Saving and investing is one of the biggest lessons that we learn in high school and college. And it feels great when you invest you savings and get something bigger in return. That’s what one college student in California did. He invested $5,000 in Cryptocurrency and earned $800,000 in profit. But there is a negative side of the story. He now owes $400,000 in taxes.
An anonymous college student recently posted on Reddit to solicit advice about what to do while they face a massive tax bill in the wake of cryptocurrency trading. According to the post, the student, who lives in California, put $5,000 into Coinbase last year after a friend said they were investing in Ethereum $215.060 +0.12%.
After “hitting 10x’altcoinsiple alt coins,” the college crypto-trader eventually turned the $5k investment “all the way up to an $880,000 portfolio in December 2017.”
The student says that he did not know anything about enough Cryptocurrency when he started investing in digital currency.
The unnamed student, who goes under the suitably named Reddit handle “u/throwaway283921”, claims to have begun his trading in May 2017, whereby he signed up at popular cryptocurrency broker Coinbase. Moving forward, the student then purchased a range of alt-coins, which he states increased in value by more than 10x. By the end of December 2017, at a time when the cryptocurrency industry experienced a significant injection of capital that resulted in Bitcoin reaching its all-time high of $20,000, the student claims that his portfolio was worth just over $800,000. Not bad for a $5,000 investment just six months prior.
He let the money stay in his account hoping that he would earn more, particularly because Bitcoin had a higher value at the time.
Initially, earnings from cryptocurrency investments were not taxable by law. However, the government noticed how profitable the industry is and decided to impose taxes on these digital assets. While cryptocurrencies are generally seen as currencies, there is an ongoing debate about whether they are securities, currencies or commodities.
The student is also in deep regrets, as he says that the Cryptocurrency market has completely ruined his life.
It is important to remember that the government now imposes taxes on digital currencies. That is because digital currencies are now treated as commodities.