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Author: Admin | 2025-04-28
Company, DAOs enable the community of token holders (members) to vote on the future of the organization.A good example of this is Uniswap. Holders of UNI tokens vote on issues relating to the protocol - for example, how transaction fees are used and what new features to add.Members of a DAO can profit from the DAO in various ways. For example, they might receive a share of the profits which result from the activities of the DAO or they might sell their DAO tokens to investors.The IRS has no specific guidance on the taxation of DAOs. However, given the DAO is not a registered entity in any jurisdiction and has no central control, it cannot pay taxes itself. It’s therefore most akin to a flow-through entity, which is a business entity that passes any income it makes straight to its owners, shareholders, or investors. Under this interpretation, any income passed on to the members of the DAO would likely be subject to Income Tax, and the sale of DAO tokens that have appreciated since acquiring them would be subject to capital gains taxes.Aside from the lack of federal guidance, the US state of Wyoming has formally recognized DAOs as a form of limited liability corporation (DAO LLC). The appropriate legal recognition of DAOs is an important step to understanding the flow-on tax characterization of a DAO.Thinking of heading to Home Depot to pay for your renovations in Bitcoin? You might be in for a surprise tax bill because spending your crypto on goods and services is subject to Capital Gains Tax.Spending crypto on goods and servicesCAPITAL GAINS TAXSpending your crypto is subject to Capital Gains Tax as it's a disposal of an asset. The IRS views this as you selling your crypto for market value. So you'll need to calculate your cost basis and subsequent capital gain or loss for these transactions. To do this, just take the cost base of your crypto asset and subtract it from the fair market value of your crypto asset in USD on the day you spent it.You need to keep detailed records of your crypto transactions. The IRS says taxpayers need to maintain records that are sufficient to establish the position taken on their tax return. Therefore as a minimum, you should keep records of your crypto transactions including:The date of your transactions.The fair market value of your crypto in USD the day you acquired it.The fair market value of your crypto in USD the day you disposed of it.The capital gain or loss you made from each transaction.What the transaction was and the parties involved.Receipts of purchase and sale.Records of transfers and transactions from all your crypto wallets and exchanges.The IRS can
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