This is exactly why a sales tax would make things so much easier. Who care about historic price points of when you bought and sold BTC, let alone the historic electricity costs and pool fees when you mined it. You buy a milk shake, you pay taxes. Want food, etc. to be taxed differently? Still easier than figuring out if you are operating a railroad/fishing farm in Alaska while running a BTC mining rig to heat your house using sustainable energy from your newly installed solar panels.
IRS Says Bitcoin Is Property
111–120 of 317 posts
Re: IRS Says Bitcoin Is Property
#112Earlier quoted context omitted.
Still seems like a problem to me.
How so? These aren't new rules, just old rules that are newly applied to Bitcoin. As others have noted, this is how things work for employer issued stock. You only put yourself in danger if you are ignorant of the rules and don't take necessary precautions. If you are investing enough to open yourself up to a capital gains loss of more than $3000, you have no excuse to be ignorant. Tax tip from a non-lawyer/non-accou…
The fact that "it's always been that way" is no refutation of the fact that "it's a problem" that you could lose money and yet still owe taxes as if you had gains because capital losses (hysteretically) saturate at $3000.
Re: IRS Says Bitcoin Is Property
#113Interesting, 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.
They have gotten really good at finding money. Even
employees at banks are rewarded by the IRS for turning
in anything they think is suspicious--not just over 10K
amounts-anything the minimum wage worker "thinks" is
suspicious! I'm not bashing minimum wage workers--just
pointing out low level workers can turn the IRS on you.
Personally, If I came into a huge amout of cash. I would
bury it, until inflation really gets moving. If you bury
it, do it sober. True story: I know a guy who buried
800,000 grand in a PVC pipe--while intoxicated on a conacopia of substences. He woke up the next day
and couldn't find where he bured it. When ever I drive by
the house the guy lived in--I feel extremely sad; even
though it wasen't my money--such a waste. What's even more
interesting is the ex wife told the current owners of the
house that there might be close to a million dollars on their property. The owners did not believe, or even do
some test digging? Sometimes, people do tell the truth. I
wish I was never told that story.
Re: IRS Says Bitcoin Is Property
#114I imagine a managed wallet like Coinbase would really help here. They could easily create a report on exactly how much you owe in capital gains. Managing this yourself could get a bit messy.
Please don't store most of your bitcoin in Coinbase. If Coinbase ever goes under, you'll lose all your bitcoin. It sucks when someone else loses your bitcoin for you.
It is no different than having your money in multiple banks or brokers.
Re: IRS Says Bitcoin Is Property
#115Keep coins in a secret wallet. When you need to change for USD, transfer only that amount to your "public" wallet, and pay taxes just on that.
Re: IRS Says Bitcoin Is Property
#116I imagine a managed wallet like Coinbase would really help here. They could easily create a report on exactly how much you owe in capital gains. Managing this yourself could get a bit messy.
Do you need to have it managed? Why not just have a service where you put in your addresses and it looks through the blockchain to find all the transactions you performed, etc. I believe as long as it keeps historical prices it could get very good results even if each BTC transaction doesn't log how much USD-et-al was involved.
Good point. Coinbase is also an exchange so it knows exactly how much you paid in and out BUT there's no reason why a service couldn't integrate to an exchange's API and do the same thing.
Re: IRS Says Bitcoin Is Property
#117Earlier quoted context omitted.
How does this work when mining in a pool is nearly continuous? You earn 0.000000x btc per share in a pool, and you might earn a share every few seconds. What exchange do I use to determine the value of the btc?
It's likely that the taxable event would occur when you can control the bitcoins. For instance, many pools have a minimum payout and you can't withdraw any until you meet that minimum. Based on other IRS rules, the taxable event would occur when you reach that withdrawal minimum. As for the exchange to use for the value, it would probably be legitimate to use an average of a few exchanges, if the prices are wildly di…
Should emphasize that whatever valuation will be expected to be reasonable and done consistently (so don't pick different exchanges for different payments or whatever, and probably don't pick Mt. Gox, and so on).
Re: IRS Says Bitcoin Is Property
#118And 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.
They can monitor it when it hits the real world, i.e., as soon as you want any actual goods or services instead of just a virtual coin.
Noone in IRS cares if you hide $100 or $1000; but for large amounts the spending is traceable.
Re: IRS Says Bitcoin Is Property
#119This is exactly why a sales tax would make things so much easier. Who care about historic price points of when you bought and sold BTC, let alone the historic electricity costs and pool fees when you mined it. You buy a milk shake, you pay taxes. Want food, etc. to be taxed differently? Still easier than figuring out if you are operating a railroad/fishing farm in Alaska while running a BTC mining rig to heat your ho…
Sales taxes are regressive, so much so that combined US state taxes are also regressive, being largely funded by sales tax. Refer to the big square in the middle of https://xkcd.com/980/
Re: IRS Says Bitcoin Is Property
#120I 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?
As I understand it, the main difference is that, if it were currency, you’d need to go though a lot of regulation to process it, keep it and change it with dollars.
I doubt the IRS can influence SEC and the Financial commission into the finer points of Legal tender. What they say is: no matter that, these things are like stock, and we feel the right to tax your profits on trading them.
Sounds reasonable to me.
Put otherwise: it sounds like when a lawyer (or The Dude) says that you are “an asshole”. Most lawyers don’t really have the moral standing to accuse anyone of that, but what they are saying is: my qualifications are telling you what is legal and what isn’t, and this unsavory action isn’t illegal. IRS is saying: BitCoins are not just to pay for your groceries, they are a way to store and accrue value; they have no standing on how convenient they are or should be to buy groceries.