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IRS Rules Bitcoin Is Property (Not Currency)
Zero Hedge ^ | 25 March 2014 | Tyler Durden

Posted on 03/25/2014 11:49:35 AM PDT by Errant

After less than three months consideration, the IRS has issued its statement clarifying th etax treatment of Bitcoins (and other virtual currencies) before the April 15th Deadline. The finding, summarized, is that Vitual currencies will be treated as property (not as a currency) which, as WSJ notes, means an investor who buys bitcoin would typically have a capital gain or loss when it’s sold. The price of Bitcoin is rising modestly on this news...

(Excerpt) Read more at zerohedge.com ...


TOPICS: Business/Economy; Religion
KEYWORDS: bitcoin; crypto; currency; goldbugs; irs; tylerdurden; tylerdurdenmyass; zerohedge
Pretty much how I had it figured as well, at least for now.
1 posted on 03/25/2014 11:49:35 AM PDT by Errant
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To: Lurkina.n.Learnin; nascarnation; TsonicTsunami08; SgtHooper; Ghost of SVR4; Lee N. Field; DTA; ...

Click to be Added / Removed.
2 posted on 03/25/2014 11:49:54 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Because unlike Federal reserve notes, virtual currency is worth something!


3 posted on 03/25/2014 11:51:46 AM PDT by DaveyB ("When injustice becomes the law; rebellion becomes duty." - Thomas Jefferson)
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To: All
Text of IRS Guidance on Bitcoin: Property, not Currency [WSJ]
4 posted on 03/25/2014 11:52:23 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Trying to attach a cost to BC use both to dissuade and because it’s the future.


5 posted on 03/25/2014 11:52:55 AM PDT by gaijin
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To: DaveyB

Lol, well probably because FRNs are the only “legal” currency of the land. And now that they’ve allowed the (BTC) horse to escape the barn, they have no other choice. ;)


6 posted on 03/25/2014 11:55:51 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

This is not good news for Bitcoin.

If it were a “Currency” than its increased Buying power would NOT be taxable.

It may now be that Bitcoins that appreciate and a traded for Goods become a “Taxable” event.

Compared to our Dollar for example. An increase in its buying power is not a taxable event.


7 posted on 03/25/2014 11:55:54 AM PDT by Zeneta (Thoughts in time and out of season.)
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To: Errant

This is a record keeping killer. Every transaction would require a paper trail and a determination of capital gain or loss. If sustained, this ruling would kill bitcoins for everyday use in the US.


8 posted on 03/25/2014 11:58:43 AM PDT by Truth29
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To: Errant

They don’t dare call it currency - yet.

Gives it credibility.


9 posted on 03/25/2014 12:00:09 PM PDT by cuban leaf
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To: gaijin

It does complicate things. Seems to me you’re going to have to determine a basis for any that are sold/traded for FRNs. Not sure how it will work if you simply trade them for some other good or service. I guess I should actually read the guidance I myself linked to before speculating. ;)


10 posted on 03/25/2014 12:00:40 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Like it or not, what the IRS rules is the way it’s gonna be. Now people can begin to accumulate some, and make plans for it.


11 posted on 03/25/2014 12:01:37 PM PDT by I want the USA back (Media: completely irresponsible traitors. Complicit in the destruction of our country.)
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To: Truth29
Every transaction would require a paper trail and a determination of capital gain or loss.

It may not apply in a trade, where you exchange Btc for a good or service of equal value. You will have to keep up with your basis and/or expenses if you sell/cash out for FRNs, as with any asset such as equities and etc. I'm no tax expert by any means however.

12 posted on 03/25/2014 12:05:44 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Are Bitcoins are Deemed “Property”, like an equity/Stock or “Real Property” like a home/car/pair of underwear?

There’s a huge difference.


13 posted on 03/25/2014 12:06:55 PM PDT by Zeneta (Thoughts in time and out of season.)
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To: Errant

Does this make it subject to sales tax? The whores in Sacramento need money.


14 posted on 03/25/2014 12:06:58 PM PDT by Lurkina.n.Learnin
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To: Errant

The determination of cost basis would be for every transaction, no matter how minor. From the linked article:
“Today’s IRS guidance will provide certainty for investors, along with potential income-tax liability. 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.”


15 posted on 03/25/2014 12:11:45 PM PDT by Truth29
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To: Lurkina.n.Learnin
That would come under state taxing authorities. For instance, private sales in our state aren't taxed. However if you were to buy Btc from a local dealer, that might mean your have to pay sales tax in my state.

It's complicated, as there are exceptions in our state law for things that qualify for "investment purposes" like gold, silver, coins, and etc.

At least we and the states have some guidance to work from now, and we no longer have to fear a raid by treasury agents for having illegal currency, since they've ruled that it isn't (currency). :-)

16 posted on 03/25/2014 12:13:46 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: gaijin
Trying to attach a cost to BC use both to dissuade and because it’s the future.

They don't care if people use it, they just want their "fair share"... same as if you trade art, real estate or any other things of value.

17 posted on 03/25/2014 12:14:07 PM PDT by Cementjungle
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To: Errant

From zerohedge:


Is a person who “mines” a virtual currency considered to have received income?

Yes, and if the taxpayer engages in mining as a trade or business, self-employment tax is often due.


This is going to be a problem.

Bitcoins are fungible and globally mined. If a US company issues “Equity/Stocks” is that a taxable event? I don’t think it is.


18 posted on 03/25/2014 12:14:17 PM PDT by Zeneta (Thoughts in time and out of season.)
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To: Errant

Well... Sure. Currencies are property, too. Currency just means it’s a form of property that everybody has, so it is useful as a medium of exchange. Bowling balls could be currency too except we’d all need really big pockets.


19 posted on 03/25/2014 12:15:28 PM PDT by Ramius (Personally, I give us one chance in three. More tea anyone?)
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To: Errant

Oh sure... But NorFed warehouse receipts and physical gold coins were “counterfeit currency” subject to seizure...


20 posted on 03/25/2014 12:15:48 PM PDT by Dead Corpse (Tre Norner eg ber, binde til rota...)
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To: Truth29
I'd have to read the IRS guidance before I'll agree with the author's determination. Seems to me there will have to be some sort of allowances made for Btc purchases. I think businesses will demand it.
21 posted on 03/25/2014 12:18:26 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Zeneta
This is going to be a problem.

I agree. I also agree that "mined" coins are a source of income, just like any business. I see the possibility that miners will have to be regulated now, or somehow a record of the "BTC" they produce maintained.

Issues that will need to be worked out in time as will all new technologies. There was a times when didn't need red lights or even parking meters. ;)

22 posted on 03/25/2014 12:24:00 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

If it is not a currency then why do need a money transmitters license to transmit bitcoins?


23 posted on 03/25/2014 12:28:15 PM PDT by Vince Ferrer
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To: Errant

I don’t know. The currency model seems to me to make more sense than, say, a precious metal analog.


24 posted on 03/25/2014 12:28:51 PM PDT by Still Thinking (Freedom is NOT a loophole!)
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To: Vince Ferrer

Good point. I just hurriedly glanced through some of the guidance. This adds a huge new wrinkle to the mix and will take tax experts to translate into common language. No doubt further guidance/clarification/changes will follow this first release.


25 posted on 03/25/2014 12:40:08 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

All your everything are belong to us!


26 posted on 03/25/2014 12:40:44 PM PDT by Organic Panic
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To: Still Thinking

#25


27 posted on 03/25/2014 12:41:01 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Organic Panic

Lol, looks like it!


28 posted on 03/25/2014 12:41:22 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

If I take a yard of fabric and make a shirt, sell it, then the “income” is taxable.

If I take a company, sell it, (equity sale) then that income is not taxable, from what I understand.

The difference is the transfer of ownership, being either ALL or PARTIAL ownership.

A shirt is a shirt that no one expects it to appreciate in value. But, if I made or even bought a thousand shirts at $10 and sold them for $20, I’d have a taxable event.

Bitcoin miners will have to reduce their cost basis by calculating their costs to produce them. Their time, effort and computing power usage, etc etc etc. They can easily claim that their costs have exceeded their sales price.

Do you think the IRS is going to set some standard for “Production costs”?

From my perspective, Bitcoins are neither a currency nor a property, in the way they define them, but a property more like a chicken, a barter tool, used to trade for other properties.


29 posted on 03/25/2014 12:49:13 PM PDT by Zeneta (Thoughts in time and out of season.)
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To: Zeneta

So...metals are property too.


30 posted on 03/25/2014 12:52:14 PM PDT by Therapsid
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To: Zeneta
Do you think the IRS is going to set some standard for “Production costs”?

No, I see "mining" as taxed like any other business where the owner has skin in the game. The miner will not be able to take out his own labor, only expenses for equipment, salaries, repairs, electrical costs, and any other associated costs for producing coins.

Where I see a problem is as you observed: "Bitcoins are neither a currency nor a property". I suggest they are a little of both. IMO, they should be treated like a currency by those who acquire them for convenience and use them for purchases while treating as an asset for those who trade or mine them.

I'm not sure how you keep the two separated. It is indeed a problem looking for a solution.

31 posted on 03/25/2014 1:00:03 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

I think if they are going to tax Bitcoin, it should be taxed by weight... :)


32 posted on 03/25/2014 1:16:48 PM PDT by PoloSec ( Believe the Gospel: how that Christ died for our sins, was buried and rose again)
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To: PoloSec

Bitcoin is backed by the same hard asset that us currency is backed by {null}, but the full faith and credit of bitcoin verse the us treasury and federal reserve may prove to be a bit more appealing in the future.


33 posted on 03/25/2014 1:25:45 PM PDT by DaveyB ("When injustice becomes the law; rebellion becomes duty." - Thomas Jefferson)
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To: Therapsid

So...metals are property too


Yep.

If you’ve got a real Silver coin, 1986-2013 Silver Eagle, $1.00 face value, and trade it for cash at ~$19.00 (current market), that is a capital gain.

Your cost basis for this may vary, but it would be assumed that it was its face value. If you factor in inflation/deprecation then your cost basis may be closer to what you can sell it for.

The IRS doesn’t care about an individual that trades their coins for cash. They want the money from people that do this as a business.

The question I have is “Where does the IRS draw the line?”

There have been moves to “Tax” excessive corporate profits, what’s the difference between that and “excessive Savings?”

Politically, I would run a campaign that equated “Corporate profits” to an “individuals Savings”. There’s not a single Liberal/Progressive that would forgo their personal savings.

Corporate profits represent a company that lives within its means. An individuals savings represents the same.


34 posted on 03/25/2014 1:33:55 PM PDT by Zeneta (Thoughts in time and out of season.)
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To: Errant

Properties are “NOT FUNGIBLE”

Bitcoins are !!!!!!

Equities have a limited fungibility where as a currency does not.

Fungibility:

Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. For example, since one ounce of gold is equivalent to any other ounce of gold, gold is fungible. Other fungible commodities include sweet crude oil, company shares, bonds, precious metals, currencies. Fungibility refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not relate to the exchange of one commodity for another different commodity.

http://en.wikipedia.org/wiki/Fungibility

The IRS ruling, from what I understand, is an attempt to deem Bitcoins as NOT being fully fungible, even though they are, and classify them as a hybrid.

In the late 1990’s there was an effort to create a new currency based on “airline miles”, miles/credits that could be accumulated and traded for cash etc...


35 posted on 03/25/2014 1:55:17 PM PDT by Zeneta (Thoughts in time and out of season.)
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To: PoloSec

Like the way you think! ;)


36 posted on 03/25/2014 3:32:52 PM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Truth29

>>This is a record keeping killer. Every transaction would require a paper trail and a determination of capital gain or loss. If sustained, this ruling would kill bitcoins for everyday use in the US.<<

And the IRS is going to want you to do annual accounting on your holdings.


37 posted on 03/25/2014 3:41:03 PM PDT by B4Ranch (Name your illness, do a Google & YouTube search with "hydrogen peroxide". Do it and be surprised.)
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To: Truth29
Every transaction would require a paper trail and a determination of capital gain or loss

All the transactions are in the chain, no need for any other records. Someone will write some simple software to capture taxable events and that will speed corporate adoption.

38 posted on 03/27/2014 4:25:18 PM PDT by palmer (There's someone in my lead but it's not me)
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