Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

IRS Says Bitcoin Is Property

bloomberg.com

Post reply on HN
Print view View original

21–30 of 317 posts

Re: IRS Says Bitcoin Is Property

#21

Post by hitchhiker999 »

shmerl wrote: post #13
thematt wrote: post #9

Interesting, but unsurprising. The more interesting aspect is that unlike tangible property, bank accounts or stock transactions that can be audited, this seems practically unenforceable on the IRS's part.

Exactly. They write: > “The danger is the creation of an electronic black market, similar to the cash economy,” But how can they avoid it if Bitcoin does work like cash in many aspects and they have no control over it?

In short, despite what many seem to think ?? -> Anything they do / will do / or try to do is simply a hack. The problem they have isn't going away - they'll eventually need increasingly draconian legislation to monitor bitcoin transactions.

It will be (almost entirely) up to trust in the long run.

Re: IRS Says Bitcoin Is Property

#22

Post by shmerl »

loumf wrote: post #12
thematt wrote: post #9

Interesting, but unsurprising. The more interesting aspect is that unlike tangible property, bank accounts or stock transactions that can be audited, this seems practically unenforceable on the IRS's part.

At large enough amounts, the IRS routinely investigates large accounts no matter how they are held. For example, in cocaine and cash. At some point you spend the money, and the difference in spending and taxes paid gets their attention.

And if the money is spent in same Bitcoins? It seems the only control they might have is when Bitcoins are exchanged to regular currency.

Re: IRS Says Bitcoin Is Property

#24

Post by dragontamer »

uptown wrote: post #8

"Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop." So if the coffee shop leaves the "property" as bitcoins instead of converting it over to dollars, and the value of those bitcoins falls before cashing-out, they're stuck paying tax on the $2 worth of income despite potentially no-longer having the…

Yes, although they sell the BTC as capital loss with carryover to the next year if you hit the cap.

http://www.investopedia.com/terms/c/capital-loss-carryover.a...

Declaring them as "property" is the simplest solution. Everyone who has worked with Stocks knows exactly how the tax system works in these cases.

Re: IRS Says Bitcoin Is Property

#25

Post by dionidium »

mjn wrote: post #4
antr wrote: post #3

I'm not familiar with US tax, but isn't property tax in the US something like 200bp per year? If I understand this correctly this can be a huge blow for Bitcoin users in the US

The U.S. has no property taxes in that sense (a tax on all owned property, more commonly called a "wealth tax"). Some states have a tax called a "property tax", but it applies only to land and buildings ("real property"), not to other kinds of property such as stocks, baseball cards, gold, bitcoin, bank accounts, paintings, etc.

but it applies only to land and buildings ("real property")

And, frequently, automobiles, boats, etc

Re: IRS Says Bitcoin Is Property

#26

Post by dllthomas »

rdmcfee wrote: post #18

On one hand this makes sense. The IRS is trying to avoid early adopters from cashing out millions by purchasing goods to avoid paying capital gains tax. On the other hand, this is debilitating for people who want to use BTC for day to day transactions. Imagine the paperwork involved. <- opportunity for a wallet app which tracks gains/losses

You say it's debilitating, but you describe the precise solution. This is easy to code around if you don't care about preserving BTC anonymity.

Re: IRS Says Bitcoin Is Property

#27

Post by uptown »

jstalin wrote: post #16
uptown wrote: post #8

"Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop." So if the coffee shop leaves the "property" as bitcoins instead of converting it over to dollars, and the value of those bitcoins falls before cashing-out, they're stuck paying tax on the $2 worth of income despite potentially no-longer having the…

My initial thought is that they'd be able to deduct the loss since the bitcoin is being treated as property and not currency. The trade of property for property is done at market value and any subsequent trade is as well, leading to a loss.

Wouldn't it be treated as depreciation, which typically has limits?

Re: IRS Says Bitcoin Is Property

#28

Post by rch »

Compared to getting the general public to accept virtual currencies for everyday transactions, shouldn't it be relatively easy to convince those same people to put pressure on the IRS and congress? In fact, this is a particularly good year to begin such an effort, since the Senate is in play in the midterms. If predictions start to indicate an unusually high turnout of virtual currency supporters, it would throw a big wrench into almost every political playbook (which are presently primed for older, conservative demographics).

Re: IRS Says Bitcoin Is Property

#29

Post by dragontamer »

rdmcfee wrote: post #18

On one hand this makes sense. The IRS is trying to avoid early adopters from cashing out millions by purchasing goods to avoid paying capital gains tax. On the other hand, this is debilitating for people who want to use BTC for day to day transactions. Imagine the paperwork involved. <- opportunity for a wallet app which tracks gains/losses

What is so hard about looking through the blockchain and backtracing all of your trades at a later date?

You know your own public and private key, so you can find all of your transactions and the date at which you've received or sent off BTC. Come tax day, you run a single program over all your transactions and you should be set.

There's no need to go "cloud" on this one, a simple offline blockchain app would solve the problem.

Re: IRS Says Bitcoin Is Property

#30

Post by hitchhiker999 »

sergiotapia wrote: post #23

And how exactly can they know your bitcoin stash amount?

If a user has a reasonable knowledge of bitcoin, they can't. They can monitor it only when it hits the existing financial structure. If you don't cross through that, they (in effect / in most cases / under normal circumstances) can't really see it.
Post reply on HN