SAN FRANCISCO: For Americans who got rich buying Bitcoin a year ago, Elon Musk is inviting them to buy one of his cars with some of the proceeds. The taxman will be watching if they do.
That’s because cashing in the digital asset for a shiny, new Tesla will count as realising a capital gain.
Say a person bought into crypto a year ago, when Bitcoin was trading at about US$6,500. Spending around US$38,000 to buy the new Model 3 would mean cashing in a gain of US$31,500 - and that’s on the cheaper end of the spectrum for the electric vehicle.
At the current rate on capital gains, that’s a US$4,750 or so tax bill the buyer would have to foot - or almost as much as the amount he paid for his original Bitcoin.
The inverse is also true. If the token was bought when it peaked at around US$61,000 earlier this month and it was sold, converting part of it to a Model 3 would give the Bitcoin seller a tidy tax deduction next year.
