hands of a third party like a friend or an investment manager it’s a different story.


8 posted on 05/08/2021 2:52:14 AM PDT by Alberta's Child ("And once in a night I dreamed you were there; I canceled my flight from going nowhere.")
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To: ransomnote

the US govt only has financial domain over US dollars

expecting to collect taxes off transactions in other currencies is absurd. the US govt only comes into play once the currency changes to US dollars.

they might as well push for all transactions conducted in euros. which is stupid.


9 posted on 05/08/2021 2:55:07 AM PDT by sten (fighting tyranny never goes out of style )
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To: ransomnote
"his John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share."

I am not for tax dodging, but DOJ going all moral on us is rather hard to take for lots of reasons, like I see no evidence that DOJ has ever been in it for We the People.

If the government actually put funds principally towards socially beneficial activities [defense...] I would be all for fairness. But when it principally goes to augmenting the regulatory burden on all of us or the further profusion of critical race theory, etc., fairer distribution just means more revenue which means I am worse off, not better off because some rich scammer didn't enable them to hire more bureaucrats.

10 posted on 05/08/2021 2:55:26 AM PDT by AndyJackson
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To: sten

Nice try. A capital gain is a capital gain, and they have jurisdiction over everyone claiming citizenship.


11 posted on 05/08/2021 2:56:29 AM PDT by AndyJackson
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To: ransomnote

They treat crypto like collectables. The difference is when you sell them you tend to “barter” for goods or services instead of taking cash, which makes it hard to track for tax purposes.


12 posted on 05/08/2021 2:57:23 AM PDT by ChronicMA
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To: faithhopecharity

(No probable cause. Unconstitutional)

Funny. You still think that overlords give a damn about constitutionality??


13 posted on 05/08/2021 3:00:03 AM PDT by winner3000
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To: sten

Anyone who does business in multiple countries calculates and pays taxes in different currencies all the time. As a U.S. taxpayer, I have to report my foreign income and capital gains on my U.S. tax return. If I buy an investment property in Europe and sell it five years later, I have to report the capital gain on my U.S. tax return even if both transactions are conducted in euros. I simply document the purchase price and the sale price on my U.S. return based on the euro-dollar exchange rates at the time of purchase and the time of sale.


14 posted on 05/08/2021 3:02:19 AM PDT by Alberta's Child ("And once in a night I dreamed you were there; I canceled my flight from going nowhere.")
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To: entropy12

all hale fedgov


15 posted on 05/08/2021 3:05:18 AM PDT by Pollard
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To: ransomnote

And Biden wants to give these people $10 billion a year more???*

*$80 billion dollars total for the 8-year-term of the infrastructure bill.

And what is this “income” stuff? Wouldn’t trading cryptocurrency be in the realm of capital gains?


16 posted on 05/08/2021 3:06:13 AM PDT by Tolerance Sucks Rocks (GOP-free since 10/9/20)
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To: ransomnote

Once they figure out that most of the Bitcoin types are Democrat voters, enforcement will drop, substantially.


17 posted on 05/08/2021 3:06:26 AM PDT by BobL (TheDonald.win is now Patriots.win)
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To: faithhopecharity
No probable cause. Unconstitutional

How can you say that?!

Rather, according to the court’s order, the summons seeks information related to the IRS’s “investigation of an ascertainable group or class of persons” that the IRS has reasonable basis to believe “may have failed to comply with internal revenue laws.”

Aren't the police routinely allowed to enter your premises, search your personal papers, and rummage through your wife's lingerie drawer on the suspicion that some ill-defined "wrong-doing" (= "non-compliance") might be going on?

After all, you exist, and it can therefore be reasonably assumed that you may have failed - at some point in your life - to comply with at least one of the 50,000 statutes, ordinances, and requirements of the federal government's tax code.

Regards,

18 posted on 05/08/2021 3:11:08 AM PDT by alexander_busek (Extraordinary claims require extraordinary evidence.)
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To: entropy12
Dropping out just got more difficult.

This will be serious when the IRS tackles the hawala network. /s

19 posted on 05/08/2021 3:25:56 AM PDT by ptsal (Vote R.E.D. >>>Remove Every Democrat ***)
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To: ransomnote

Sounds like a massive fishing expedition by a weaponized FedGov bureaucracy seeking to identify and locate wealth they want to confiscate.


20 posted on 05/08/2021 3:38:44 AM PDT by PubliusMM (RKBA; a matter of fact, not opinion. The Dhimmicraps are ALL Traitors. All of them.)
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