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IRS Says Bitcoin Is Property

bloomberg.com

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Re: IRS Says Bitcoin Is Property

#171

Post by jedberg »

molsongolden wrote: post #164
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.

That's not true. If you build 3 chairs and don't sell them by the end of the year, you pay inventory tax on the 3 chairs, i.e. you pay taxes on them without selling them.

This is why stores that sell physical goods to a blowout sale at the end of the year.

Re: IRS Says Bitcoin Is Property

#172

Post by VLM »

candybar wrote: post #166
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.

If you run a numerical simulation of white noise distribution of buy and sell, you'll find no profit to tax and your buy and sell prices will average close to that number.

Re: IRS Says Bitcoin Is Property

#173

Post by sosborn »

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.

> all trades are overseen by the SEC

Longterm goal?

Re: IRS Says Bitcoin Is Property

#174

Post by makr17 »

outside1234 wrote: post #165
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?

> If its treated as property then the maximum is 20% of capital gains.

if it is _long_ _term_ capital gains. short term gains are taxed at the same rate as regular income.

Re: IRS Says Bitcoin Is Property

#175

Post by molsongolden »

outside1234 wrote: post #165
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?

If you haven't held the asset for over a year then it will be taxed at ordinary rates not capital gains.

Re: IRS Says Bitcoin Is Property

#176

Post by VLM »

twoodfin wrote: post #137
IgorPartola wrote: post #111

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 ho…

I am warily a supporter of a national sales tax to replace the income tax, but there are a few problems with it: - Making it non-regressive, let alone as close to progressive as our current system, is damned hard. FAIR Tax-style check-cutting probably isn't enough. - The tax would have to be high enough that black market sales would be extremely tempting. It's comparatively easier to monitor and regulate ~150 million…

"FAIR Tax-style check-cutting probably isn't enough."

I fail to see how this could be complicated. Assume poor person spends 100% of their income and all of it is taxed, so send them a "psuedo-basic-income" check of whatever minimum wage is times the sales tax.

Re: IRS Says Bitcoin Is Property

#177

Post by anigbrowl »

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.

Well, the blockchain records all transactions, and when they took place: http://blockr.io/ So if the IRS is auditing you, then it would be easy for them to cross-reference to that.

Re: IRS Says Bitcoin Is Property

#178

Post by dclusin »

outside1234 wrote: post #165
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?

The lower 20% (Didn't it recently go up to 29%?) rate is only applicable if you have held the asset for 2 years. If you buy and sell short term, as I have, then short-term capital gains applies.

Re: IRS Says Bitcoin Is Property

#179

Post by dismiss22x »

outside1234 wrote: post #165
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?

Maximum of 43.4% if its sold within a year.

Re: IRS Says Bitcoin Is Property

#180

Post by modeless »

outside1234 wrote: post #165
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?

I think he's talking about mining, which is now subject to income tax (likely 25%) and self-employment tax (15%).
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