Investors Who Lost Big on Bitcoin Can Get a Tax Break
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What is the episode's overview and money headlines about the U.S. economy?
With your Money Briefing, I'm Charlie Turner in New York for The Wall Street Journal. Bitcoin investors felt the pain when the cryptocurrency bubble popped this year, but the IRS tax code allows crypto investors to take advantage of their losses. We'll have more on this in a moment from The Wall Street Journal's Laura Saunders. First, here are some money headlines. The labor market is not the only strength of the U.S. economy. To quote one economic expert, the consumer is on fire. Businesses have been pulling back on spending as the global economy cools, but the consumer is on a firm footing. Personal consumption expenditures, a measure of household spending on a range of consumer goods and services, increased a seasonally adjusted four-tenths percent in November from the prior month, according to the Commerce Department.
That made for the ninth straight monthly increase in the PCE index. Households benefited from falling gas prices, adding to their purchasing power for other goods and services. And the University of Michigan's final consumer sentiment index for December rose more than expected. Consumers' outlook on the U.S. economy improved, a sign that many American households are shrugging off renewed volatility in financial markets as this year's optimistic sentiment continued in the final weeks of the holiday season. Finally, the Wall Street Journal says the reign of the unicorn IPO has commenced. Investors gripe that highly valued tech companies are avoiding public markets and opting to remain private for longer.
But in 2018, to little fanfare, 38 tech and Internet companies valued at $1 billion or more at the time of their IPO listed shares in the U.S., the most to do so since the height of the dot-com boom in 2000, according to DealLogic. That's expected to rise next year, according to bankers and fund managers who follow the IPO market. In 2019, some of the hottest names among tech unicorns, including Uber Technologies, Lyft and Slack Technologies, are considering IPOs. Still ahead, a silver lining for investors who took a bath on Bitcoin.
If you've been a Bitcoin investor, you've taken a big bath. The cryptocurrency's value has been crushed this year, falling from around $15,000 to about $4,000. Other digital currencies have similarly been clobbered. But there is a silver lining in this, a potentially big one. The Wall Street Journal's Laura Saunders says the U.S. tax code provides a measure of relief by letting investors use such losses to offset taxes on winners, either now or sometime down the road. Laura joins us in our studio. This is a tax break, isn't it, Laura? Yeah. How does this work? Can you use the amount that you've lost on an investment like Bitcoin to subtract from the tax on winning investments? Is that the way it basically works?
Yes. I'm going to explain this a little bit slowly because so many people who have these crypto investments just don't understand anything about taxes. They don't understand that these are investments that are taxable like stocks and bonds. that the profits are taxable, the losses also give you an advantage because they can be deducted against your profits if you do it in the right way at the right time. And there are a bunch of other things as well, like you can use your losses to shelter your profits, especially from the same year.
How have consumer spending and PCE trends influenced the economic outlook?
But even if you have extra losses, they can carry forward to a future year. And another good piece of news is that those losses can be used to offset taxable gains on other investments. Like if you had a piece of land and you sold it and you wouldn't have to pay the tax if you had the losses from the Bitcoin. I think we had an example that somebody had $40,000 of losses on Bitcoin, but she had $10,000 of gains in Bitcoin and $20,000 of gain on Apple stock. Well, then she wouldn't pay any tax on those gains. And so that sheltered these all these taxes. This is important to pay attention to, and it's especially important to pay attention to before the end of the year because if you take those losses this year, they could be applied to gains or they could carry over to the future or whatever.
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