IRS Says Bitcoin Is Property • Hacker News Board

Re: IRS Says Bitcoin Is Property

#71

Post by dllthomas » Tue, Mar 25, 2014, 7:08 PM UTC

dragontamer wrote: post #29

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 t…

You need some sort of data source for what prices were at various points. This could be offline, but is likely to be big. Still, substantially easier problem than a lot of tax-related reporting.

Re: IRS Says Bitcoin Is Property

#72

Post by jcyr » Tue, Mar 25, 2014, 7:08 PM UTC

So we should be tracking our bitcoin in our wallets by age, such that when spending we incur long term capital gain vs short term (if possible)?

Or perhaps use the most recent bitcoin purchased if the value is relatively the same as purchase date, thus seeing no gain (vs say 2 yr old coins which have greatly appreciated).

Re: IRS Says Bitcoin Is Property

#73

Post by loumf » Tue, Mar 25, 2014, 7:09 PM UTC

ChuckMcM wrote: post #38

RyJones wrote: post #15

Earlier quoted context omitted.

This is pretty much what happened to a lot of people in the valley during the dot-com bubble pop - your stock losses could be carried forward until the heat death of the universe, but you paid on 100% of the (illusory) gains.

I was going to say this exact same thing. I was writing off 'losses' from stock losing value from 2001 to 2012 at $3,000 a year. It would have been longer except that you can, in some cases, offset gains made later against those losses. And yes, all under the auspices of 'alternative minimum tax' for which I have a special place of loathing in my heart for whomever thought that was a good idea.

Do you know (remember) the mechanics of how the AMT affected this? Were you given stock that you didn't have a chance to sell? My understanding that only the initial grant of stock and the subsequent selling are taxable -- and didn't realize the AMT affected this.

Re: IRS Says Bitcoin Is Property

#74

Post by [deleted] » Tue, Mar 25, 2014, 7:09 PM UTC

sitkack wrote: post #48

streptomycin wrote: post #5

Earlier quoted context omitted.

Bitcoin miners would have to report their earnings as taxable income with a value equal to the worth on the day it was mined.

I am confused about bitcoin taxation and mining, I mined coins back in 2011, when they were $7. They matched my costs of hardware and electricity. Are they both income and capital gains (when I sell over a year later)?

[deleted]

Re: IRS Says Bitcoin Is Property

#75

Post by quakkels » Tue, Mar 25, 2014, 7:10 PM UTC

I can't tell if this is good or bad. But, does it strike anyone else as odd that the IRS ignores that bitcoin _is_ actually currency? Can they even declare it to be property when the reality is that it is currency?

Re: IRS Says Bitcoin Is Property

#76

Post by genericuser » Tue, Mar 25, 2014, 7:10 PM UTC

dionidium wrote: post #25

mjn wrote: post #4

Earlier quoted context omitted.

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

In many locations the taxes on vehicles come in the form of a separate excise tax on 'value' given to the vehicle based on its original value and age, this tax is administered at the City level where I live in Massachusetts.

Are there locations in the US where the general property tax is applied itself to vehicles? Or were you simply stating that things other than land and buildings could be taxed, and not that the property tax applies to them?

Re: IRS Says Bitcoin Is Property

#77

Post by antr » Tue, Mar 25, 2014, 7:11 PM UTC

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.

Understood, thanks

Re: IRS Says Bitcoin Is Property

#78

Post by [deleted] » Tue, Mar 25, 2014, 7:11 PM UTC

jcampbell1 wrote: post #10

It seems there are hypothetical scenarios where your taxes could exceed your net worth. If you mine a bitcoin worth $1000, and then it's value falls to $100, you could owe taxes on $1000, and the $900 capital loss would only carry forward to the next year.

[deleted]

Re: IRS Says Bitcoin Is Property

#79

Post by jstalin » Tue, Mar 25, 2014, 7:13 PM UTC

wizzard wrote: post #64

What does this mean for Mt. Gox users? I know it would be for next year's return and we're not even sure how much has been lost yet since they are apparently still "finding" wallets.

Like any other property theft, you can (sometimes) deduct the value of the theft from your income.

http://www.irs.gov/publications/p547/ar02.html

Re: IRS Says Bitcoin Is Property

#80

Post by humanrebar » Tue, Mar 25, 2014, 7:13 PM UTC

slg wrote: post #41

jcampbell1 wrote: post #10

It seems there are hypothetical scenarios where your taxes could exceed your net worth. If you mine a bitcoin worth $1000, and then it's value falls to $100, you could owe taxes on $1000, and the $900 capital loss would only carry forward to the next year.

You can use the $900 in capital losses to offset your income (up to $3000). According to the IRS, you would have only $100 in income ($1000 - $900). So in your example, you would have $100 cash and tax liabilities on $100 in income. You will only run into a problem when you exceed $3000 in capital losses, that is when you would have to rollover your losses to the next year.

Still seems like a problem to me.