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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 ...
Because unlike Federal reserve notes, virtual currency is worth something!
Trying to attach a cost to BC use both to dissuade and because it’s the future.
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. ;)
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.
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.
They don’t dare call it currency - yet.
Gives it credibility.
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. ;)
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.
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.
Are Bitcoins are Deemed “Property”, like an equity/Stock or “Real Property” like a home/car/pair of underwear?
There’s a huge difference.
Does this make it subject to sales tax? The whores in Sacramento need money.
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.”
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). :-)
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.
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.
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.
Oh sure... But NorFed warehouse receipts and physical gold coins were “counterfeit currency” subject to seizure...
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