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IRS Says Bitcoin Is Property

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Re: IRS Says Bitcoin Is Property

#161

Post by adventured »

SilasX wrote: post #112
slg wrote: post #101

Earlier quoted context omitted.

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.

Capital gains (the losses) don't saturate at $3,000.

If I have accumulated $100,000 in capital losses over the prior ten years, I can wipe all of that out in one shot by producing a large enough capital gain in one year.

Capital losses saturate when applied to ordinary income.

Re: IRS Says Bitcoin Is Property

#162

Post by [deleted] »

Zarathust wrote: post #157

I don't see how this law could be enforceable. Hiding bitcoins from the IRS seems to be trivial and lying about the real acquisition value as well. This is very different from stocks where all trades are overseen by the SEC. You can't just go to a neighbor's house and pay for stock in cash without telling anybody else.

[deleted]

Re: IRS Says Bitcoin Is Property

#163

Post by bduerst »

phogster wrote: post #142
patio11 wrote: post #85

Earlier quoted context omitted.

This is not an anomalous case in taxing business income. A few startups asked me to do work on a barter basis. (Can you do a week of marketing work for us if we build you an iPhone app?) I told them that, if I were to agree to do that, I'd be legally obligated to value my work at it's market price and file an informational return to the IRS showing that amount of money given as payment for services rendered, which th…

Wait, are both parties responsible for paying taxes in this case? In the normal case the party receiving payment for services rendered is the one that pays income taxes. Here both are providing and receiving a service at the same time.

It's more complex than that because both parties have to report the dollar amounts of the goods/services in the barter exchange.

Whoever comes out on top has to report income, and whoever comes out on bottom has to report the expense.

Re: IRS Says Bitcoin Is Property

#164

Post by molsongolden »

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.

This seems insane. If I build 3 chairs I do not include the market price of 3 chairs on that day in my gross income, I sell the chairs and recognize the income generated by the sales.

Re: IRS Says Bitcoin Is Property

#165

Post by outside1234 »

scotty79 wrote: post #132

> “The danger is the creation of an electronic black market, similar to the cash economy,” Joshua Blank, a tax law professor at New York University, said in a December interview. “That’s what the IRS wants to avoid.” I think demanding over 40% tax on a trivially worldwide transferable, hard to track, easy to secretly manufacture commodity is exactly the best way to create black market.

If its treated as property then the maximum is 20% of capital gains. Do you not think you should pay taxes on gains?

Re: IRS Says Bitcoin Is Property

#166

Post by candybar »

patio11 wrote: post #145

Somebody in the Bitcoin ecosystem would get a lot of attention if they published an authoritative number for the average Bitcoin price in 2013, which would likely suffice for most taxpayers' needs for a reasonable and consistent valuation. (Ask a tax professional if you disbelieve that informal recommendation.) This is one of the many equally valid options for e.g. calculating the yen/USD conversion if you happen to…

Isn't the whole point of saying bitcoin is not currency, but property, that you're not allowed to do this kind of accounting? I'm pretty sure if I buy and sell the same stock throughout the year, I can't simply account for it using the stock's average for the year.

Re: IRS Says Bitcoin Is Property

#167

Post by shazow »

patio11 wrote: post #145

Somebody in the Bitcoin ecosystem would get a lot of attention if they published an authoritative number for the average Bitcoin price in 2013, which would likely suffice for most taxpayers' needs for a reasonable and consistent valuation. (Ask a tax professional if you disbelieve that informal recommendation.) This is one of the many equally valid options for e.g. calculating the yen/USD conversion if you happen to…

http://bitcoinaverage.com/ does currency-adjusted price averages across many exchanges around the world.

You should be able to get a yearly average from the API but I worry this would not be what the IRS had in mind, but rather specific prices at time of purchase vs liquidation.

Re: IRS Says Bitcoin Is Property

#168

Post by stevewilhelm »

Anderkent wrote: post #86
loumf wrote: post #51

Earlier quoted context omitted.

Mostly this happened to people that got bad advice (I really hope all of the entrepreneurs reading this site are smarter now). For most, the issue was exercising their options. This is a tax event -- and the tax is owed on the difference in your strike price and the current price of the stock. If you find yourself in this situation -- immediately sell enough stock to cover the tax. If you are given stock -- that is t…

Doesnt selling stock immediately rather than after a year mean your tax rate on it is higher?

> Doesnt selling stock immediately rather than after a year mean your tax rate on it is higher?

This is the exact thinking that got many people in trouble during the dot.com bubble.

They exercised their options and neglected to sell and hold enough capital to pay their tax obligation.

Then the bubble burst and stock prices dropped, in some cases to nothing, within a year. The IRS still wanted the capital gains taxes on the difference between the option's grant price and the stock price on the day the options were exercised (aka the taxable event).

It was not uncommon to have people loose their houses and have their wages garnished to pay off their taxes.

Consider this a cautionary tale when speculatively trading Bitcoin.

Re: IRS Says Bitcoin Is Property

#169

Post by gnaritas »

Smudge wrote: post #133
abhigupta wrote: post #114

Earlier quoted context omitted.

It is no different than having your money in multiple banks or brokers.

Coinbase is not FDIC insured.

Neither is your computer or your safe. Coinbase is very likely much safer for the average consumer than anything they'd do themselves.
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