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I am a non resident alien on F1 OPT living in the US, and have noticed an arbitrage opportunity when trading ETH [a cryptocurrency] between the US & India.

Assume the following:

  • I bought 5 eth for a total price of $1000 in US through coinbase which is linked to my US Bank account.
  • I then transferred the 5 eth to my brother in India.
  • He sold the 5 eth at $1200.
  • He then transferred $1100 to my forex card through which I withdrew $800(ATM limit) for 2 days.

Who is liable for tax? I really hope both of us aren't liable as it'll become double taxation then. I was thinking along the lines of that my brother pays the tax in India and then he sends money to me as a gift which is not taxable in US as it is less than $100k. I want to do everything abiding by the law.

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    "... then he sends me money as a gift" Please don't commit tax fraud. Receiving a payment as a result of profitable activity and pretending it is a gift is tax fraud. Don't do that. – Grade 'Eh' Bacon Feb 13 '18 at 13:48
  • Thank you for that. I wanted to make sure I'm not breaking any rules. Is there a solution to not have to do double tax? – Ujjwal Gulecha Feb 13 '18 at 15:55
  • Also, why is it a tax fraud? My brother is selling it in India and not in the US. He is paying tax for it. Why should I also pay tax? Technically speaking I am just transferring property – Ujjwal Gulecha Feb 13 '18 at 15:56
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    I'm not making any comment on whether any specific portion of that transaction is, in itself, taxable in either the US or India. What I am saying is that pretending something is a gift when it isn't is an attempt to commit tax fraud. If you consider it a 'gift' then surely it would be fine to not receive it, right? Except, you know that's not the case - you know that such an arrangement would require profit on both sides as part of an ongoing business partnership. No such payment is a gift. – Grade 'Eh' Bacon Feb 13 '18 at 16:17
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It seems the most reasonable interpretation of this transaction is that you sold the 5 ETH to your brother for $1100.

In this case, you have a capital gain of $100 (bought for $1000, sold for $1100), and its tax status is the same as if it had gone up and you had sold it the next day locally for that same amount.

On the flip side, your brother bought the 5 ETH for $1100 (his cost basis) and then sold them for $1200, also netting a $100 capital gain (taxed according however gains are taxed for him in India.)

  • That makes sense to me! I asked an accountant and they said the same thing. Thank you! – Ujjwal Gulecha Feb 14 '18 at 8:22

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