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IRS Says Bitcoin Is Property

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Re: IRS Says Bitcoin Is Property

#301

Post by scintill76 »

iLoch wrote: post #156
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…

"Income tax? Sales tax? Why not both?" - Canadian government. sigh

The US doesn't have federal sales tax, but many states do, so Americans have this too.

Re: IRS Says Bitcoin Is Property

#302

Post by politician »

I wonder what other "proof of work" algorithms also now generate taxable events. Or whether something mundane like using iterated bcrypt2 turns the resulting hashes into property which I have to report to the IRS?

Re: IRS Says Bitcoin Is Property

#303

Post by scotty79 »

PeterisP wrote: post #272
scotty79 wrote: post #238

Earlier quoted context omitted.

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.

Thank you. I haven't researched the subject. I still think you will be better of dealing with German tax authorities than with IRS. I suspect there are and will be some European countries that treat bitcoins with more leniency.

Re: IRS Says Bitcoin Is Property

#304

Post by politician »

knome wrote: post #247
ThomPete wrote: post #125

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

All this has given me a thought. If in the video game based economy for TF2 you receive a hat that can be traded on the marketplace or traded to others, do you have to consider that a taxable event? If you have something rare and it's potential value goes up, is it a capital gain? Is the depreciation similarly a loss?

Was Blizzard's removal of RMT from Diablo 3 more or less related to IRS issues? When ships in EVE Online are blown up, can we claim a deduction?

Re: IRS Says Bitcoin Is Property

#305

Post by mehmeta »

URSpider94 wrote: post #291
phogster wrote: post #142

Earlier quoted context omitted.

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.

If the barter is for services (I mow your lawn if you do my taxes), then yes, both parties would owe income tax on the fair market value of the services -- it would be the same as if they had paid each other the same amount in cash. If the barter is an exchange of goods for services (I'll do your taxes in return for 10 dozen eggs from your farm), then the party that received the goods in exchange for their services o…

Excellent post overall, very helpful.

>> However, if I exchange my apartment for your car, then it's not a like-kind exchange, because the items exchanged are not of like kind (makes sense?), and both parties pay capital gains (or can claim a loss) vs. the fair market value of the exchange.

You probably can't claim a capital loss for a car as you can only claim it for things you hold for investment purposes. Since the car's depreciation is expected to be because of personal use you can't claim loss on it whereas if it were to increase for some reason (memorabilia) you'd have to pay gains.

Re: IRS Says Bitcoin Is Property

#306

Post by scotty79 »

evjim wrote: post #255
twoodfin wrote: post #251

Earlier quoted context omitted.

How could wages possibly keep up with the inflation that such a scheme would create? If they don't keep up, the government needs to print more money to provide more benefits to keep people from starving, and you have a pretty vicious circle.

We are already partially taxed by inflation. I think about 1% per year. Minimum wage should be matched to inflation and living costs. Obviously it could cycle out of control if the amount of money printed wasn't regulated. But it could be a decent method to cut no-value-add industries (IRS, accounting). Job mobility could be higher if you didn't have to file with the government every time you got hired. So the worker…

Tax would still be deflationary as rich people could easily escape it by investing their money in gold or other currencies.

Re: IRS Says Bitcoin Is Property

#307

Post by beagle3 »

stevewilhelm wrote: post #282
beagle3 wrote: post #242

Earlier quoted context omitted.

But do see my other comments on SEC rule 144 - sometimes you are forbidden from selling in a way that exposes you to loss risk that cannot be mitigated without running afoul of security laws.

You can purchase put options or employ other strategies to hedge against risk when one owns a large position in a single stock.

There was specific language that explicitly said "this is illegal" until the latest revision. Now, it's implicit, and in inquiries to the SEC they have repeatedly said "that goes against regulation".

The general idea behind rule 144 very sane: It's supposed to limit pump-and-dump IPOs and M&As, by forcing anyone who did not pay for their shares outright to wait 6 months before they can gain anything (and legally, the SEC is only interested in the overall guarantee - e.g. put options that guarantee you don't lose are AGAINST the current spirit and the former letter of the law).

However, the laws apply equally to someone who owns 90% of the shares (who is in a position to abuse an IPO and M&A) and 0.1% of the shares (who is likely an employee receiving RSU or options, has zero control, and likely not even any finances to draw upon)

The tax law is insane, the security regulations are complicated, and their interplay is ludicrously insanely crazy.

Whenever you see people saying "oh, it's very simple - you just didn't get the right advice" you can be sure that they have no idea what they are talking about - either they didn't have to deal with it, or they weren't aware they were doing something illegal.

Re: IRS Says Bitcoin Is Property

#308

Post by URSpider94 »

mehmeta wrote: post #305
URSpider94 wrote: post #291

Earlier quoted context omitted.

If the barter is for services (I mow your lawn if you do my taxes), then yes, both parties would owe income tax on the fair market value of the services -- it would be the same as if they had paid each other the same amount in cash. If the barter is an exchange of goods for services (I'll do your taxes in return for 10 dozen eggs from your farm), then the party that received the goods in exchange for their services o…

Excellent post overall, very helpful. >> However, if I exchange my apartment for your car, then it's not a like-kind exchange, because the items exchanged are not of like kind (makes sense?), and both parties pay capital gains (or can claim a loss) vs. the fair market value of the exchange. You probably can't claim a capital loss for a car as you can only claim it for things you hold for investment purposes. Since th…

Fair point, I'd have to be holding the car for investment purposes, or using it as a business asset, not using it for personal transport.

Re: IRS Says Bitcoin Is Property

#309

Post by patio11 »

DrStalker wrote: post #297
uiri wrote: post #248

Earlier quoted context omitted.

I think that given the speed at which bitcoin mining hardware is obsoleted, it is perfectly reasonable that most ASICs would have an expected useful life of under a year.

For tax purposes does it matter when the device is obsolete or when it reaches the end of it's expected lifespan as functional hardware?

The relevant test is "economic useful life", which the IRS helpfully defines:

(b) Useful life. For the purpose of section 167 the estimated useful life of an asset is not necessarily the useful life inherent in the asset but is the period over which the asset may reasonably be expected to be useful to the taxpayer in his trade or business or in the production of his income. This period shall be determined by reference to his experience with similar property taking into account present conditions and probable future developments. Some of the factors to be considered in determining this period are (1) wear and tear and decay or decline from natural causes, (2) the normal progress of the art, economic changes, inventions, and current developments within the industry and the taxpayer's trade or business, (3) the climatic and other local conditions peculiar to the taxpayer's trade or business, and (4) the taxpayer's policy as to repairs, renewals, and replacements. Salvage value is not a factor for the purpose of determining useful life. If the taxpayer's experience is inadequate, the general experience in the industry may be used until such time as the taxpayer's own experience forms an adequate basis for making the determination. The estimated remaining useful life may be subject to modification by reason of conditions known to exist at the end of the taxable year and shall be redetermined when necessary regardless of the method of computing depreciation. However, estimated remaining useful life shall be redetermined only when the change in the useful life is significant and there is a clear and convincing basis for the redetermination.

Re: IRS Says Bitcoin Is Property

#310

Post by mindcrime »

npizzolato wrote: post #256
mindcrime wrote: post #199

“It’s challenging if you have to think about capital gains before you buy a cup of coffee,” he said. This is exactly why we need to quit caring what the IRS, Fed, Treasury, Inland Revenue, etc. think of Bitcoin, and focus on it's use (along with Tor, tumblers, and other technologies) as an untraceable, anonymous crypto-currency that lets us avoid dealings with the IRS and agencies of their ilk. Will this work against…

Let me know how that works out for you when the IRS wants to know how you bought that house, car, and boat with all the money you never reported. When the IRS shows up at your door and your answer is "hahaha sorry, it's all untraceable and anonymous, you can't know how much i own!", I'm sure they'll throw their hands up and walk away in defeat.

I'm sure they'll throw their hands up and walk away in defeat.

That should certainly be our goal. We're hackers, we're better than this. Again, we should be looking for ways to route around the damage, rather than embracing it.

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