Bitcoin Trading and Mining: How to Structure to Save Taxes!

Okay, welcome everybody. My name is Mark Kohler. Please do not go anywhere yet until you hear what we're about today. My name is Mark Kohler, CPA attorney, budding crypto miner, crypto trader, and I've got my amazing co. Here he is over here, my amazing co host, Matt Sorenson, author of the book the Self Directed IRA Handbook. Do I need to start over? Cory, we're good. So, author of the Self Directed IRA Handbook, Matt Sorenson. Welcome. Thanks for joining me.

All right, thank you. I'm an adult. I'm not a minor. I can have an adult beverage. That's one of my favorite pickup lines. I'd like to buy you a drink, but I'm only a minor, I think. Is that what show is that in a minor anyways? Yeah, you know what I mean? Just some minor jokes.

Well, welcome everybody. Yes, it's going to be fun. Matt and I are both tax lawyers and we authors of several books on entrepreneurship and self directing retirement accounts, tax and legal savings. But today's show is dedicated, as you've seen in the title, to cryptocurrency tax strategies. We're going to do a full webinar on this with more PowerPoint slides next in the next three weeks on the Entrepreneur homepage. If you're following us on our newsletter through our podcast, you'll get the links to that when it comes out. But today, this is a Facebook YouTube Live. I'd like to hear your questions down below. We've got one of our other tax lawyers in the house here, Darren Charrington. He's going to be fielding questions, typing answers or posing them to Matt and I as we go. Also, Matt, tell us about your article. I think it just went live today.

Yeah, yesterday I think it went up and it's in the top articles on Entrepreneur on crypto taxation. So, like there's all these weird things you got to learn about crypto when you're buying it, owning it, trading it. Like let's say you bought bitcoin six months ago and now you gave one and a half bitcoin to buy a Tesla. Well, did that bitcoin go up in value from the time you bought it to when you exchanged it for a Tesla? The Model X is one and a half. So there's tax on those situations. You got to learn those rules. So my article gets into that on just buying and selling it for dollars, buying crypto and selling other crypto, buying crypto and exchanging it for goods or services like a Tesla or pizza. I mean, it's kind of complicated, but we're gonna break it down for you.

Yeah, it's gonna be good. So if you've even thought about investing in cryptocurrencies, whether it's bitcoin, Ethereum, the smart coin, the list goes on and on. There's probably about 40 of them or more. If you've been interested in that or heard of mining for bitcoin. We're gonna explain what that means, how to do it inside of a Roth ira, what the process is, and go from there. Now, first here, I have with me a real bitcoin. No, that's not. It's just a golden egg. There is no such thing as a real bitcoin. But some of you IT geeks are already mad that I'm even joking about that. Let me throw this out. I am a tax geek. I am okay with that. Many of you IT geeks out there barely tolerating me and Matt so far. Let me just say this. We are experts, and I mean this. I'm trying to help you avoid paying any tax at all on your crypto trading or mining or paying the least amount of tax. I don't understand hash rates and bit rates and motherboard versus graphics card versus cpu. I get that. I'm not trying to explain to people how to build their motherboard and get up on nice hash and all those things. I get it. But be patient with us. I did a video over the last couple days, have gotten some hate mail from IT experts going, you don't call it that, you loser. You don't know what you're doing. Okay, I'm not teaching you how to mine. I'm teaching you how to mine and save taxes. And my IT guy that's been helping me, he's like, work Wonder Twin, Power activate. I mean, this is a huge thing. When you have a good IT person and a good tax person, we can save a lot. So don't think you're above hearing me out either, because you may know it, but you don't know taxes. We both can help each other. Matt, any disclaimers on your end?

Yeah, no, I love that. That we're not crypto experts. We're experts in the tax rules and retirement plan rules to minimize, defer, or avoid tax. Either one of those is good, right?

Yeah.

On the money you can make from crypto, whether it's it, mining it, and so that. That's where our expertise is. So you don't want our advice on even what crypto to buy or the graphics card to be using or all that stuff. I mean, we're figuring these, those pieces out, but we know the tax rules. That's our shtick. That's what we're experts on.

So, yeah, very good. Okay, so I'm going to. Now, can they see my whiteboard yet? Corey? Okay, we're going to make my whiteboard live here. As a couple asides, Matt and I also have a podcast each week called the Directed Ira Podcast. We also have the Main street business podcast. Boom, there we go. We got a whiteboard. So can they still see Matt and I or just the whiteboard? Oh, we're split three ways. Is that what we're doing? Okay, we'll see. Oh, all right.

Okay.

Okay, now let me explain it this way, Matt. See if you agree with me when it comes to trading crypto. Oh, sorry. When it comes to cryptocurrency. Now, again, some people out there have no idea what this is all about. Others of you are experts. So be patient. I'm going to do a little of both. Some techie high end stuff or complicated points and some very basic points. So be patient here. I'm also filling your questions below. We've got help here in the room, but they're going to read off those questions whether it's on YouTube or Facebook. Now, when it comes to cryptocurrency, Matt, let me give this a shot that I want you to add to this.

Okay.

You can see the whiteboard too, right, Matt?

Yep.

Okay, so here we have cryptocurrency. Cryptocurrency involves a variety of coins or keys. Matt may explain a little bit of that, but bitcoin is a type of cryptocurrency. And I'm gonna say there's about 40 plus other types of coins.

So when people hear probably hundreds, there's probably hundreds, but 40 that you, you know, that have got people actually using an investing maybe. Yeah, let's see.

Let's say that. Okay, so in general, we're not going to try to explain to you in this podcast, I mean, in this video webinar what cryptocurrency is, what blockchain technology is. We're not going to worry about that here. But just know for any of you that are newbies, there's plenty of great YouTube videos out there that you can study up on this. Matt, you said you found one that was really helpful. Where was that?

Yeah. So MIT has a lot of their classes online, and in 2018 there was a whole class on blockchain and crypto done by the current commodities, future trading Commissioner or recent appointee of the Biden administration. He did a whole year course on this. He's a former like Wall Street, Goldman Sachs guy, but he's very knowledgeable on crypto. So it's a good class. I've been watching that to learn on it. And they start with what's blockchain? And so really good if you want to kind of geek out on it. I mean, let's face it, there's no new seasons of my favorite shows like Peaky Blinders or Ozark or any of those great shows. So I'm just, you know, watching MIT courses on YouTube to fill my time. Okay, so check that one out. If you go search like MIT class on, on blockchain and crypto, you'll find it. And I forget the guy's name that teaches it, but he's a, he's, he's, he's good, he's good because he's, he's a got some technical background, got banking background and he's also regulates currently the cftc, which is who regulates crypto exchanges right now.

I love it. Good, good. By the way, we know it might be a little hazy on the whiteboard, but it's the best we can do. We're coming to you from Idaho and Phoenix live on three different platforms. It's a little tricky. Okay. When it comes to cryptocurrency, we need to talk about the tax results of trading and mining. Next, and forgive my handwriting a little bit here, people mining. And then within trading and mining, you've got inside of a Roth IRA and you as a person, you also have mining inside of a Roth IRA and you as a person. Now I'm going to give another opinion here right off the bat, and that is if you're going to invest in cryptocurrency, you better be doing it in a Roth. If you have a traditional IRA or doing this inside a solo 401k, get over to the Roth. Matt and I have written countless blog articles, books, plenty of YouTube videos on this. Just type Kohler Roth or sorenson Roth on YouTube and you're going to see some incredible videos on this. I want to repeat again for those that are with us, thank you for being patient with the hyper focus we have on this presentation regarding doing cryptocurrency with the least amount of taxes, if no taxes at all. We're going to go with that for now. So Matt's article on entrepreneur. So if you just type Matt Sorenson, Entrepreneur, you'll see that article come right up. Who Corey or Darren, if you can pull that on Entrepreneur's website and get the link in the chat on some of these, it'd be great. Matt's article focused on the. Well, Matt tried to cover all of it, but I think the main issue was here on the trading. Let's just start, Matt, how about with a regular person buying bitcoin and selling it, not a Roth ira? I'll try to diagram this as we go.

Okay.

Yep.

Let's just go individual and let's say there's going to be three outcomes when you buy it. There could be three things you would do with it. Right? I'm going to buy crypto and I'm going to use some dollars to buy it. Okay, let's say I spent $30,000 to buy Bitcoin. All right? Now I can have different outcomes when I buy it. What could I do? I could wait till the bitcoin goes up to 30, 40,000 and I sell it for $40,000. Okay.

Purchase price, PP. Purchase price is PP. Sales price is 40 grand. So we have a $10,000 gain. Okay.

Yeah. Now the first thing to know is this is property for tax purposes. So, Congressman, or, sorry, the IRS in 2014 came out and said cryptocurrency is not currency for tax purposes, where if it goes up or down and you exchange it, they don't care. Cryptocurrency is property, almost like a stock in many ways in that if the price goes up and you sell it for a gain, you have to pay tax on the gain. If the price goes down and you sell for a loss, you get a loss. So now if you held it a year, you get preferred long term capital gains rates. And I should say over a year you get long term capital gains rate, which maxes out. It goes from 0 to 20%, depending on your income levels. And if you've held it less than a year, you're going to get short term capital gain rates, which is your regular income tax rate, depending on what tax bracket you're in. So if you're in it for the long haul, you've at least held it by long haul for at least a year. You're going to get a preferred tax rate, capital gains rates over a year, you're sorry, under a year, let's say you bought it and sold it the next hour for a gain, you're going to pay short term capital gains rates or even 11 months later, short term capital gains rates.

Now, on a short term capital gain, I want everybody to know you're going to at least pay 10% and it could be as high as 37% now. Now a lot of people out there go, oh, the best way to save on bitcoin is just to hold it a year. You're fine, and you'll get long term capital gain. We've got a way to pay zero tax, which we're going to talk about now. I want to just mention triggers. A lot of people say, well, if I just leave it in bitcoin, I'm not going to pay any tax. And that's true. As long as you leave it in the same type of currency that you purchased, you just leave it there, there's no tax. But the IRS has said there's primarily three triggering events the minute. Number one, you convert it to cash, you sell your bitcoin and you get cash. So I'm going to say convert to dollars. That's any type of cryptocurrency to US Dollars, or if you live in Japan, yen. If you live in the uk, euro or pounds. As soon as you get regular money, you have to pay the tax on any appreciation, short term or long term, depending on how long you held it. Number two is if you trade it for another cryptocurrency. So if I trade bitcoin for Ethereum, I'll put E for that. So I'm just going to trade one cryptocurrency for another cryptocurrency. Whatever the value was on that day, I have to look at what did I buy the bitcoin for, what did I trade it for? For that other currency or whatever currency is coming or going that triggers attacks. Now some of you are already getting mad. You're going, how could the IRS get in here and do all this? I'm going to trade my cryptocurrency on an offshore exchange and their IRS is never going to know about this. People don't try to play that game. And I know some of you it people have watched Mr. Robot and you're figuring out I can hide this money somewhere and I'll get away with will catch up to you. I've been a tax attorney for 20 years and I've had clients come to me in dire straits, ending up in prison. The IRS is all over this. And these main custodians around the country that are starting to help with cryptocurrency are now signing deals with Visa and major banks because they want to get legit. And they're going to be reporting all of the transactions they have to the irs. Last trigger. And I'LL shut up. Matt. The last trigger is you use the money to buy something like you, you purchase a service. And again, this was this week, Visa is now partnering up with Coinbase so that you can use bitcoin to buy stuff. And Tesla said you can buy a car with the bitcoin. So if you purchase something, the value of whatever you purchased is a taxable event, less what you paid for it. So you're going to have one of these capital gains, whether it's short term, long term, that's going to happen when you purchase something. So those are the three triggers. Anything else, Matt, you'd add?

Yeah, let me just give an example. On the purchase something, let's say you bought bitcoin a year ago when it was 10,000 a Bitcoin and you, let's say you bought one and a half Bitcoin for 15 grand. And then let's say you exchange that one and a half Bitcoin now for a Tesla Model X which is 75 grand. Okay, so right now about one and a half Bitcoin is worth about 75. So you've bought it for 15 and now it's worth 75. You have about a $60,000 gain now. Good for you. You basically had $15,000 last year. Now you got a Tesla Model X. Cool. But you also got a $60,000 tax gain there. Now if you held it a year, this was a year ago, you would only pay again the short term capital gains rates here, 0 to 20% depending on your short term.

We mean long term.

Sorry, long term, long term capital gains rates. And so that, that's how it works in practice. Now you can't forget state.

And don't forget state.

True.

You're going to pay bed of 20 depending on your bracket and, and, and then state, which could be 5 to 10%.

Okay. Yeah. Or zero for those of you lucky.

And so we're going to go 0 to 30%. We don't know what it'll be.

Yeah. So you can see for those of you that want to buy crypto and use it for goods or services, how complicated this is going to be to track it. Well, how do I know what tax to pay? And there's even tax apps and softwares out there that track your purchase of crypto and when you're using it, exchanging for goods or services or trading it or selling it. So, and those are linked in my article, a couple of ones that are, that I found to be really good and had some, some good content. So just keep this in Mind these tax rules when buying and trading crypto exchanging it are pretty dang complicated. They take some record keeping and the obligations on you. Just because you try to hide it and it's not on an exchange and like a hot wallet so to speak where that exchange is reporting it doesn't mean you don't have an obligation to pay the tax. That just means no one told the IRS you still owe the tax and failure to disclose it and tell the IRS that can get pretty criminal if you get down the road far enough on this. So be careful on this. Don't stick your head in the sand.

Alright now I'm seeing a few questions and by the way I want to welcome everybody and if some of your questions are possible to be answered versus typing, I've got a tax attorney here in the house that's going to help as well. Now let me hit a couple points. Joyce said I am mining bitcoin myself. Now we're going to come to that here in a minute. We're going to talk about mining Joyce, where you're doing it yourself. The next one was someone asked can the losses of mining offset the earnings of trading. The answer is yes. But if you're having losses in mining I've got a bigger issue because I'm an idiot and I'm making money. So we've got to talk Liliana about that. Now let's move to trading everybody and I'm going to take some more questions. Let's just get through trading and what the tax results are of buying and selling any sort of cryptocurrency. Then we're going to talk about mining. And I got a freaking awesome structure you're going to love now with trading, as Matt just explained, you've got this Tesla example is classic. Now do you want to know how to do this tax free every day of the week and on twice on Sunday is do all of your trading in a Roth ira. Just do all the trading in your Roth. You could go to directed ira.com right now, directed ira.com and set up what's called a crypto Roth. You can also set up a crypto traditional, a crypto health Savings account, a crypto sep, a crypto Coverdell. But you can set up a crypto Roth right now for 300 bucks. You can pay for it with your own money. Don't even have to use your Roth money but you can set up a crypto Roth. Put money in your Roth for last year up until April 15th. You may have an old IRA you want to Convert to a Roth. You may have other Roth you can move in from Ameritrade, but you can set up a crypto Roth self directed account. You'll have a Gemini trading account funded by your Roth within, what, Matt, two days at max. Two, three days.

Money's in, it'll be, it'll be set up next day, and then you just have to verify yourself, which is, you know, the accounts owned by your ira. So it goes pretty fast.

Okay, now this Roth do what? Okay, so with your Gemini. Sorry, our producers helping us make sure everything looks good. Thank you, Corey. Crypto Roth$300 Gemini. Now you're trading any crypto you want. Any crypto you want inside your Roth

that's on Gemini, which has most of the stuff. Yeah, you know, they'll like Bitcoin and Ethereum and Litecoin. They got most of the stuff.

Okay, here's the beauty. People see this? Never pay tax. Now you young people, I know you're freaking out right now. You're going, yeah, Mark, Matt. But I'd like to actually use this money to buy a Tesla. I'd actually. To use this money to buy some crap or convert to dollars. I get it. So do both. That's the answer. Do crypto trading in both your own name and do it in your Roth. Because people trust me. I have consultations with clients every day from around the country. Every day in our firm, where people are in their 40s, 50s, and 60s that have nothing for retirement people. If you can get these accounts going with crypto right now in your Roth, you'll never pay tax, ever. Now, when you turn 59, you'll have a million dollars or more just sitting there that you can spend however the hell you want. But do both. Trust me, it'll pay off.

All right.

Anything, Matt, you'd add on the Roth crypto, that's it. No tax at all.

I mean, yeah, the Roth IRA is, it's, it's tricky to pull off, but we figured out how to make it simple. So, you know, if you call up your Roth IRA custodian, let's say your Roth IRA right now is a Fidelity. You're like, hey, I want to buy Roth. Or I was right. I want to buy crypto with my Roth ira. They're like, you can't buy crypto with it. Like you maybe get an etf, or, or, or some of these crypto trusts, these bitcoin trusts that have high fees. But if you really actually want to own the actual crypto, and even something besides bitcoin, you can use the crypto Roth, we have an easy process. You get to trade it with a Gemini linked account that's owned by your crypto Roth ira. And it's just like you're buying and trading stock in your Roth ira, okay? It's the same thing. You buy stock, you sell it for a gain. All that gain goes back in the Roth ira. You don't pay tax. You keep building that thing up over time and by the time you retire at 59 and a half, you pull it out totally tax free. I mean, the Roth IRA is the only way. Like I've said this a lot lately, it's the only way to make money, not pay tax and not go to jail. Okay? So Congress gave it to us. They said, use this account, just use this special account to go grow and build your wealth. And when it comes out at retirement, you don't have to pay tax. So that's what we're trying to get to do. If you believe in crypto, and that's where you think you take percent of your whatever you want to invest or you know, we don't know what to buy. I'm just saying if you want to do it, this is the right avenue, very tax savvy way to do it. No doubt.

Okay, now a couple other questions I want to hit here. By the way, Darren, I'm going to come to you if you want to ask a couple. I can see these, but I can't see YouTube questions. So you might want to help me out with YouTube. Okay. If you can go back up Corey so I can see what we're looking at here. Okay, a couple thoughts. So someone said, well, who the heck is regulating the taxability of this gain or loss?

Greg?

And Louise says, when investing in crypto, do I get a 1099? How is this handled? Okay, I know that for some of you, this is the first time in your life where you feel like IRS Big Brother is breathing down your neck. You're like, hey, I've got a job, I get withholdings, I pay my taxes, I get a refund or owe a little bit. Cool. Now that you're buying crypto, you're like, what the heck? Why is the IRS sticking their nose in my business? Well, welcome to being a US Citizen. If you don't like it, what's his name on Facebook as an original owner, moved to Singapore, saved 67 million in taxes by giving up his US citizenship if that's what you want to do. But the IRS is working hand in hand with Gemini, Coinbase, and every other custodian that's allowing crypto trading, and they are going to any in the US and they are going to be issuing 1099s for buy sells and trades of cryptocurrency, just like you had a Merrill lynch stock brokerage account. Now you say, well, I'm going to do it offshore. Guys. This is one of the top 12 Dirty Dozen IRS targets that they've been putting out for years. Is anybody trying to do transactions offshore to avoid US Tax? They now have Swiss bank accounts opened up to the irs, the Cook Islands, the Nevis accounts. You cannot hide internationally as well as you used to be able to, and I would never recommend that. So what I'm saying is, deal with it now. Understand, you're going to pay some taxes, and it's going to get reported to you on 1099s from these companies that you are using as a wallet. And you'll go. Two words, cold storage. They will catch you someday. People just don't go down that path.

Yeah. So, yeah, I think a couple things on that where you feel like, don't go offshore. That's my big thing. There's a couple. There's a lot of. There's a lot in there. You're just gonna have to comply with this. There's no way around it. I. I mean, if you want to go dark and do it off an exchange and sell crypto to places that don't report, you're playing with fire. You really are. Those places are going to get mass audits from the irs. They're going to chase down transactions. They have tremendous subpoena power. They're going to be going after these things. So do it legit. If you go offshore, guess what? You might have to do an fbar report. The FinCEN who regulates this stuff has a proposal to make a crypto wallet that is held offshore, a bank account for purposes of having to do a foreign bank account report to the irs. That's a complicated thing that goes to the irs, and it gives you. Makes you a high audit risk when you have to file those things. So there's a lot of things you're gonna have to do if you try to go offshore. If you really want to be legit. It is just not worth it.

It's not worth it. Now, crypto quest 111 says there are thousands of cryptocurrencies. Yes, we get that. When I say 40, those are the big 40 or more in that range that you're going to be able to buy 40.

You know, top 40, top 40 radio. That's the top 40.

I mean those are top 40 hits. Yeah, it's just that's what you can typically trade in Gemini, maybe even on Robinhood or in Coinbase or Coinbase Pro. So just, just be patient. We know that there you IT folks out there or like these guys are idiots. I get that we are idiots when it comes to the actual technology of blockchain keys, hash rates, mining, we know enough to be dangerous. But I can tell you again where the IRS is going to meet you and how we can save taxes. So be open to that point of view. Okay, go. Says I have a solo 401k open to KKOS lawyers. That's our firm. We'll give out our contact information on how to set up entities, get a tax consultation with one of our tax lawyers and very affordable. We want to save you 10 times whatever you pay us at Directed Ira, I set up my solo 401k between KQS and directed, the custodial compliance agreement and then open crypto accounts. How do I do this? How do I open up an account now to trade and buy and sell crypto when I have a solo 401k? Matt, do you want to help him out with that?

Yeah. So you need a crypto 401k account. So these accounts are different from the regular self directed account. So Directed Ira, we have self directed accounts that you can use to buy real estate, invest in an LLC and a private company and a startup. All those things that are typical self directed accounts people have done over the years. Crypto is a new thing now our crypto accounts are linked to Gemini Trading accounts, which you will have trading access on that Gemini trading account. 365, 365 days a year, 24 7. You know, you. The crypto exchanges are open all the time, so. But that's a separate account. So you'll have to open up a crypto 401k account. And that app's on our website when you go to the crypto account options. So you will have another account if you're wanting to do crypto.

Okay.

And that's just because we have to link it to Gemini. It's different than everything else now also,

Matt, if they had a 401k, a solo 401k, they could create an LLC and have the LLC open a wallet at Coinbase Pro or Gemini. That is an option.

Kraken or. Yeah, or if you want, if you don't like Gemini, you want to Go somewhere else. You could do the LLC option. Yep.

Yep. It will take you a little longer to get those accounts open. I have an LLC that I applied at Kraken, Coinbase, and Gemini yesterday, and I'm waiting to see how long it takes me to get a wallet in the name of my llc. So I'm out there doing this with you to see how long it's taken. Lorenzo Pack says his name is Gary Gensler that did the talking about Gary Gensler.

Yep, that's the guy.

Okay, I'm gonna write this down for everybody. Gary Gensler.

Yeah. And he was CFTC chair, and I think he's now coming into sec. I don't know. He's a government guy. Pretty smart, though, and his class is good. He's got. He gets some people in that are more on the tech side, too.

And if you want to understand crypto better, Google his name and his MIT talk. Now, Frank says most cryptocurrencies will disappear, and it's very volatile to trade. Frank, we get it. I agree. People, I'm not telling you to put 100% of your retirement in cryptocurrency, but I'm telling you our phones are ringing off the hook. We have clients that have made millions doing this and making thousands. I'm making thousands doing it. Now, am I putting all my wealth in this, Frank? Of course not. But do I want to diversify 5 or 10% of my holdings? Maybe give it a shot? I'm telling you, this is happening. Banks across the board are now investing. Coinbase is now going public in its first IPO in this space. Bitcoin is now partnered with Visa, or I should say Coinbase. This is a very common thing, and it's only going to grow. So is it risky? Sure, I get it. Travis says you guys are the best.

If you don't want to do it, don't do it. I mean, that's not. We're not here to change. We're not here to convince you to buy Bitcoin or any crypto. We're just here to say, here's how the tax rules work. If you want to do it, you know, that's so.

Yeah, thanks. And so thanks, everybody. Travis says, mark and Matt, you're the best. Appreciate all you're trying to do. We appreciate that. Susan says, what are node rewards considered to be? When we claim from nodes and reinvest into making new nodes? Does you know what that means, Matt?

Well, the reward stuff that comes. Those are similar, I think. Like, similar to an airdrop Sometimes that are promotional. Those are basically like gifts of crypto or a token or something like that. And so that is taxable as ordinary income. If you get that now, the value of it might be nothing. So it's not very taxable. But if you get any rewards or promotional things from a blockchain or a crypto that you hold, those are. That's ordinary income. Again, they might have little value, but if it does, it's going to be ordinary income, too.

Okay, now we're going to come back to the whiteboard and go on to mining here in a moment. I've got one more question, and then I'm going to Darren, who has some questions. On YouTube. Wayne's World says, what does one do when they make millions in crypto? Once they convert it to dollars and pay their tax? What should I do with that money? Well, Wayne's World first, congratulations, that's a good problem to have. And we do, we do consults with clients all the time to help them deploy money. We're not financial advisors in the sense that we're licensed to sell sock bonds, mutual funds, ETFs, or we're not even licensed realtors or brokers. But what we do as a tax attorney, as a law firm is we'll sit on the phone with you, share with you what our other wealthy clients are doing. Maybe we're going to use trusts or LLCs to help protect, hide, not from the IRS, but from potential creditors. We're going to hide that money, protect it, and we're going to tell you what our other clients are doing. Maybe it is deploying it in real estate, some ETFs, some other cryptocurrencies, maybe into small business equities. Matt?

Yeah, I mean, back in about 2016, 2017, when, when crypto got hot last time, I had some clients that were selling and making a lot of money. And I shot a video on it still up on my YouTube. I'm talking about, isn't this crazy? Bitcoin is $2,500. For one bitcoin, it's $2,500. You know what I mean? 20x since then. But even back then, those clients were pretty savvy because they were like, man, we just got crushed in taxes. I mean, I made a killing return. I mean, these people bought it at tens and hundreds of dollars, right? So they had a phenomenal return. And many of them cashed out because they, they took some off the table. They're like, okay, I made a few million. Now whatever. I'm Not, I don't want to get rid of all of it, but I want to take some cash off the table. I can, you know, and so you're going to pay tax there. But what many of them did to the smart ones was they said, there's a better way to do this. And it's a Roth ira. And that's where we started getting into this, is helping clients use the Roth IRA strategy, get as much money over as they could to Roth put it into the crypto investments they wanted to make. Now that money's growing for the long haul, tax free so many times. One of the tax strategies Mark and I talk about is don't you make any more money. We don't want you to make any more money. Right? We want your Roth IRA to make more money because that money comes out tax free now. Now, like Mark said at the beginning, if you're like, well, I want to make money at this and buy the Tesla next month or whatever, I want to exchange it and just, I want to live off of this, okay, we're not saying do one or the other, then invest some money personally if that's what you want to do, and you will pay tax on that piece. But this is where the Roth is. It's a tool. It's a tool to use. That's a tax efficient way to grow it for the long haul.

All right, we're going to go back to the whiteboard in a moment. Darren, any questions from YouTube you wanted us to take?

So you already see the YouTube ones, but I'll ask you a couple other ones.

Okay.

Will the Roth allow you to have your private keys?

Will the Roth allow you to have your private keys? Could I go cold storage with a Roth or Matt?

Okay, so with our crypto Roth ira, it will be on Gemini. Now, you won't have the private keys. You will be in, like hot storage on Gemini's exchange. Or you can pay an additional fee and you'll go to cold storage on Gemini. Now, if you want to hold the keys, you won't want to do the crypto IRA. Roth IRA strategy, you'll want to use an IRA LLC. There you'll have your Roth IRA or IRA or HSA, whatever account you're using, own an LLC 100%. And then that LLC will go open up a wallet and can go buy and sell crypto. And you will have control of the private keys.

Let's go live. Corey, on the whiteboard, some of you may be confused on the difference between a Roth ira, llc, crypto Trading and a crypto Roth IRA with Gemini. Let me diagram it here, which might help. And Matt, correct me if I'm wrong, the first thing is you can have what I'm going to give you two options here. You can have a Roth IRA, a standard Roth IRA@directed ira.com. okay? So you're going to have this little Roth. It's going to form an llc. Then the LLC is going to go out on Kraken, let's say, and set up a wallet in the name of the llc. This might take one to three weeks or longer.

Some of them are saying a couple months. We'll see, we'll see. Testing. That's the time.

I'm testing it. You're going to have an EIN under the name of your LLC that's owned 100% by your Roth. This will go out and buy and sell and you can hold the keys with this llc. That's okay. Also, we have clients that will set up multiple Roths, and they may have their kids Roth or their spouse's Roth or their Roth, and they can combine money into an LLC and go out and with the ein, open a wallet. So the beauty of this strategy is you can pool money to get a bigger dollar amount in your llc. Now, under a crypto Roth, this account is made to be streamlined so you're up and trading quickly. It's no need for an llc, no need to talk to the law firm. You're going to have a crypto Roth, but it's going to be hot storage and you're going to be with Gemini. And you can only trade what Gemini is offering. And some of you high tech folks, they say, I hate that I want cold storage. I want to be trading some more unique cryptocurrencies.

You can get, I mean, you can get offline, you can get offline cold storage at Gemini. It's just not the type of cold storage where, you know, you're holding the keys yourself. Okay. It's going to be at Gemini and Gemini has an eye in it as a, as my, you know, I'm a Gemini myself, actually. Gemini. Sorry. You know, we're just be grateful that Mark is doing the diagramming here and hits his right handwriting. I am terrible at that. So.

Okay. Any other questions? You want me to hit Darren at the moment, yeah.

So Luis Sanchez on Facebook, he asks, so what expenses can we write off? Do you set the Roth IRA personal or as a business entity in the usa?

So Luis asked what expenses I can write off if you're doing in trading Nothing. You're not a business. First of all, in a Roth there's no taxes, so there's no write offs. People, if you set up this LLC owned by your Roth, you're getting no write offs here, except for the write off of buying the crypto. I mean, you've got your purchase of the crypto and the sale, there's your basis and gain. But see, there's no taxes with the Roth, so there's no need to track expenses. Now over here, your only expenses are your trading fees. You can't write off your cell phone, you can't write off your auto. This is not a business. The reason why you're getting long term capital gain, sorry, up here, trading in your own name. The reason why you're getting short term capital gain and long term capital gain is because it's an investment. There's no business going on here. Now over in mining there are expenses and it's going to depend on how we approach it whether you do it in a Roth or your own name. Okay, so I'm going to go over to mining now. Is that okay, Darin?

Okay.

All right, everybody, I'm going to give a little bit of this. Matt knows I've been doing a little bit more mining. I do have my own rig. I've got three graphics cards, they are 3880s and I've got a motherboard with 12 slots. And as I make more money, I might buy more slots. Now, let's just talk about what mining is for a minute and maybe, Matt, that's what you're good at. Why don't you tell people what mining is, then I'll explain how you set it up and get going. Matt.

So mining is basically a service that computers are providing to the blockchain network. So they're verifying transactions and doing things that make the blockchain operate. And so the thing of blockchain is it's open ledger. Everyone can see it. No one knows the underlying people that are doing the transactions, but everyone has. There's the community of the blockchain essentially is verifying certain things. So those who are mining or even staking are basically providing a service and the computing power to validate transactions that are passing through in the blockchain. That's the simplest answer. So because you're providing this service is different than buying and selling crypto currency for gain. Now generally when you're doing mining, you're getting paid in crypto, which creates bitcoin. Yeah, yeah, Bitcoin. If you choose it right, you get Paid another crypto, I guess not at nice hash.

I get paid in bitcoin. Yep. All right, so I'm mining any type, but I get paid a bitcoin.

Okay.

But yeah, now once I get paid a bitcoin, I can trade it for any other type of crypto inside hash. But for their ease of accounting, because bitcoin is the most stable market price, they pay a bitcoin, no matter what type of mining you're doing for any type of crypto, but it's a service.

That's what Matt's stable price. That's a pretty volatile market, right? Yeah, that's pretty volatile.

Okay, now I'm going to go back to questions. Frank and other people. Staking is also a trigger. Matt, do you know what he would mean by staking as a trigger? I guess if you're going to.

Well, I would just think of staking as a different way to mine something. There's like these proof of work and different ways that this computing power is basically put onto the is given to a blockchain network. So staking is a different kind of. It's a better way really for many people's opinion to validate transactions and maintain a blockchain is doing staking as opposed to mining. But both of them in the end for tax purposes. I'm trying to explain this from a tax standpoint so you understand it's a service. The person who owns the computer is providing that service to the network in exchange for being paid in bitcoin, for example.

Okay, now a couple comments. Greg says there's a reverb on the video. Are you working on that, Corey? It's gone now, thank you. Okay, now someone asked one other question. I'm going to just say this quickly if in the trading realm. So over here on the left, if I'm going to trade, let me just say this. If you have a gain on a trade, now this is you personally and you have a loss on a trade. Those net each other out. So let's say I bought some Bitcoin for 40, I sold it for 50 and I had a gain of 10 grand. But then I bought some Ethereum for 30 and I sold it for 20 and I had a $10,000 loss. Those would net each other and I would pay zero tax.

Yeah.

So people now remember you net your short term gains with your short term capital gain. Then you should net your long term capital gain with your long term capital gain. This is where accountants do the work for you. You're not going to do this on TurboTax people.

Yeah. So your, your long term capital loss with your long term capital gain and your short term capital loss with your short term capital gain.

Thank you.

Yeah. So those losses net against gains short term to short term, long term to long term and if you have, let's say you have more losses like this kind of happened to some people in 18 and 19 when a lot of crypto kind of went down in value. Depending on when you bought is if you have losses you can carry those forward. So don't think you've missed out on it. And if you had losses in prior years, you should go back and amend, claim those losses. And I got the form in my article on Entrepreneur that shows you where you report losses and gains because those losses can carry forward and offset future gains that you have in the future when you start making gains. Yeah.

Now I'm going to repeat that for everybody. When you're trading crypto in your own name, your short term capital gains net with your short term capital losses, your long term capital gains net with your long term capital losses and then you pay the tax as that all nets out. Now for some of you that are do it yourselfers, engineers and IT folks and you've been using TurboTax in years past, now that you're trading crypto, you're going to probably need to upgrade to an account that knows what the freak they're doing. So it's okay people, you got the IRS looking over your shoulder and you might have to start using accountants. Get used to being wealthy. That's what wealthy people do. All right, now I'm going to go to mining. Now Matt said this is important, that mining is a service. Now there's an important point that all of you have to realize. When you do mining as a service that's like you're running a restaurant, you're doing landscaping, you're an engineer, you're a lawyer, you're an accountant, you're a plumber. A service is subject to self employment tax. When you do mining, it's going on a schedule C that's a small business. You will pay self employment tax of 15.3%. Then you're going to pay state tax and then you're going to pay fed. And I know some of you are thinking oh well I'm doing it on a server in Nevada or Wyoming or Florida or Texas. I'm not paying state tax. If you live in a state with state tax, you're going to be paying self employment tax fed and state on your mining. I'M a tax lawyer. I'm keeping you out of jail. I know this. Don't think you can find a different answer on Google. Find someone that's going to actually sign your tax return that's a real CPA and a real lawyer. And ask them. Not some bozo out there that's done this on a trading account in Australia and thinks they can save you. That's who you're putting your trust in when you get an audit from the IRS with penalty and interest that are stacking up. I'm trying to be forceful about this because I'm sick and tired of people saying, well, I found out on the web in a chat room, I can do it differently. Great. Have them sign your tax return.

Okay.

Now.

Or at least get their. Their name and address so you have someone to write when you're in prison, you know?

Yeah.

For crying out loud.

Okay.

So, I mean, I. I was a prosecutor. I'll just say this. I prosecuted people for state tax fraud before I got into private practice. And so people do go to jail for messing around with this. And the state income tax is one that people get duped into for some reason. They think it's some, like, creative strategy to just. Well, I'll just.

Or I'll set up my entity in Nevada. Yeah.

And I live in California, but all of a sudden, I don't have any to pay income tax. The state of California. Sorry, folks. Whether it's crypto or any other business, whatever you're doing that don't work, you're really gonna have to leave California, become a resident of Nevada, and do business in Nevada. You know, to really pull that off,

my producer said I can't say BS on live YouTube or Facebook. Is that right? Am I in trouble? You're gonna be okay. Okay. Hopefully entrepreneur doesn't kick me out. I just get mad. I'm trying to save you people. I'm trying to protect you. Okay, now, people, we're gonna get to some of these other questions on Gemini and everything. I'd love that all of you are here. This is an awesome live broadcast. Okay, now we're going to mining. Okay. Let's say you as a person is mining. Okay. I'll come to the Roth strategy in a minute. But let's say you're going to go mine. What we're going to do, I'm going to take this section and I'm going to move it down below because we don't have enough space there. So what you would do if you're mining now, I know there's different ways to do this. I'm just going to give you the most common. You as a person would go open an account at Nicehash. It's free software. They are going to take 2% as their fee of any earnings. That's how they operate generally. Okay, hang with me everybody. I know that some of you know how to do this better with a different software program. If you want to put it out in the chat, that's cool. But Nicehash is simple and easy. When you sign up for Nicehash as a person, they're going to give you a wallet. You're then going to set up your rig. Now let me give you some numbers of what I did on my. Well, let's back up before I give you an example. You set up your rig, which is a motherboard and graphics cards and a cpu. And I know all that stuff. Some of you say it better than me, that's cool. But I've stood there and watched my guy do his and I've kind of learned a little bit. But you have your graphics cards and your rig. You get onto Nicehash and they start shopping out your server to do cryptocurrency algorithms and blockchain verification. And they're going to pay you in bitcoin. They pay every four hours. So in a 24 hour period you get paid six times. And that money is ordinary income. Now like I said, you have two options at this point. This is what I've been teaching for years. I have books on this. You could either claim it as a sole proprietor, sole prop on a schedule C and pay that self employment tax of 15.3% the first 140 grand. And I can teach more. Watch my videos on when to use an S corp. Or you could actually mine in an S corp, which is what I'd recommend because there's no self employment tax. I can actually set up a solo 401k. I could do all sorts of cool things here. I have to take a little W2. You now look good for credit purposes. And I can save taxes by mining with this S corp. And I've got clients that are mining with an S corp because they're making more than 40 grand a year. If you're going to make more than 40 grand a year mining, I'm going to want you to use an S corp. It's just the way to go. Let me give a quick example and I'll turn the time back to Matt. So here's a quick example. This is What I've done. Now, some of you may have done it cheaper, better or worse. But what I did in the last month, because I said I'm going to crack the code and do this, I got a great IT guy I trust. I spent 10 to $12,000 and I bought a server for approximately 3,500. I won't say server, motherboard and CPU. I know server is a very generic term for you IT folks out there. I bought three graphic cards. They were 3880s. I bought them for approximately 2000 a piece. So I'm into this $9500 approximately so far. There's some service fees and there was casing. They're doing an out kind of a rack, you know, for this thing. And the setup, as soon as it was turned on and we received all the equipment and it was set up, I'm making about 40 cents per hour per car. With 720 hours in a month, that's approximately 300 to $350 a month per card. So with my system of three cards, I'm making approximately $1,000 a month. That's a 10% return per month. That's 120% return per year. Now, are we going to have down times?

Sure.

Are hash rates going to play into it? Absolutely. I'm going to come to utility costs. There's a few variables here. I get it. But my IT guy has got my hash rates fine tuned. So these cards should last me four to five years. That's our goal. Now, my utility cost in my local area is about 54 cents a day per card. That's 2 cents per hour per card. So I'm bringing in 40 cents an hour and I'm spending 2 cents an hour. I am making 38 cents an hour mining. All I had was a fixed cost of setup and utilities. My IT guy is charging me one hour a month right now to maintain it. Once you turn it on, there shouldn't be problems. You cross your fingers. Now, if someone out there says I'm losing money on mining, you may want to talk to my IT guy and figure out how the hell you're losing money on mining. Now you may say, Well, I spent 10,000 and I've only made 1,000. I lost money. You're not losing money. You made an investment of 10 and you're making 1,000amonth. That's a freaking awesome return. That's if you do it personally, you're going to pay taxes. Let's say you make $1,000 mining. Matt, my last Point, Forgive me. If you make $1,000 mining as a sole proprietor, you're going to pay 15.3% off the top. Then you're going to pay state tax of approximately 5 to 10% and then federal tax. Depending on your bracket, it could be anywhere from 10 to 25 or 30%. You're going to lose at least, at least 45% in taxes mining. I do this as you do in any business.

Let me say that as you do in any business, right? I mean that's whether you're doing mining here, you're getting real estate commission, you got an online store, restaurant, I don't care what business you are. It's the same problem, but it has the similar solution of the S Corp, which is any of you that are familiar with our content or a lot of marks, it's the same thing of the S Corp. When you're doing this personally.

Matt, Richard Tan asked, what if your income is too high for a Roth ira?

Well, you can still do a backdoor Roth ira. Just because you can't come in the front door of the Roth IRA party, there's still a back door that you can get into. Go to the direct IRA website. There's a backdoor Roth IRA page there that explains how it works and the steps to do it. But it's possible even for high income earners to do what's called a backdoor Roth IRA for new contributions or even convert some traditional dollars if you have some to Roth dollars. You could do that too.

Yeah, Richard, just go Google BackDoor Roth IRA or go to YouTube and type in BackDoor Roth IRA. Richard, we will have you a Roth IRA by freaking tomorrow. Anybody can have a Roth at any income level. Lorenzo is commenting repeatedly here on private keys. And if you don't have the private keys, you really don't own it. I get it, Lorenzo. There are some truists out there that think that cold storage is the only way to go. They don't trust anybody. They don't want hot storage. They don't want to use Gemini, that's fine. Like I said up here, if you want to hold the wallet and the keys, you can still do it with a Roth. The Roth owns the llc. The LLC opens the wallet. It holds the keys if you want.

But if you want lots of clients do that. You can use the Trezor, the Nano Ledger, any of those. Or you know, you store however you want. But like those private keys, you can actually have them in your control. No one else has them. When using the LLC structure, Perfect.

And if you want to do a crypto Roth immediately. And some of you don't care if Gemini holds your keys, you're trading by tomorrow morning, you know, or tomorrow sometime. You got to get your money in there. So don't stress out people. Okay, Matt, I'm talking a lot. Let me throw a few questions. Your wayne says, I'm 62, I want to sell my cryptos and retire. I need a plan of some kind or structure. Can you guys help me? I mean, that's really Wayne's question.

Yeah, I mean, if you own, I presume you own crypto personally. If you owned it in your Roth ira, of course you'd be like, easy, you could be selling it, no tax. But if you're owning it personally, you know, well, we just want to look at what is, how long have you held it. We want to get long term capital gain, if possible, to get your preferred rates. One thing to know too is for many people who have bought crypto over the years, let's say you bought crypto in 2018 and then you bought, let's say you bought bitcoin. Let's just say, let's say you bought some Bitcoin in 2016, then you bought some in 2018, then you bought some in 2019 and 2020, and now it's 2021. You're like, I want to sell some of that bitcoin now. I'm 62, I want to start living off of this. I've made some good returns. Well, which, you only want to sell a piece of it though. Well, what cost basis do you take? Now? Obviously you'd want to sell the bitcoin that you bought in 2019 or the most recent one that has probably the highest value because that'll get you the smallest gain. Right? You don't want to, you don't want to sell the crypto you bought in 2016 or the cheapest crypto you bought because you're have a huge gain when you sell it. So the IRS does have some rules on that, on how you can pay tax on that. They basically let you take what's called HiFO. There's some technical pieces to this, but basically what you can do is look at the highest value of crypto. That's the highest. HIFO is highest in, first out. So we can look at the bitcoin you bought at the highest price. As long as you can track that specific crypto and then sell that specific crypto, you'll be able to take that higher cost basis when determining the tax due as you're selling and converting it to dollars.

I love it. A few questions here. Louise says. So what expenses can I write off? Do you set the Roth IRA personal as a business entity in us okay, now everybody, I'm going to repeat this. This is very important. If you are trading crypto, not mining, you're just buying crypto and selling is not a business. There are no expenses you can write off. You buy it for 10 grand, you sell it for 20, you pay tax in the middle. The only write off you get is the cost basis of what you bought it for. You do not have a business period. It's as if you're buying and selling Microsoft stock. That is not a business. Now if you're going to be mining, look at the whiteboard here. If I have a sole proprietorship and I'm mining myself or I have an S corp and I'm mining in my S corp, then you can write off cell phone and travel and dining and home office and computers and laptops and Internet and da, da, da. Because you have a business of mining. If you're doing trading in a Roth, it doesn't matter because you don't need write offs because you're paying no tax. Okay, I'm going to jump to the mining in a Roth and then we'll just focus on questions the rest of the time. Now everybody, let's look back at the top and thank you for those of you that have made it. Someone said here that they saw me back in. Wayne said, I saw you back in Arizona years ago in real estate classes in college. Been a long time. You still look the same. Well, Wayne, two words. Plastic surgery. Okay, now, okay. Trading. Trading in a retirement account. Trading in your own name. Mining in your own name. Now we're going to talk about mining in your roth. Now I will warn you, this is a little technical. I've done it. I'm excited and I love it. Is that okay to say, Matt?

Yeah, this is a little technical. I like that. So that was a warning. If you didn't know. That was a little warning. So you know, keep your arms and hands inside this ride right now. This is gonna be, this is gonna be dangerous.

This is gonna love this. You it folks, you're gonna geek out on this because you're gonna go, holy hell. I know what I'm doing in it. Kohler, Matt, know what they're doing. And Kohler and Sorensen know what they're doing in tax. This is a match made in heaven. Now let me give you Another quick first disclaimer here. I love Dave Ramsey. I think Dave Ramsey does a great job saving lives financially of people around them, around the country, around the world. One of the things that he has taught over and over again is starting to save now. Even if it's just incrementally. $20 a week, $20 a day, $1,000 a month, $10 a month. As long as you start saving now and keep that going as long as you can, people, you will exponentially have millions of dollars later on in life. Literally. That's the concept I want you to have. When it comes to mining inside a Roth ira, you're not going to get rich overnight. It's a long term process. And even if Bitcoin goes up and down in price or Ethereum or smart coin or whatever you're doing, it's okay because you're not selling, you're building a pool. In 20 years from now, do you think cryptocurrency is going to be around? I think it will be. Now, I don't know what the value is. Is it still high risk? Sure. But if I can start with just a small investment and keep this going for five or 10 years, I'm going to have millions in 20 years. I'm not kidding. So here's how the math works. Here's how you do this. First, you open up a Roth, a regular Roth ira@directedira.com. do not get the crypto Roth with Gemini because you're not going to get a Gemini account. You're going to mine. Scroll up more. Oh, there we go. Ooh, there we go. Everybody's like, where the heck is it? Okay, there we go. Okay, I'll keep it right there. All right, next, I'm going to do this quickly here. There's about 13 steps on a PowerPoint that I shot on YouTube earlier today that will go live tomorrow. Make sure you're following us on our newsletter. Please hit YouTube and the bell icon on Markj Kohler, my page. You'll get all my videos whenever they go live. Okay, The Roth IRA is going to open a holding company. This is an llc. Now, you can have multiple Roths again. You could have multiple family members joining in the party. That's an option. But I'm just going to say this Roth owns this llc. This LLC is going to be your holding llc. It is going to apply immediately for a wallet with whoever you want. Kraken, Coinbase, Pro, Gemini, I don't care. But you have to get a wallet going as quickly as you can. Next, this llc, you're going to fund this LLC with the amount of money you're going to need to get your equipment going. Now, I said earlier, I've got an IT guy. I wanted to give you his name. His name is Peter Gunter. And if you email me Markj Kohler Markjkoler, I will send you his email address. He can set you up a mining rig, put it in a box, send it to you, log in remotely and turn it on. His base price is 10 grand to 12 grand for about a three graphic card rig. But he can do as many graphic cards as you want. If you want to do a 12 graphic card rig, a graphic card rig, you're looking probably around $35,000. Now, you may take three Roth IRAs, mom, dad, kid, and put together 30 grand and go buy a 10 card rig. You can do that. So anyway, let me know if you want Peter Gunter's contact info. I make no money on it. Now this llc, you're going to fund it with your dollars and you're going to form a second llc. This is the LLC you're actually going to be mining with. Now, Matt, can you explain what this purpose of this LLC is? Because you really cracked the code on this 10 years ago when you started writing the book on this.

Yeah. So one of the problems with an IRA is getting business income for services is there's a tax called unrelated business Income tax, UBIT or sometimes called ubti. Now when you have this income flowing down to a Roth or any retirement account, it's a 37% federal tax rate. And some states even have a state UBIT tax. Okay. So it's a really high tax. And you know, when you're trading and stuff, you know, crypto, you don't need to worry about it. When you're doing services or selling products or anything with a retirement account or an LLC like this, where it's passed through and there's no corporate tax, you're going to get hit with that 37% tax. So there's a strategy out there called the UBIT blocker, sometimes called a C Corp blocker, where we add a tax election, a C Corp tax election to the LLC there. So it's taxed as a C Corp. Now, C Corp tax right now, Corporate tax is 21% federal. That's 16% lower than UBIT. You're going to pay corporate tax here, you're going to pay 21%, you ain't paying 37. Now when profits come out of this after corporate tax has Been paid. It's considered dividend income, which is exempt from UBIT and goes down to the Roth ira, no tax.

Okay, now I'm going to throw this out now, kind of spoiler alert. As you make money in this LLC that you're mining in each day, you're going to transfer. Now, I'm trying to automate this in my system. I haven't been able to yet. I've got to do it daily. It's kind of fun. Once a night, you sit down, transfer your money. I'm averaging $30 a day right now. Rain, sleet, or snow, sleep, hungover, whatever. I'm still making 30 bucks a day. That's pretty cool. Now that $30 a day I transfer down to this LLC, then I can redeploy it, frankly, into anything I want. Real estate, other crypto, small business, private equities. Anything I want, I can go freaking on Shark Tank and buy crap with it. But if I want to just keep it in crypto, this is my crypto holding company. No tax ever, because it's held by your Roth.

And see, the reason you're going to go from the LLC at the top, the mining one here, that's providing the, you know, the services that owns the equipment, is we don't want that crypto to appreciate. So if you're getting paid in Bitcoin in that entity, we don't want to leave that asset in there because we think Bitcoin is going to go up in value. Let's just assume that for tax purposes. So if we had appreciation there, we're going to pay corporate tax again on the value of the appreciation of 21%. We don't want to do that. Let's get it out of there. At the same price of when you got it, put it down to your holding wallet here, which your Roth IRA owns directly. And now when it goes up in value, let's say it doubles by the time you want to use it or exchange it to cash. Now, all that appreciation, no tax on it. But if you left it up in the blocker, llc, you're gonna pay corporate tax on the appreciation, too. But there's no need to. Yep.

Okay, now there's more steps here, people. We're only in three or four steps. I'll go quickly. Corey, put me back on. Okay, now, I explained what we're gonna do when you made the money. Like I said, spoiler alert. But let's just do this. I gotta fund the first llc, then I'm gonna fund the second llc. No dollars are going to stay down here. I don't want to keep any dollars in the lower llc. I'm going to move it up to the subsidiary. And I know subsidiary usually means down, but I like it all flows down at the end of the day. So I put it above. But the subsidiary here is now going to take the money and buy the equipment. So when I funded my LLC with about 10 to $12,000, I put the 10 to 12K here. Then I put the 10 to 12K Here. And then I paid Peter Gunter. Peter put my rig together. It's called a rig. That's what it's called now, the rig. It really is Matt on Nice hash. It's kind of funny.

Yeah.

Okay, so there's my rig.

Oil rig, or.

Yeah. Now, everybody, I'm going to go to

Q and A on our. By the way, on our podcast, we used to have some music on our old podcast. And the music we selected, the name of it, it was kind of like this generic music you could pick, was called Oil Rig.

Do you remember?

That was the name of it. I guess that's the kind of music they play on an oil rig. And that was what Mark and I were into, I guess.

Yep, yep. Okay. Now buy the equipment. Now, meanwhile, people, the money's going from here to here, then up to here. Meanwhile, you're waiting for your wallet and the parent company, because that might take two to three weeks. Meanwhile, let's say this, too.

So you're gonna actually have a bank account, too, in the LLC. LLCs have an LLC business checking account, as will the other LLC with the blocker. So they'll both have a business checking account. And that's where the Roth IRA is going to invest its money. It's going to send cash to the LLC, which goes in the LLC's bank account. That bank account of the LLC gets linked to the wallet. There's just. Remember, there's a little bank account step in the middle there.

Yep. I did mine at Wells Fargo. So I have a Wells Fargo bank account for each llc. Now, in this example, everybody, because there's a few questions here. There are no expenses written off in this llc, C Corp. Except for utilities and outside IT services. That's it. I can't pay myself. I'm not going to write off my cell phone or a trip to Hawaii. I can't do any of that. This is not my llc. This is my C Corporate, my Roth llc. Now, I'm going to buy the equipment. Now, here's an important step that I had to Learn the hard way. It took us a day to figure it out. This LLC is going to open a Nicehash account. Well, I was hitting my head against the wall. I couldn't open a Nicehash account in the name of an LLC until I got ahold of Nicehash Support. What you have to do is first start a nice hash. Oh, that's above the cut. Here, I'll do it. You first set up a personal Nicehash account and they'll verify who you are with your passport or driver's license. And then that happens within 10 minutes. They do two authentication. What do you call it? Two.

Two party.

Two party. Yeah. Two step authentication.

Sorry, yeah. Two. Yeah, two part. Yeah, part maybe.

And then you're going to set up an organization in the settings menu and you set up an organization with the ein of two factor.

Two factor.

Two factor. There we go. Yeah. Tell you guys, we're idiots here when it comes to some of this, you know, Mr. Robot stuff. Okay, so first is your personal account. Then you set up the organization under the llc. And then the Nicehash sets up the rig and you're making money. That's it. Now you're going to file at 1120-tax return for this LLC.

1120. 1120.

Oh my gosh. 1120 tax return. That's a C Corp return. And you're going to track your expenses here, you're going to push the money down every day and then you're going to build up this LLC down here and never pay tax again on it. And people, when you start running the numbers on $1000 a month and a Roth IRA. Oh man. With 100% return and $1000 a month going in. A Roth IRA. That's insane. I would just pray this lasts for 5 years before the bottom falls out. And then I'm like, there's my million dollars 20 years from now. But anyway, Matt, we're going to do Q and A or anything you'd add to this system?

No, I mean, this is, this is an awesome strategy for those that want to get on the mining side of it. You know, some people have been like, man, crypto goes up and down in value, but the mining's always there, you know, and so if you want to play that side of it, this is a great way. Or maybe you're doing both. You know, you're investing in crypto and doing this. But now this, this strategy that Mark's outlined here, some people might look at and be like, that's pretty complicated. Yeah, but if you look at the income you're gonna be making on this and the tax savings from doing this structure, it's gonna pay off. And this is not something that's gonna cost you tens of thousands. You know, you know, you into a structure like this, like some big tax law firms and stuff, they'll be like tens, hundreds of thousands of dollars to execute stuff like this. It is not that expensive.

Yeah. Now, by the way, there's one other disclosure here. The legal structure through the law firm. And you're gonna call KKOS lawyers for this. Kqslawyers.com our phone number. Now, this is not supposed to be an infomercial. I just want to give you the resources. There's probably a handful of law firms in the country that even could get their head around this, period. And we're on the cutting edge. The phone number is 435-586-9366. And you will meet with a tax attorney that'll spend time with you setting up this two entity structure. Probably around 2,500 bucks in that realm. Depends on what state you're in. You might have extra time you want to spend with us, but let me introduce you to one of our amazing lawyers. Get your head down. This is Darren Charrington right here. This guy's the man now. We even matched today. This is ridiculous. We're such nerds. Okay.

That's right.

But, Darren, you're doing appointments. How far are you out? A week and a half? Yeah, a week and a half.

Two weeks.

Okay.

Yeah.

I don't know what more to say. This guy was good looking, ready to go, so thanks, but I just wanted to introduce you on camera. So Darren knows his rules. We are. We have five, seven tax attorneys, and you can call and make an appointment. Now, what I'd recommend is you can get with directed ira, get your ROTH set up, get your money over there. You could. You can even meet with one of our law clerks, Max Merritt. And Max can get your LLC filed at least, so you can get your ein and get your bank account going. And then you'll have time with Darren to work through the details. But find a law firm that knows what they're doing. Plan on about 10 to 12 grand for your unit. And if you're into this thing, 15, making $1,000 a month, that's a hell of a return. Within a year, you broke even, you know, in that range, so. Okay, Matt, ready for some questions?

Yeah.

Are you okay with some collateralized loan questions?

Collateralized loan?

Can you take out A collateralized loan against my Bitcoin to prevent creating a taxable event.

No, not. I mean, can you take. Oh, sorry, Collateralize. Well, they're. Basically what you're trying to say is can I use my bitcoin as collateral and have someone loan me money secured against the bitcoin? Yeah, just like you could do with the stock portfolio or real estate. So if you have appreciation and a lot of equity and you don't want to sell it to get the gain, sure. You could put debt against that asset if someone would loan you on that and then that debt would not be taxable income yet to you until obviously you'll have a gain when you still sell the asset. That could work. That could work.

Yeah. You're just fine. I don't know where you go for it, but someone might do it. Teresa asked, can you tell us Gary Gensler's name again? That's G. E as in echo, N as in Nancy, S as in Sam, L as in Lima, E as in echo, R as in Romeo. Gary Gensler MIT under, you know, understanding

that it's called the blockchain and crypto. If you look for that on mit. GARY Gensler MIT blockchain and crypto, you'll find it. It's a whole semester class so that it's a good one. There's a lot out there. That's what I'll say about this. And you know, I've tried researching and learning and educating myself on this is there's a lot of crap out there. So if you have other people, have good resources, share them that you know are legit people that know what they're talking about. It'd be good to. To help share that because it's hard to filter through the, the noise in this space right now and the people that may say something that sounds great but don't really know what they're talking about. That's more hype than reality.

Yeah, Tori says. Oh, Tori's trying to do a little networking here. He's letting people know he's got another method of doing some things. That's cool, Tori. No problem. Okay, Corey, can you give me a little slide down here? I want to see what other questions we need to deal with here. What about income from nodes? That is ordinary income as well. Just as if you're mining so you would have self employment tax or run it through an S corp. Liliana says Mark was the most valuable, valuable piece of nuvo back in the day.

Thanks.

That's how I met him too. Thanks, Liliana I appreciate that. Vivian says, matt, I have a traditional 401k. Is there a way to move it to a crypto IRA without having to do a conversion and pay taxes on that money?

Well, yeah, if you have a traditional 401k, you can roll it to a traditional IRA and just do a crypto traditional IRA. And that's fine. You could do that. We talk about the Roth, because the Roth is going to come out tax free. Now, if you're like, well, I'd rather be in a Roth, okay, you can convert the traditional IRA when it comes over here to Roth and then do a crypto Roth, but that's not necessary. And you could just, you know, I like that in the long haul. I think 10 years from now you're like, man, I'm glad I moved that over to a Roth 10 years ago and converted it, because now all the money is going to come out tax free. Right? Now, converting to Roth sounds pretty crappy, right? Because you're going to pay tax on the value of what your traditional is now to what you converted over to Roth. Okay, you're cool doing traditional. You can just stay traditional.

Okay, Marco, don't slide that because I got to talk to Marco and I think, Marco, you text me on another chat the other day and I was trying to set you straight. We're going to do it here in a minute. Vivian asks when she said about keeping it in a traditional ira. Vivian, you're going to love this. Matt and I recorded a one hour podcast earlier today on our lunch hour on how and why to convert to a Roth. It will be live by tomorrow, so make sure you subscribe to our podcast directed Ira podcast, Easy Schmeezy. It's on Stitcher, it's on Spotify, and on itunes as a podcast. You'll love it. So, Vivian, listen to that. You're going to freaking love it now, Marco, this is good. Marco asked this because I bet you there's someone else out there that thinks it. Mark, you're still maxed at $6,000 for contributions per year if you're 59 and a half or younger, correct? Now, Marco, that is correct. But I want to clarify a few people here. On some things. If you want to put money into an IRA or a Roth, you have until April 15th, just three weeks from now, to put in six grand for 2020 or 7,000 for 2020 if you're 50 or older.

Okay?

Now, I had some hate mail the other day because someone said, how can you build millions in a Roth when you can only put 6,000 in a year. Now, Marco, I'm not saying you are alluding to that, but I think it wasn't you now, but people, when you invest your Roth, that can be unlimited. It's just like Monopoly. Every time you go around the town, you only get $200 when you pass go. But if you land on Park Place and you buy it and you make millions and win the game, that's okay. Now after April 15th, you can put in another 6,000. Well, no, sorry, you can put in 6,000 right now for 2021 or 6,000 7,000 for 2021. And now you've got 12,000 or 14,000 to play with right now. But as Matt talked about earlier, you can also take an old traditional IRA or an old 401k and you can convert over to Roth. And you're right, Vivian, you're going to pay the tax right now, but you're going to rip that band aid off and never pay tax again. So you've got the traditional to Roth on a conversion and you've got your two contributions you can do right now you. And if you again are married or you've got a business partner or a child or a mom or dad, you both could do 12 grand. And now you've got 24 grand to go out there and probably get a motherboard with at least five cards. I don't know. Matt?

Yep. What you got?

Can I looking for a question near from California says can I open a self directed IRA for minors and invest money for 2020 before April 15th?

Now, we're not talking crypto miners, we're talking like under 18 miners, right? Yes. Now if you. This is perfect for those either business owners, entrepreneurs, you have your own business with where you can pay your kids. Okay, that's a great tax strategy in and of itself. Why not take an expense and deduction for paying your own kids. You pay for their crap anyways. And there's some strategies we have on this. Mark's got a lot of content on it, a chapter in his book going how to pay your kids. But if they make six grand, you can put six grand into a Roth IRA for them. All right? Now they've got six grand in a Roth ira. You can then do a crypto Roth ira. We have many clients right now who are doing crypto Roth IRAs for their kids. We've had some clients doing crypto ESAs, education, savings accounts, Coverdells for their kids to hoping that, you know, it goes up and they're gonna be able to pay for all their college with it, even to a health savings account. So, yes, you can do it for minors. They just have to have earned income. That's the requirement for Roth IRA or traditional IRA accounts. They must have earned income.

Okay, we're going to finish on a few thoughts. We've already gone over by 28 minutes. Entrepreneur gives us the latitude when there's so much conversation going on to keep going here because we know how important this topic is for many of you. Any final questions, please throw them up out there. I know that some people are going back on controlling keys or not controlling keys. I think it was the other day, one of the major custodians had a problem. They lost some keys. They reimbursed everybody for their lost value during that process. I get it. Some of you want cold storage. You want to hold your keys, your preppers, you want to be safe. I get it. There's ways to do it with your Roth. And we've got the method. Make an appointment with Darren Charrington. He'll teach you how. Also, I'm going to blow your brain with this, too. You can do all of this in your health savings account. You could go to directra.com right now and set up a crypto health saving account. So now you can be doing trading or mining in your health savings account and pull out profit immediately for any valid medical expense. Crazy. All right, let's see. Is there any. Scroll up, Corey. Let's see if there's any final questions, then we'll wrap this up. Whoa, whoa. What if you have a newly formed LLC with an ein. Can you use that LLC to open the Roth account? To open trading platform on Gemini Platform Divyandeva. The answer is no. You have to use a special LLC that's set up with all the erisa, Department of Labor and IRS provisions and it has to be created upon formation by the Roth.

So.

So if you already have an llc, you're like, oh, I already have an llc. I'm okay. Regrettably, no. Save that LLC for a rental property. Save that LLC for your other business. It has to be a Roth llc, self directed LLC set up that meets certain provisions. We are very affordable in the process, frankly. Talk to Darren. Matt, I'm gonna ask you this. I have a. This is from Mullock. I have a Roth IRA with Fidelity still. Can I open another Roth with directed ira? What about contribution limits?

Yeah, absolutely. You can open a Roth IRA at directed so you can move money from the Fidelity Roth ira. It's just what's called a trustee to trustee transfer. And let's say you still want to do some stock at Fidelity. Okay? Leave whatever stock you want there, money you want there to do your stock at your Fidelity account, do some trading, and then you can sell some. Get to cash. Send the cash over to your Roth IRA at Directed ira. We help do that. And then that cash in your Roth IRA Directed. Your crypto Roth here will then go invest it into the Gemini account. Then you can start trading the crypto there. So you can have both. Keep both. Now, you still have the 6,000 a year annual contributions to the Roth. You can't. Don't get to do 12 because you have two Roth accounts still 6,000 per person. But you can transfer as much as you want over to the crypto Roth IRA at Directed and leave the rest back at Fidelity.

Matt, how did you look at that?

There you go.

Matt said it. Option one, transfer Option two, you're still limited to six. But as Matt said, you can split it.

Contribute. I like it.

Okay, is there is crypto Roth hugedomains.com. i googled it. It takes me to huge domains.com.

just go to directed ira.com, please, people.

And we are. This setup is 300 bucks. We know what we're doing. We're really one of the few in the country that have any sort of relationship with the custodian directly, like Gemini. If some of you are like Gemini gets hacked. I don't like Gemini. That's okay, people. Do this. Set up the Roth and an LLC with a wallet wherever you want. Let me repeat that, everybody. If you're freaked out with Gemini, don't do the crypto Roth. The only benefit of the crypto Roth with Gemini is you're up and going. You're off to the races, easy. You don't have to have a lawyer. You don't have to have an LLC. And you're gonna be up in business in 48 hours. If you don't like Gemini, then you've got to set up the Roth with an LLC and then wait to get the wallet set up, which is fine. I'm doing that. I'm doing that. Do either one. Divyandeva says, I don't see why trading one crypto for another within an exchange without ever leaving the exchange is even considered a taxable event. It shouldn't become a taxable event until it leaves a given exchange. Devian. I agree with you. Call your legislator. Call your senator.

Yeah, right. Your congressman or senator.

You do that without paying tax.

Yeah. And I also that that I love the argument. I agree with you, too. But the tax court judge in the IRS is just going to say we don't care. That's not the rule, unfortunately.

Okay, I want to hear what Vergado says here. It's a lot like buying and selling stocks. Sell Tesla and buy Apple, you pay the profits on the Tesla. Sell. Thank you, Vergado. You're exactly right. And you reset your basis on the Apple stock. So that's a good point for deviant. He's saying, well, if I sell Bitcoin and I buy Ethereum, I shouldn't have to pay tax till I leave Merrill Lynch. No, you buy and sell stock inside Merrill lynch, you're paying your tax. Darren, do you have any final words or any other questions we should hit anything. We'll do it. Okay. All right, folks. Matt Sorenson, Darren Terrington, our producer, Cory White. Everybody out there. An hour and a half marathon. But don't you feel smarter, A little richer maybe? I hope so. I'm so grateful to be with you. We're here every Thursday at 4 o' clock mountain when we're in town and we're talking about topics you want to talk about. Next week will not be crypto. It'll be a tax or legal strategy. You want to talk about building partnerships, raising capital, writing off kids, writing off your auto, whatever you want. Matt and I will talk about it. We're grateful to be a part of the partnership here with Entrepreneur. We love the team there. Ryan Shea, the CEO. Love you, Matt, take us out. Any final words of wisdom?

Yeah. Thanks, everyone. Just keep in mind, you know, this can seem complicated. I just want to say that, and I get it, if this is like you're brand new to this or even some of the tax rules you're a little frustrated with, but the knowledge and getting educated on is how you can make the best strategic decisions to minimize it. That's what we're trying to do. We will not be your experts in crypto, but we can be the experts in how to make sure you keep as much of those crypto profits as possible by knowing the strategies to minimize and in fact, reduce entirely taxes you could be making on crypto trading or mining. So thanks, everyone.