Tesla Now Accepting Bitcoin as Payment

Yesterday, Bitcoin gained 0.48% against the US dollar, hitting the $54,331.0 level at the end of the session and breaking a two-day losing streak. Other cryptocurrencies did not follow suit, such as Ethereum which continued losing ground, falling by 0.85% and closing the session at the $1,668.77 level. Dogecoin followed, which fell by 2.72% against the US dollar and closed at the $0.053423 level.

Recently, Elon Musk said that Tesla will accept Bitcoin as payment, making official an announcement he made some time ago that pushed up enthusiasm for crypto in the markets.

"You can now buy a Tesla with Bitcoin," he tweeted, adding that Tesla is intending to manage Bitcoin payments using their own software and operate Bitcoin nodes directly.

Increasing institutional adoption, as well as fears for inflation, have been favoring Bitcoin's performance, even though there are still important investors and politicians that have expressed their doubts about them.

I agree with ScubaDiver (welcome to freerepublic, reddit has/had it's good r/'s) that you would be expected to pay the taxes.

Then the question becomes what btc are you selling for the tesla? The btc you bought in 2018 at 6k or the btc you bought last year at 9K or the btc you bought yesterday? My "friend" has been buying 500 in btc every paycheck for years. What happens if he forgets his password and loses his coin? Didn't some hedge fund guy claim to have lost million (or billions) in btc a few years ago? What if I lose my btc in a fishing accident? Then what? The very first question under your name and address, ssn, ect is "did you transact in crypto" (paraphrasing) on this years IRS 1040. With current KYC laws, the IRS knows who is buying they just don't really know where it's going.

One reason the IRS has a better handle on this than many might think is that the currency exchanges (mostly) issue 1009-Ks on every purchase. There's a matching system the IRS has created for these transactions that works exactly like the matching system they've created for the W2 system. IOW, if your employer says they paid you $100K and you only claim $50K, the IRS understands that discrepancy immediately and your return gets flagged for review. I believe - but am not certain - that as of today, these 1099s are only being issued for buyers those with $20K in annual gains or 200 transactions. If you've only bought $1K in crypto in 2020, the IRS probably doesn't know about it...maybe.

With respect to how they know what crypto you were using for a purchase and when that crypto was purchased (was it longer than 1-years, for instance), that get's a bit more complicated. Long story short is when you disclose that purchase, the IRS will then evaluate that transaction using the schudeles they have. From what I understand, that requires human intervention...but, that could be wrong. Perhaps that's automated as well. You'd really need to talk to an accountant or tax lawyer who's more familiar with it.

Yes, if you lose your bitcoin credentials, you're screwed. No way around that, it's simply a artifact of cryptocurrency. This article from CNBC talks in a bit more detail about what the IRS' relationship is with crypto.

Failure to report cryptocurrency on your tax return can lead to trouble with the IRS

"they just don't really know where it's going."

I wouldn't bet the farm on that. It's probably true those tracking systems aren't as robust as they could be...or will be. But, it's probably unwise to presume the IRS has no idea where Crypto is going, particularly for US-based merchants. Clearly, these car dealerships are reporting their crypto transaction including the name of the person buying the car.

Tesla posted its first full year of net income in 2020 — but not because of sales to its customers.

Eleven states require automakers sell a certain percentage of zero-emissions vehicles by 2025. If they can’t, the automakers have to buy regulatory credits from another automaker that meets those requirements — such as Tesla, which exclusively sells electric cars.
It’s a lucrative business for Tesla — bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla’s net income of $721 million — meaning Tesla would have otherwise posted a net loss in 2020.

“These guys are losing money selling cars. They’re making money selling credits. And the credits are going away,” said Gordon Johnson of GLJ Research and one of the biggest bears on Tesla (TSLA) shares.
Tesla top executives concede the company can’t count on that source of cash continuing.
https://edition.cnn.com/2021/01/31/investing/tesla-profitability/index.html

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.