Bitcoin Jesus and the IRS – Introduction
Roger Ver, famously known as “Bitcoin Jesus” for his early and passionate advocacy of cryptocurrency, finds himself at the centre of a legal battle with the U.S.
Internal Revenue Service (IRS). The dispute revolves around an eye-watering $48 million tax bill, allegedly tied to Ver’s renunciation of U.S. citizenship in 2014.
At the heart of the case lies the expatriation tax, a measure designed to ensure individuals departing the U.S. tax system settle their dues before cutting ties.
For Ver, who reportedly misrepresented his Bitcoin holdings, this law has led to allegations of tax evasion, filing false returns, and even mail fraud.
What Is the Expatriation Tax?
The expatriation tax—officially the Expatriation Tax under the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008—is a mechanism to prevent high-net-worth individuals from sidestepping U.S. taxes by renouncing their citizenship.
The law applies to:
- Wealth Threshold: Individuals with a net worth exceeding $2 million.
- Tax Liability Threshold: Those with an average annual income tax liability exceeding $190,000 over the prior five years.
Under this rule, certain assets are treated as if sold (a “deemed sale”) the day before expatriation, and any unrealized gains are taxed.
For instance, if you hold stock with a cost basis of $500,000 that is now worth $1 million, the $500,000 gain is taxed—even if you haven’t sold the stock.
In Ver’s case, his Bitcoin holdings and associated business assets are central to the IRS’s allegations.
Roger Ver’s Bitcoin Saga
Back in 2014, Bitcoin was in its nascent stages, and Ver was among its most vocal proponents.
However, the IRS claims that Ver significantly understated the value of his crypto assets, including those held by his companies MemoryDealers and Agilestar.
By 2017, Bitcoin’s meteoric rise in value amplified these alleged understatements.
According to prosecutors, Ver sold tens of thousands of Bitcoin through his businesses, earning approximately $240 million—tax-free.
Additionally, Ver is accused of:
- Misleading appraisers and tax preparers about the extent of his holdings.
- Omitting key details in his expatriation filings, resulting in significant underreporting.
The Legal Arguments
Ver’s legal team has pushed back hard against the allegations, framing the expatriation tax as:
- Unconstitutional: They argue it imposes an undue burden on the right to expatriate.
- Vague: They claim the law lacks clarity, particularly when applied to emerging asset classes like cryptocurrency.
Moreover, Ver’s lawyers have accused the IRS of ignoring documentation that purportedly demonstrates his lack of intent to evade taxes.
Conversely, the IRS insists that Ver knowingly underreported his assets and acted in bad faith to reduce his tax liability.
Crypto and the IRS
The Ver case underscores broader challenges in taxing cryptocurrencies:
- Valuation Issues: Cryptocurrencies are notoriously volatile, and accurately valuing them at a specific point in time can be difficult.
- Ownership Transparency: Tracking crypto ownership across wallets and exchanges adds layers of complexity.
- Regulatory Evolution: In 2014, clear tax guidance for crypto was sparse, leaving room for differing interpretations.
The IRS’s aggressive stance suggests a growing resolve to close loopholes and enforce compliance in this fast-evolving sector.
What’s at Stake for Ver?
The stakes couldn’t be higher:
- Mail Fraud: Up to 20 years for each count.
- Tax Evasion: Up to 5 years per count.
- False Returns: Up to 3 years per count.
For Ver, a man who once epitomised the promise of decentralised finance, this legal battle could mark a significant fall from grace.
Conclusion
Roger Ver’s case represents a seminal moment in the crossed paths of crypto and taxation.
It highlights the complexities of applying traditional tax frameworks to modern assets and the importance of accurate reporting in an era where digital currencies are becoming mainstream.
For individuals considering expatriation or those heavily involved in cryptocurrency, this case serves as a stark reminder of the risks and responsibilities.
Final Thoughts
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