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IRS Says Bitcoin Is Property

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Re: IRS Says Bitcoin Is Property

#261

Post by gamblor956 »

JumpCrisscross wrote: post #209

If I had more time on my hands: (1) Launch a Bitcoin capital gains/losses tax approximation application (the "App") in beta. User keys in their Bitcoin addresses. App searches the block chain for the user's entry and exit times. App searches exchanges for the most favourable pricing source. App then returns an approximation of taxes owed/to be credited (e.g. in case of coins lost at Mt. Gox). App has a prominent disc…

App searches exchanges for the most favourable pricing source.

The taxpayer has to be consistent with how they determine the price of bitcoins, generally meaning that they have to use the same method unless they have a good reason for switching. Deliberately choosing the most favorable pricing source is fine the first year--but they'd have to stick with the same source in subsequent years.

Also, the app would be enabling tax fraud. A "prominent disclaimer" isn't going to be much protection. If anything, it's likely to be used against the appmaker to demonstrate willful blindness.

Re: IRS Says Bitcoin Is Property

#262

Post by JumpCrisscross »

gamblor956 wrote: post #261
JumpCrisscross wrote: post #209

If I had more time on my hands: (1) Launch a Bitcoin capital gains/losses tax approximation application (the "App") in beta. User keys in their Bitcoin addresses. App searches the block chain for the user's entry and exit times. App searches exchanges for the most favourable pricing source. App then returns an approximation of taxes owed/to be credited (e.g. in case of coins lost at Mt. Gox). App has a prominent disc…

App searches exchanges for the most favourable pricing source. The taxpayer has to be consistent with how they determine the price of bitcoins, generally meaning that they have to use the same method unless they have a good reason for switching. Deliberately choosing the most favorable pricing source is fine the first year--but they'd have to stick with the same source in subsequent years. Also, the app would be enab…

A taxpayer has to be internally consistent in picking their pricing source. It does not follow that the pricing source must be consistent between tax payers. Different situations could merit different pricing sources. It is not wrong to advise different people in different situations on how their differing needs may merit different pricing sources.

Re: IRS Says Bitcoin Is Property

#263

Post by gamblor956 »

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.

Bitcoins earned through mining are considered compensation for providing resources to the Bitcoin network to compute hashes verifying transactions.

IOW, it's not at all analogous to building 3 chairs yourself.

Re: IRS Says Bitcoin Is Property

#264

Post by gibybo »

dclusin wrote: post #178
outside1234 wrote: post #165

Earlier quoted context omitted.

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.

Capital gains varies a little depending on the asset (currencies, precious metals, real estate, etc have special rules), but generally it's 15% for long-term capital gains (1 year, not 2 years) and your regular income tax rate for short term capital gains.

It was recently raised to 20% for people in the highest income tax bracket. AMT of 28% may be used instead in certain circumstances.

Re: IRS Says Bitcoin Is Property

#265

Post by vidarh »

VLM wrote: post #160
twoodfin wrote: post #137

Earlier quoted context omitted.

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…

"Making it non-regressive, let alone as close to progressive as our current system, is damned hard." Its not really important or difficult. The state I grew up in has a long list of poor people exemptions by industry. Everything in the grocery store except hot deli food is tax free, for example. Tuition, medical care, bunch of other poor people things all tax free... As a poor person the only taxes you'll likely ever…

> euro style 50%

As a European, I wonder what you're referring to. My aggregate total tax, including VAT (I'm in the UK, so the VAT rate is 20% for standard rated goods, but like in your case there's lots of zero rated goods; I believe the top VAT rate in the EU is 25%) is ~36% on a salary that puts me well into the "1%".

(VAT accounts for "only" about 4 percentage points of that, as the amount of my post-income-tax income that goes towards non-zero-rated products is not all that high).

Marginal tax rates in many European countries can be around or exceeding 50%, but you'd have to be ludicrously wealthy with a useless accountant to actually pay anywhere near that, even including VAT, unless you spend all your money on drinking and driving.

Re: IRS Says Bitcoin Is Property

#266

Post by [deleted] »

JumpCrisscross wrote: post #262
gamblor956 wrote: post #261

Earlier quoted context omitted.

App searches exchanges for the most favourable pricing source. The taxpayer has to be consistent with how they determine the price of bitcoins, generally meaning that they have to use the same method unless they have a good reason for switching. Deliberately choosing the most favorable pricing source is fine the first year--but they'd have to stick with the same source in subsequent years. Also, the app would be enab…

A taxpayer has to be internally consistent in picking their pricing source. It does not follow that the pricing source must be consistent between tax payers. Different situations could merit different pricing sources. It is not wrong to advise different people in different situations on how their differing needs may merit different pricing sources.

[deleted]

Re: IRS Says Bitcoin Is Property

#267

Post by gamblor956 »

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.

If you severely underreport your income, the period of time for which the IRS can go after you never ends. That means, theoretically, they could go after you when you're 90 for income you didn't report in 2013/2014.

Re: IRS Says Bitcoin Is Property

#268

Post by kingkilr »

dragontamer wrote: post #63
dllthomas wrote: post #47

Earlier quoted context omitted.

"BTC Anonymity requires the use of mixers" There are different levels of anonymity. "using mixers is against the law (its money laundering)" I think that's likely the case, and I think if it's not yet the case it will be soon, but do you know if this has actually been prosecuted (or otherwise made legally clear) anywhere yet?

""" There are different levels of anonymity. """ You are either secure, or not secure. There is no in between. BTC is a permanent public ledger that can be analyzed for the rest of time. Without mixers (or similar techniques), it becomes possible to figure out lots of facts. http://www.coindesk.com/194993-btc-transaction-147m-mystery-... Similarly, your transactions can be tracked and analyzed because its all public…

https://research.microsoft.com/en-us/people/mickens/thisworl...

Re: IRS Says Bitcoin Is Property

#269

Post by saluk »

JumpCrisscross wrote: post #209

If I had more time on my hands: (1) Launch a Bitcoin capital gains/losses tax approximation application (the "App") in beta. User keys in their Bitcoin addresses. App searches the block chain for the user's entry and exit times. App searches exchanges for the most favourable pricing source. App then returns an approximation of taxes owed/to be credited (e.g. in case of coins lost at Mt. Gox). App has a prominent disc…

The pricing must be priced at the time of the transaction - so you will need to search based on historical valuation.

Re: IRS Says Bitcoin Is Property

#270

Post by bduerst »

mattm wrote: post #258
bduerst wrote: post #163

Earlier quoted context omitted.

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.

Assuming the barter trade was even, the income and expense would cancel out thereby no taxes would be owed.

In barter exchanges, this is almost never the case, and is more suspicious when reported as such.
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