Tax Questions, Musings & Implications

Question 1: When I swap BNB for SafeMoon, or vice versa, is it a taxable event?

Yes

“Crypto to crypto trades are taxed. When you trade cryptocurrency for another crypto, you are taxed on the value at which you sold it in USD, net the amount for which you purchased it in USD.

For example, if you bought Bitcoin for USD 3,000 and later traded it for Litecoin totalling USD 6,000, you are taxed on your capital gains profit.”

In other words, if you bought BNB at $200 and later traded it for SafeMoon at $600, you’re subject to tax on the $400 profit. However, if you just bought the BNB and traded it the same day for SafeMoon, you’re unlikely to have occurred any capital gain.

Question 2: Do reflections get taxed as capital gains, dividends, ordinary income or other?

My guess would be ordinary income, because that’s how staking interest is currently taxed. Although reflections seem to fall in a genre of their own.. I can’t think of a fiat equivalent. One might argue it could be categorized as a gift by sellers, thus subject to gift tax rules. Side note: dividends don’t appear to be impacted by Biden’s tax plan. Someone make the case?

Question 3: What’s the best tax strategy?

I’m not a financial advisor (or CPA).

One thing for sure - this first tax return for SafeMoon holders will be interesting. Keep good records.

Edit: In regards to U.S. tax code.