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IRS Says Bitcoin Is Property

bloomberg.com

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Re: IRS Says Bitcoin Is Property

#271

Post by derekp7 »

zacinbusiness wrote: post #230
derekp7 wrote: post #202

Earlier quoted context omitted.

If bitcoin is property, then this should be handled the same way barter is handled. Taxes would be paid on the fair cash value of the property. This is also what would keep USD in use -- it is the only currency the government accepts to pay taxes.

Ah interesting. Would price volatility make this practice too difficult? Or would the market eventually reach a basic equilibrium price?

Actually, I think I stated that kind of backwards. If I sell you a cow for 2 BTC, then I owe taxes based on the cash value of the cow. Same as if I sold a cow for 10 pigs. But, you can't pay taxes in BTC or pigs, so that is one thing that will always keep USD in use.

Re: IRS Says Bitcoin Is Property

#272

Post by PeterisP »

scotty79 wrote: post #238
PeterisP wrote: post #107

Earlier quoted context omitted.

Umm, just as with any other expensive property - they ask you to declare them; and if you conveniently forget to declare it, but at some time later (say, after 5 years) they somehow find that out, then you go to jail. Are you sure that you can hide that stash (and all purchases/deals made from it) permanently?

Just until you ditch citizenship of that prison country and live happily ever after spending your bitcoins in Germany or some warm paradise.

Germany treats BTC income the exact same way.

Re: IRS Says Bitcoin Is Property

#274

Post by logfromblammo »

bduerst wrote: post #270
mattm wrote: post #258

Earlier quoted context omitted.

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.

The whole point of barter is that the stuff traded by each side has roughly equivalent value to the traders.

Seems like the tax rules outlaw pure barter and make you use dollars in your transaction whether you want to or not.

Re: IRS Says Bitcoin Is Property

#275

Post by sokoloff »

csmeder wrote: post #216
csmeder wrote: post #212

What does this mean if a person bought a Bitcoin for $400 last year and now it is worth $583.03. What is the proper way to record this on a tax form? Will they have to pay tax now or when they sell the coin?

It sounds like no taxes would be collected at this point according to this: "Do I need to file or pay taxes if I own Bitcoins? Not if you bought Bitcoins or any crypto-currencies with your own money. However, if you traded, sold, or used any to purchase something, then you might. If you were given Bitcoins as payment, as a salary, or as a gift/donation, this is income and should be reported as any other income you ea…

You don't itemize your property on any tax form. If I bought AAPL stock some time in the past, but haven't (yet) sold it, I don't report that position to the IRS.

Re: IRS Says Bitcoin Is Property

#276

Post by derekp7 »

molsongolden wrote: post #224
jrockway wrote: post #198

Earlier quoted context omitted.

It's not a problem if you immediately sell a portion of the coin to cover your tax liability. This is how employer stock programs work; when shares vest, some are immediately sold to cover the income tax. Then, if the shares decrease in value and are sold, you have a normal capital loss to deduct. If they increase in value and are sold, you have normal capital gains. This is money, not "do whatever you want".

It doesn't seem fair or correct to compare Bitcoin to employer stock programs. The IRS seems to be doing this as well. Stock and stock options are generally granted in exchange for work performed for an employer so you have earned those amounts but Bitcoins are created through mining not given by an employer.

So here's a question for everyone -- if I take a few hunks of wood, say worth 10 bucks, and use it to craft a musical instrument that can be sold for $100, does that count as $90 in income, even if I just leave it on a shelf?

Re: IRS Says Bitcoin Is Property

#277

Post by dionidium »

genericuser wrote: post #76
dionidium wrote: post #25

Earlier quoted context omitted.

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 p…

It differs from state to state, basically:

* http://money.howstuffworks.com/personal-finance/personal-inc...

Re: IRS Says Bitcoin Is Property

#278

Post by arg01 »

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.

Is this a problem for anyone with money in MTGox?

i.e. would sales inside MTGox have counted towards this tax or isn't only with withdrawl/deposit into their ecosystem. I can imagine that if internal to MTGox interactions are treated this way then there are a lot of people who sustained a capital loss higher than that and had no option to withdrawl the money to pay taxes.

Re: IRS Says Bitcoin Is Property

#279

Post by logfromblammo »

ThomPete wrote: post #125

Interestingly Denmarks IRS just ruled that it's not taxable. (in Danish) http://epn.dk/samfund/politik/ECE6587289/afgoerelse-gevinste...

And so now a business structure incorporating both Danish and US companies is probably possible, such that Bitcoin can be used to avoid taxes on dollar and euro income.

Re: IRS Says Bitcoin Is Property

#280

Post by junto »

thrownaway2424 wrote: post #127
uptown wrote: post #8

"Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop." So if the coffee shop leaves the "property" as bitcoins instead of converting it over to dollars, and the value of those bitcoins falls before cashing-out, they're stuck paying tax on the $2 worth of income despite potentially no-longer having the…

If a coffee shop is accepting bitcoins in exchange for coffee, they are already exposed to the FX risk that bitcoins will fall in dollar terms before they can be liquidated. In other news, the number of coffee shops which accept bitcoins is indistinguishable from zero in practice.

This is an important point. If bitcoin had been used more as a currency, rather than investment speculation, the bitcoin community would have a much stronger case to argue that it is a currency.

It probably wouldn't have changed the IRS decision since this is the first regulatory post warning shot, but bit coiners only have themselves to blame.

It needs to be perceived by the outside world as a currency and not like a ponzi scheme that is full of thieves and brigands, because like it or not, that appears to be the general public's and the medias opinion to date.

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