Interesting problem to have, a EU citizen living in the UK: https://www.reddit.com/r/Bitcoin/comments/6w5c0v/i_have_sold_over_4m_worth_of_bitcoin_how_to/ I probably would buy some puts on it just in case. He hasn't actually sold all of it yet...
The "problem" here is classic: When finally being right in an "investment", what do you do? Without a trading/investment plan this is a tough problem! It'll be hard to be objective after such an event. Do he sell everything now? I did that with a stock that jumped (with gap) 100% on me once, now it's worth 10x.. I didn't have a plan, and PNL went slowly downhill from there. Also the calls for "professional advice" is classic, but very likely he'll then be scammed into bad investments or other schemes. Best bet would be professional advice from a close friend, research himself or play it safe withdrawing smaller amounts over longer time. That he thinks he should avoid taxes is outrageous, but clearly displays a corrupt culture! But of course he shouldn't have to pay taxes for "paper money" either, value he hasn't cashed in at some point. If he lost money on investments, he'd also be elligible to tax breaks as well. It's usually symmetrical, so not "theft" at all. IRS are all over BC so better do this by the book. The ledger is open for all to see, though anonymized until identities are revealed. There should be no problem until he realizes the investment.
There was an interesting and I think correct response about miners. When you mine, once you create the coin, that is already a taxable event, even if you keep it holding for years. The base for the tax is the current value at the time of creation and after that it is counted as investment, in case of holding, a long term. So let's say BTC's value will slowly grind down to 3K in a year. Any coin mined during that year will carry a loss as investment, and also will be taxed at a higher value at its creation. He is looking at a 600K or so tax bill, so even if he can somehow shave off 100K of it, that is not bad at all... I wonder about put prices, specially longer term. Maybe selling calls are a better protection.... Edit: Here is the post: "You are already likely past due on taxes from mining. My tax firm looked at this for me, and when you are mining you need to pay some tax at the time you mined the coin. If 1 bitcoin was worth $100 when you mined it, that is taxed as ordinary income at the time you mined it because you took possession of the asset. From that point if you have held the coins for more than a year it is a capital gain, so if 1 bitcoin was worth $200 when you sold you are only taxed on the $100 in gains. Coins are taxed on a FIFO basis. So, yeah, get a good tax guy. "Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities? A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income""
OK, I looked up option pricing, just as an intellectual exercise. BTC is at 4340 currently. On deribit.com, the 4000 strike calls with Dec 29 expiry sell for $961. That is about 15% downside protection for 4 months. If BTC goes flat or up, he could use those call gains to pay for his taxes...
What about the COST of mining, if it cost $3000 in electricity to mine a $4000 btc, then you have a 3000 deduction , no?