Shiba Inu Payments for AMC Movie Tickets Could Be a Tax Mess

  • Shiba Inu (SHIB-USD) and Dogecoin (DOGE-USD) are now accepted at AMC Entertainment (NYSE:AMC).
  • This could give a boost to both of these meme crypto tokens, especially Shiba Inu, which is not as well known as Dogecoin.
  • SHIB crypto is up significantly on this news and could spark a rebound in the cryptocurrency going forward, but the tax-related issues with using Shiba Inu can get quite cumbersome.

Shiba Inu investors received some really good news on March 10 from the AMC CEO Adam Aron. He tweeted that people can pay online for AMC movies in theatres with both Shiba Inu and Dogecoin.

This happened a week earlier than expected. Cryptopotato magazine wrote that the event was originally planned for March 19.

This is a landmark event for meme coin investors as it marks a large consumer retail company being willing to accept both crypto coins for payment. Moreover, as Shiba Inu is not as well known as Dogecoin, and it could provide further exposure for SHIB crypto to many investors.

On the other hand, it could also get quite complicated from an accounting and tax standpoint. This article will look into an example.

What This Means for Investors

As a result of this news, Shiba Inu has started to rebound. As of Saturday, March 19, the token price was 0.00002454. That’s right, it has four zeros to the right of the decimal. Another way to think of it is as follows: $10,000 will buy you 4,074,980 SHIB tokens, before transaction fees.

The easiest way to do this is to use Coinbase Global’s (NASDAQ:COIN) platform, which now allows trading in Shiba Inu. The price as of March 19, is rounded up to $0.000025. That means that for $100 you could 4,000,000 SHIB tokens (at March 19th’s price). However, Coinbase charges a fee, and the net amount you would receive is just 3,909,573 tokens (plus some decimal points).

That shows you that Coinbase takes out 2.265% of your purchase. So for the $100 paid, you get $97.73 worth of SHIB crypto.

That’s standard fare for the way crypto transactions are done these days. Nothing is very cheap.

Moreover, from my experience, this is much cheaper than prior to the situation where you could buy Shiba Inu on Coinbase. In the past, you had to first buy intermediary crypto, such as Tether (USDT-USD). Then you would convert or exchange the USDT tokens for SHIB tokens. Both of these transactions cost fees and the net amount was usually higher than the 2.265% fee not at Coinbase.

So why would anyone want to pay for movies with Shiba Inu tokens? For most millennials, the decision is really simple. It’s like buying a movie with a payment that does not feel like money. Since they expect Shiba Inu to rise in value, or since they may already have a huge gain in Shiba Inu, holders think the movie payment is like “playing with house money.”

Is it really? Let’s look at the fine print.

Why Using Shiba Inu for Payment Is Complicated

The problem with this scenario is that financial accounting for crypto payments is a bit complicated. When you use SHIB crypto to pay for a transaction, you are effectively selling it at a price. You will have to pay a capital tax.

The price is the movie ticket payment. Therefore, you have to account for the capital gains or losses when you cash in any amounts of Shiba Inu tokens to pay for anything.

Let’s say that on average you paid $100 for 3.909 million Shib tokens. This was when the price was at $0.000025, but due to fees, your average cost is now $0.000025582. That is your first complication — figuring out your real average cost per token.

Figuring Your True Cost Using Shiba Inu for Payments

Second, you have to figure out the cost of the transaction. Let’s say now the $15 price cost 500,000 SHIB tokens. That implies that the cost of the ticket was done at a price of $0.000030 per SHIB token. That is seen by dividing $15.00 by 500,000 — the result is $0.000030.

This means we have “booked” a capital gain of $0.000030 on the original cost of $0.000025582, or $0.000004418 (i.e., 5 zeros to the right, not 4). The 500,000 tokens redeemed have resulted in a $2.21 capital gain (i.e., 0.000004418 x 500,000 = $2.21). You will have to pay taxes on that at, say a rate of 20% (depending on whether you held the tokens one year or longer). That brings the cost of the transaction to 44 cents (i.e., 20% x $2.21). If you have 100 transactions in a year like this your capital gains tax accrued will be $44.18.

In essence, you will need to keep a detailed spreadsheet of this and figure out every time you buy something your implied gains and losses. Sometimes the losses will wash out the gains, but you will have to likely itemize all these calculations as itemized deductions on your taxes. That is also a hassle.

Can Things Be Simplified?

One way around this is to use a tax-free account like an IRA to house your SHIB crypto assets. But that also has issues. Can you really buy movie tickets in an IRA?

So, you can see, that as long as you are prepared, using crypto to pay for things could be a boon for Shiba Inu. On the other hand, your accounting, tax and time analyzing the transactions could be expensive.

Keep in mind that this is not tax or financial advice. You will need to talk with your accountant before you start spending cryptos for payments.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.