If you had 100$ of Bitcoin and it 'goes up' 1%... reflected in you having 'more dollars' in your cashapp account...

And you spend those dollars from cashapp, there's still 'gains' correct?

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But when you pay an LN invoice, and choose to have it come from your USD balance, you have no exposure to BTC/USD exchange rate fluctuation, and thus no gains.  You are simply instructing Cash App to settle in bitcoin after taking that amount from your USD wallet.

Now if you were to buy BTC first, and then at a later time pay an LN invoice (or withdraw), then yes -- that can be a taxable event.

Not tax advice, but Cash App doesn't treat paying for an LN invoice with USD as a taxable event either.   Neither does Strike.

bitcoin

CashApp says they won't charge fees on Bitcoin buys and withdrawals

Scoresby

But when you pay an LN invoice, and choose to have it come from your USD balance, you have no exposure to BTC/USD exchange rate fluctuation, and thus no gains.  You are simply instructing Cash App to settle in bitcoin after taking that amount from your USD wallet. 

Now if you were to buy BTC first, and then at a later time pay an LN invoice (or withdraw), then yes -- that can be a taxable event.

Not tax advice, but Cash App doesn't treat paying for an LN invoice with USD as a taxable event either.   Neither does Strike.