Posted on 03/25/2014 11:49:35 AM PDT by Errant
After less than three months consideration, the IRS has issued its statement clarifying th etax treatment of Bitcoins (and other virtual currencies) before the April 15th Deadline. The finding, summarized, is that Vitual currencies will be treated as property (not as a currency) which, as WSJ notes, means an investor who buys bitcoin would typically have a capital gain or loss when it’s sold. The price of Bitcoin is rising modestly on this news...
(Excerpt) Read more at zerohedge.com ...
I agree. I also agree that "mined" coins are a source of income, just like any business. I see the possibility that miners will have to be regulated now, or somehow a record of the "BTC" they produce maintained.
Issues that will need to be worked out in time as will all new technologies. There was a times when didn't need red lights or even parking meters. ;)
If it is not a currency then why do need a money transmitters license to transmit bitcoins?
I don’t know. The currency model seems to me to make more sense than, say, a precious metal analog.
Good point. I just hurriedly glanced through some of the guidance. This adds a huge new wrinkle to the mix and will take tax experts to translate into common language. No doubt further guidance/clarification/changes will follow this first release.
All your everything are belong to us!
#25
Lol, looks like it!
If I take a yard of fabric and make a shirt, sell it, then the “income” is taxable.
If I take a company, sell it, (equity sale) then that income is not taxable, from what I understand.
The difference is the transfer of ownership, being either ALL or PARTIAL ownership.
A shirt is a shirt that no one expects it to appreciate in value. But, if I made or even bought a thousand shirts at $10 and sold them for $20, I’d have a taxable event.
Bitcoin miners will have to reduce their cost basis by calculating their costs to produce them. Their time, effort and computing power usage, etc etc etc. They can easily claim that their costs have exceeded their sales price.
Do you think the IRS is going to set some standard for “Production costs”?
From my perspective, Bitcoins are neither a currency nor a property, in the way they define them, but a property more like a chicken, a barter tool, used to trade for other properties.
So...metals are property too.
No, I see "mining" as taxed like any other business where the owner has skin in the game. The miner will not be able to take out his own labor, only expenses for equipment, salaries, repairs, electrical costs, and any other associated costs for producing coins.
Where I see a problem is as you observed: "Bitcoins are neither a currency nor a property". I suggest they are a little of both. IMO, they should be treated like a currency by those who acquire them for convenience and use them for purchases while treating as an asset for those who trade or mine them.
I'm not sure how you keep the two separated. It is indeed a problem looking for a solution.
I think if they are going to tax Bitcoin, it should be taxed by weight... :)
Bitcoin is backed by the same hard asset that us currency is backed by {null}, but the full faith and credit of bitcoin verse the us treasury and federal reserve may prove to be a bit more appealing in the future.
So...metals are property too
Yep.
If you’ve got a real Silver coin, 1986-2013 Silver Eagle, $1.00 face value, and trade it for cash at ~$19.00 (current market), that is a capital gain.
Your cost basis for this may vary, but it would be assumed that it was its face value. If you factor in inflation/deprecation then your cost basis may be closer to what you can sell it for.
The IRS doesn’t care about an individual that trades their coins for cash. They want the money from people that do this as a business.
The question I have is “Where does the IRS draw the line?”
There have been moves to “Tax” excessive corporate profits, what’s the difference between that and “excessive Savings?”
Politically, I would run a campaign that equated “Corporate profits” to an “individuals Savings”. There’s not a single Liberal/Progressive that would forgo their personal savings.
Corporate profits represent a company that lives within its means. An individuals savings represents the same.
Properties are “NOT FUNGIBLE”
Bitcoins are !!!!!!
Equities have a limited fungibility where as a currency does not.
Fungibility:
Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. For example, since one ounce of gold is equivalent to any other ounce of gold, gold is fungible. Other fungible commodities include sweet crude oil, company shares, bonds, precious metals, currencies. Fungibility refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not relate to the exchange of one commodity for another different commodity.
http://en.wikipedia.org/wiki/Fungibility
The IRS ruling, from what I understand, is an attempt to deem Bitcoins as NOT being fully fungible, even though they are, and classify them as a hybrid.
In the late 1990’s there was an effort to create a new currency based on “airline miles”, miles/credits that could be accumulated and traded for cash etc...
Like the way you think! ;)
>>This is a record keeping killer. Every transaction would require a paper trail and a determination of capital gain or loss. If sustained, this ruling would kill bitcoins for everyday use in the US.<<
And the IRS is going to want you to do annual accounting on your holdings.
All the transactions are in the chain, no need for any other records. Someone will write some simple software to capture taxable events and that will speed corporate adoption.
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