How to enjoy tax free gains on crypto investments

Who here is investing in ETH and other crypto with a 20-year time horizon? Who here wants to minimize the burden of having to report taxes on crypto-to-crypto trades?

I do. And I want to minimize my taxes as much as possible.

It has taken me about two months to set this up. I'm not quite done, but I'm in the home stretch. Just waiting for GDAX to approve my institutional account.

Basically, what I did was set up a self-directed Roth IRA. On the Roth IRA, you don't pay any taxes on capital gains.

  1. I worked with Broad Financial / Madison Trust.

  2. Madison Trust is the custodian for my ROTH IRA. Broad Financial help me set up an LLC in my home state which is owned by the ROTH IRA.

  3. Total fees paid to Broad came to $1,195. Annual fees to Madison Trust for maintaining the Roth IRA will be about $200 per year.

  4. Broad Financial set up the LLC, obtained a tax ID number from the Feds, and filed and obtained the LLC certificate with the state. The LLC was formed in my home state of Iowa.

  5. With the LLC created, I can then open a bank checking account in the name of the LLC. With the same paperwork, I also opened an institutional account with GDAX (still waiting approval).

  6. I transferred funds from by brokerage ROTH IRA to Madison Trust, which will then issue me the capitalization check in the name of the LLC.

  7. I then deposit that capitalization check into my LLC bank account.

  8. I then fund GDAX from my LLC bank account.

  9. Any gains from GDAX are remitted back to that LLC bank account.

  10. If I want to transfer funds to another ROTH IRA (eg my brokerage IRA), I need to write a check from the LLC bank account to Madison, which will then issue a check to my broker.

There are a lot of rules regarding what assets can be owned by a self-directed IRA LLC and who you can buy from. Basically, you want to avoid self-dealing.