Understanding Taxes on Inherited Bitcoin

So, let’s say you’ve got some BTC but never cashed out. You didn’t do KYC, so the government has no clue about it, right? What if you die and your kid inherits this BTC? The only transaction history is some trade from an XMR address to BTC, so no one knows where that BTC came from, only the kid has those records.

Exactly. There’s an inheritance tax in many places that would probably hit first. And if that BTC was traded from XMR ages ago, the kid might still need to pay capital gains tax on it without any clear records. So, worst-case scenario: the government sees all that BTC as gains, and the kid gets hit with taxes.

Yeah, that’s something I really gotta research more. If BTC hits a million, I’m not selling anything. Gotta think about how to keep things as tax-efficient for any future kids. As far as I know in the US, debts usually don’t pass down to kids under 18 if the parent dies before they hit adulthood, right?

In the UK, the estate goes to a custodian for a year, usually a solicitor. They’ll sort out the tax then. You can’t inherit debts, but if the assets and debts are equal, then the inheritance is zero.

Speaking of the US, you’re not taxed until you cash out, so technically no taxes owed yet. The cool part is that if someone inherits BTC, the cost basis gets stepped up to the value at death. So if the parent bought BTC at $10 and it’s worth $40k at death, the new basis is $40k. But there’s that estate tax for anything over 11 million.

Right? Many countries aren’t ready for these scenarios. If the government believes the kid’s story, they might force them to pay the capital gains tax as if the dad sold it right when he died, plus inheritance tax. Just a wild theory, of course, but the best move might be to relocate to a place that welcomes crypto.

Inheritance tax laws seem pretty straightforward, generally. If no tax is paid at the time of inheritance, when it's sold, it’s taxed based on the original owner’s purchase cost. And if the kid has no proof of acquisition? They might say it’s NIL, so the whole amount's taxed.

This is crazy! Why should we even pay taxes on BTC? Promoting the project in a way should be enough. If countries start taxing this heavily, it’ll definitely hurt Bitcoin's price. High taxes just drive investors away, and we’ve got enough corrupt politicians as is.

I mean, taxes are a reality for all earnings. If we dodge them, we’re basically criminals. Taxes usually don’t tank prices unless they’re ridiculously high, like 50%. Who’s gonna pay that?

And don’t forget about different state laws in the US regarding inheritance. Always best to chat with a tax pro. What’s accurate info today might change completely after a certain date in 2023.

Most places, especially in the EU, let you refuse an inheritance if the taxes exceed the asset’s value. Plus, if your relative is super close, like a parent or spouse, there’s often no inheritance tax. Only the capital gains tax on what they didn’t pay.

It’s true that even if the government doesn’t know about the BTC transfer, taxes still apply. What was mentioned earlier about the original purchase doesn’t really matter with death taxes.