Cost Basis = Purchase Price + Transaction Fees + Other Costs

┌─────────────────────────────────────────────────────────────────────────────┐
│                    TAX TREATMENT BY JURISDICTION                           │
├─────────────────────────────────────────────────────────────────────────────┤
│                                                                             │
│  UNITED STATES                                                              │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │ • Crypto treated as property (IRS Notice 2014-21)                  │   │
│  │ • Capital gains/loss on sale/trade                                │   │
│  │ • Income on mining, staking, airdrops                            │   │
│  │ • Short-term (≤1 year) vs long-term (>1 year)                    │   │
│  │ • Wash sale rules do NOT apply to crypto                         │   │
│  │ • FBAR/FinCEN reporting for foreign accounts                     │   │
│  │ • Form 8949 required for crypto transactions                      │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  UNITED KINGDOM (HMRC)                                                      │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │ • Crypto treated as property                                        │   │
│  │ • Capital gains on disposal (sale/trade)                           │   │
│  │ • Income on mining, staking, airdrops                             │   │
│  │ • CGT allowance (£6,000)                                           │   │
│  │ • Section 104 pooling for identical assets                        │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  GERMANY                                                                    │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │ • Crypto held > 1 year: tax-free (if not used for income)          │   │
│  │ • Crypto held < 1 year: capital gains tax                         │   │
│  │ • Mining, staking: business income (if profitable)                │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  SINGAPORE                                                                  │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │ • No capital gains tax                                              │   │
│  │ • Income tax on trading if deemed as business                      │   │
│  │ • VAT/GST not applicable for crypto as payment                     │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  SWITZERLAND                                                                │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │ • Wealth tax on crypto holdings (cantonal)                         │   │
│  │ • Capital gains tax-free for individuals (as private assets)      │   │
│  │ • Income tax on mining, staking, trading as business              │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  PORTUGAL                                                                   │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │ • Crypto gains tax-free if held > 1 year                           │   │
│  │ • Income tax on mining, staking, trading as business              │   │
│  │ • 28% flat rate on gains < 1 year                                 │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
└─────────────────────────────────────────────────────────────────────────────┘

# ===================================================================
# MODULE 5, LESSON 5: TAX IMPLICATIONS OF DIGITAL ASSETS
# ===================================================================

import pandas as pd
import numpy as np
import matplotlib.pyplot as plt
from typing import Dict, List, Tuple
from datetime import datetime, timedelta
import random
import warnings
warnings.filterwarnings('ignore')

print("="*70)
print("TAX IMPLICATIONS OF DIGITAL ASSETS")
print("="*70)

# ----------------------------------------------------------------
# PART A: TAX CALCULATION SIMULATION (FIFO)
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART A: Capital Gains Calculation (FIFO)")
print("-"*60)

class TaxCalculator:
    """
    Simulated capital gains tax calculator using FIFO.
    """
    def __init__(self, currency: str = "USD"):
        self.currency = currency
        self.transactions = []
        self.holdings = []  # list of (date, amount, cost_basis_per_unit)
    
    def add_purchase(self, date: datetime, amount: float, price: float, fee: float = 0):
        """Record a purchase transaction."""
        self.transactions.append({
            'type': 'purchase',
            'date': date,
            'amount': amount,
            'price': price,
            'fee': fee
        })
        cost_basis = amount * price + fee
        per_unit = cost_basis / amount
        self.holdings.append({
            'date': date,
            'amount': amount,
            'cost_basis_per_unit': per_unit
        })
        print(f"Purchase: {amount:.4f} at {price:.2f} ({self.currency})")
    
    def sell(self, date: datetime, amount: float, price: float, fee: float = 0) -> Dict:
        """Record a sale and calculate capital gains."""
        if amount > self.get_total_holdings():
            return {'error': 'Insufficient holdings'}
        
        remaining = amount
        total_proceeds = amount * price - fee
        total_cost_basis = 0
        units_sold = []
        
        # FIFO: sell oldest holdings first
        for holding in self.holdings:
            if holding['amount'] <= 0:
                continue
            
            sell_amount = min(remaining, holding['amount'])
            cost_basis = sell_amount * holding['cost_basis_per_unit']
            total_cost_basis += cost_basis
            
            units_sold.append({
                'purchase_date': holding['date'],
                'sale_date': date,
                'amount': sell_amount,
                'cost_basis': cost_basis,
                'cost_basis_per_unit': holding['cost_basis_per_unit'],
                'sale_price': price
            })
            
            holding['amount'] -= sell_amount
            remaining -= sell_amount
            
            if remaining <= 0:
                break
        
        if remaining > 0:
            return {'error': 'Insufficient holdings after processing'}
        
        # Calculate gain
        proceeds = amount * price - fee
        gain = proceeds - total_cost_basis
        holding_period = (date - units_sold[0]['purchase_date']).days
        
        transaction = {
            'type': 'sale',
            'date': date,
            'amount': amount,
            'price': price,
            'fee': fee,
            'proceeds': proceeds,
            'cost_basis': total_cost_basis,
            'gain': gain,
            'holding_period_days': holding_period,
            'holding_period': 'Long-term' if holding_period > 365 else 'Short-term',
            'units': units_sold
        }
        self.transactions.append(transaction)
        
        print(f"Sale: {amount:.4f} at {price:.2f} | Gain: {gain:.2f} ({self.currency})")
        return transaction
    
    def get_total_holdings(self) -> float:
        return sum(h['amount'] for h in self.holdings)
    
    def get_tax_summary(self, short_term_rate: float = 0.25, long_term_rate: float = 0.15) -> Dict:
        """Get summary of gains and taxes."""
        short_term_gains = 0
        long_term_gains = 0
        
        for tx in self.transactions:
            if tx['type'] == 'sale':
                if tx['holding_period'] == 'Short-term':
                    short_term_gains += tx['gain']
                else:
                    long_term_gains += tx['gain']
        
        total_gain = short_term_gains + long_term_gains
        short_term_tax = short_term_gains * short_term_rate if short_term_gains > 0 else 0
        long_term_tax = long_term_gains * long_term_rate if long_term_gains > 0 else 0
        total_tax = short_term_tax + long_term_tax
        
        return {
            'short_term_gains': short_term_gains,
            'long_term_gains': long_term_gains,
            'total_gain': total_gain,
            'short_term_tax': short_term_tax,
            'long_term_tax': long_term_tax,
            'total_tax': total_tax,
            'effective_tax_rate': total_tax / total_gain if total_gain != 0 else 0
        }

# Simulate trading
tax_calc = TaxCalculator()

print("Simulating trades...")

# Add purchases over time
dates = [datetime(2023, 1, 15), datetime(2023, 3, 20), datetime(2023, 6, 10)]
prices = [45000, 52000, 48000]
amounts = [1.0, 0.5, 0.8]

for i, date in enumerate(dates):
    tax_calc.add_purchase(date, amounts[i], prices[i], fee=10)

# Show holdings
print(f"Total Holdings: {tax_calc.get_total_holdings():.4f} BTC")

# Sell some
sales = [
    (datetime(2024, 5, 10), 0.5, 65000, 10),  # Long-term gain
    (datetime(2024, 7, 15), 0.3, 58000, 10),  # Short-term gain
    (datetime(2024, 9, 1), 0.4, 61000, 10)    # Some short, some long
]

print("\nSales:")
for date, amount, price, fee in sales:
    tax_calc.sell(date, amount, price, fee)

# Tax summary
summary = tax_calc.get_tax_summary(short_term_rate=0.25, long_term_rate=0.15)
print(f"\nTax Summary ({tax_calc.currency}):")
print(f"  Short-term Gains: {summary['short_term_gains']:,.2f}")
print(f"  Long-term Gains: {summary['long_term_gains']:,.2f}")
print(f"  Total Gains: {summary['total_gain']:,.2f}")
print(f"  Total Tax: {summary['total_tax']:,.2f}")
print(f"  Effective Rate: {summary['effective_tax_rate']:.1%}")

# ----------------------------------------------------------------
# PART B: JURISDICTIONAL TAX COMPARISON
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART B: Tax Comparison by Jurisdiction")
print("-"*60)

tax_comparison = {
    'Jurisdiction': ['US', 'UK', 'Germany', 'Singapore', 'Switzerland', 'Portugal', 'Japan', 'Canada'],
    'Short-term Rate (%)': [37, 45, 26.4, 24, 40, 28, 55, 33],
    'Long-term Rate (%)': [20, 20, 0, 0, 0, 0, 20, 16.5],
    'Wealth Tax': ['No', 'No', 'No', 'No', 'Yes', 'No', 'No', 'No'],
    'VAT/GST': ['No', 'No (exempt)', 'No', 'No', 'No', 'No', 'Yes', 'Yes']
}

tax_df = pd.DataFrame(tax_comparison)
print(tax_df.to_string(index=False))

# Visualise tax rates
fig, ax = plt.subplots(figsize=(12, 6))
x = np.arange(len(tax_comparison['Jurisdiction']))
width = 0.35

ax.bar(x - width/2, tax_comparison['Short-term Rate (%)'], width, label='Short-term Rate', color='red', alpha=0.7)
ax.bar(x + width/2, tax_comparison['Long-term Rate (%)'], width, label='Long-term Rate', color='green', alpha=0.7)

ax.set_xlabel('Jurisdiction')
ax.set_ylabel('Tax Rate (%)')
ax.set_title('Capital Gains Tax Rates by Jurisdiction')
ax.set_xticks(x)
ax.set_xticklabels(tax_comparison['Jurisdiction'], rotation=45, ha='right')
ax.legend()
ax.grid(True, alpha=0.3)

plt.tight_layout()
plt.savefig('tax_rates.png', dpi=300, bbox_inches='tight')
plt.show()
print("Tax rates chart saved as 'tax_rates.png'")

# ----------------------------------------------------------------
# PART C: DEFI TAX SCENARIOS
# -----------------------------------------------------------------

print("\n" + "-"*60)
print("PART C: DeFi Tax Scenarios")
print("-"*60)

defi_scenarios = {
    "Lending Interest": {
        "Tax Event": "Interest received",
        "Tax Type": "Income",
        "Timing": "At receipt",
        "Valuation": "Market value at receipt"
    },
    "Staking Rewards": {
        "Tax Event": "Rewards received",
        "Tax Type": "Income",
        "Timing": "At receipt",
        "Valuation": "Market value at receipt"
    },
    "Yield Farming": {
        "Tax Event": "Rewards received",
        "Tax Type": "Income",
        "Timing": "At receipt",
        "Valuation": "Market value at receipt"
    },
    "Liquidity Provision (Deposit)": {
        "Tax Event": "No tax",
        "Tax Type": "N/A",
        "Timing": "N/A",
        "Valuation": "N/A"
    },
    "Liquidity Provision (Withdrawal)": {
        "Tax Event": "Realised gain/loss",
        "Tax Type": "Capital",
        "Timing": "At withdrawal",
        "Valuation": "Difference in value"
    },
    "Airdrop": {
        "Tax Event": "Tokens received",
        "Tax Type": "Income",
        "Timing": "At receipt",
        "Valuation": "Market value at receipt"
    },
    "Governance Voting": {
        "Tax Event": "No tax",
        "Tax Type": "N/A",
        "Timing": "N/A",
        "Valuation": "N/A"
    },
    "Flash Loan": {
        "Tax Event": "May be taxable",
        "Tax Type": "Income",
        "Timing": "At execution",
        "Valuation": "Fee amount"
    }
}

for scenario, details in defi_scenarios.items():
    print(f"\n{scenario.upper()}:")
    print(f"  Tax Event: {details['Tax Event']}")
    print(f"  Tax Type: {details['Tax Type']}")
    print(f"  Timing: {details['Timing']}")
    print(f"  Valuation: {details['Valuation']}")

# ----------------------------------------------------------------
# PART D: TAX REPORTING CHECKLIST
# -----------------------------------------------------------------

print("\n" + "-"*60)
print("PART D: Tax Reporting Checklist")
print("-"*60)

reporting_checklist = {
    "Records to Maintain": [
        "Transaction date and time",
        "Asset type and amount",
        "Value in local currency",
        "Transaction type (buy, sell, trade, receive)",
        "Wallet addresses",
        "Transaction hash",
        "Exchange/platform used",
        "Fees paid (gas, exchange fees)"
    ],
    "Events to Report": [
        "Sale of crypto for fiat",
        "Crypto-to-crypto trades",
        "Receipt of crypto as payment",
        "Mining income",
        "Staking rewards",
        "Airdrops",
        "Interest from lending",
        "Yield farming rewards"
    ],
    "Forms and Documents": [
        "Form 8949 (US)",
        "Schedule D (US)",
        "Schedule C (US)",
        "FBAR/FATCA (US)",
        "CGT Return (UK)",
        "Self Assessment (UK)",
        "Business tax return"
    ]
}

for category, items in reporting_checklist.items():
    print(f"\n{category.upper()}:")
    for item in items:
        print(f"  □ {item}")

# ----------------------------------------------------------------
# PART E: SUMMARY AND RECOMMENDATIONS
# -----------------------------------------------------------------

print("\n" + "="*70)
print("PART E: Summary and Recommendations")
print("="*70)

print("""
Tax Implications of Digital Assets – Key Takeaways:

1. Crypto is generally treated as property for tax purposes.
2. Taxable events: sale for fiat, crypto-to-crypto trades, receipt of income.
3. Capital gains: short-term (higher rates) vs long-term (preferential rates).
4. Income: mining, staking, airdrops, yield farming rewards.
5. DeFi adds complexity: multiple transactions, complex valuations.
6. FIFO, LIFO, HIFO methods affect cost basis calculation.
7. Reporting: transaction records, tax forms, foreign account reporting.

Recommendations:
  - Maintain detailed transaction records.
  - Use FIFO for simplicity (often required).
  - Consider tax software for complex portfolios.
  - Consult a tax professional for DeFi activities.
  - Understand jurisdiction-specific rules.
  - Plan tax-loss harvesting strategies.
  - Report all taxable events accurately.
""")