Odell Beckham Jr. (OBJ) clearly paid a price for taking his $750,000 salary in Bitcoin after the market crashed after he signed the deal. According to some estimates, OBJ earned 61% less than if he had taken his salary in fiat because of cryptocurrency tax laws and current prices.
Crypto investors must pay tax on the amount they received when it was received, not the amount it was worth when they filed their tax returns, as a result of the loss as a salary or yield in cryptocurrency has tax implications.
On Nov. 12 last year, OBJ signed a one-year- deal with the Los Angeles Rams worth $750,000. In a promotional Twitter post partnered with CashApp, OBJ announced that he would be receiving 100% of his $750,000 yearly salary in Bitcoin (BTC).
At the time, Bitcoin had been breaking new all time highs and just two days before OBJ signed the Rams deal, it reached its highest price ever of $69,044. Unfortunately for OBJ, Bitcoin is now down 46% from that high, currently worth $36,972.
According to sports business analyst and senior executive producer for The Action Network Darren Rovell, OBJ’s decision to take his full salary in Bitcoin may not have been the brightest idea.
Rovell stated that OBJ’s entire salary is now worth only $413,000 compared to the original $750,000.
Once both Federal and State taxes are accounted for, at a cumulative rate of 50.3% Odell will only have earned $35,000 over the past two and a half months, which equates to just one Bitcoin. This is a far cry from the $90,000 he would have received if he’d taken his salary in fiat.
Bitcoin enthusiast Joe Pompilano (brother of influencer Anthony) argued that there were some major discrepancies between Rovells’ take and actual fact including that he was paid weekly and not annually.
However, Rovell said the weekly payments were irrelevant to the tax treatment: “The aggregate payment has been completed. It doesn’t matter when he got paid.”
This isn’t the first time that crypto assets have caused major taxation discrepancies, and as crypto adoption continues to grow internationally, it certainly won’t be the last. During “crypto winter” there were many stories of users who faced huge tax bills due to the price of assets when they received them, and not the rock bottom price they fell to by tax time.
Although rules vary, it is common for taxation organizations to require the value of crypto assets be declared the moment they are received. This leaves investors open to a huge tax bill if the value of their crypto assets fall in value between the time of purchase and the eventual lodging of their tax return.
In 2019 Adrian Forza, director of Crypto Tax Australia, told local publication Micky the story of an Australian crypto investor who was forced to pay nearly five times the value of his coins in tax.
“It was a disaster… It was a really unfair outcome because he’s basically received cryptocurrency and the value has dropped significantly and now he has to pay tax on money he doesn’t have.”
Forza continued to say that the biggest issue with cryptocurrency taxation wasn’t necessarily due to the laws themselves, with most issues arising from the lack of understanding of tax laws among crypto enthusiasts themselves:
“The demographic is 25-to-40-year-old males and a lot of them probably haven’t invested in shares or even seen an accountant before,” he said.
That may also be the case with blockchain-based play-to-earn games such as Axie Infinity. In one famous story a 22-year-old in the Philippines purchased two houses with the profits he earned from playing the game.
Hopefully he spoke to a tax agent because now, both Philippine and international regulators are coming for those profits, warning the 2 million active players of Axie Infinity that any in-game transfer of crypto assets are legally classified as taxable events.