Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%.
This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a larger scenario, this would take decades to fully receive your total deduction.
Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%.
This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a larger scenario, this would take decades to fully receive your total deduction.