So, let's say I have a friend who needs money. He is going to start a new job, and moving expenses are a problem. I happen to have a bunch of bitcoin, and I want to help him out.
He insists on paying whatever I give him back. So, I loan him $2000 worth of bitcoin. Then, he pays me back with no interest. So far, is that a taxable event for me or for him? But let's take that one step further. I loan him bitcoin, and he repays $2000, and I use that to buy back my original bitcoin. That sounds like its taxable for sure somewhere, right?
And one step even further. I loan him bitcoin, he uses it to pay for his moving expenses, and then he repays the exact amount of bitcoin that was loaned to him.
And last step I loan him bitcoin and he repays the exact dollar amount required to buy back the original amount of bitcoin loaned to him. Is that taxable?
In all of these situations, the financial position of both parties ends in the exact same position as it started. No interest was charged. No profit was made. Just a bunch of bitcoin and money was swapped around for a short period of time in order to facilitate moving expenses for someone. Which of these options is not a taxable event?
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