Topic: (2014-03-26) Zerohedge ..IRS Slams Bitcoin With Retroactive Tax Rules (Read 1759 times)

True, but it never considered bitcoin to be property, and very much said all reporting activity was done only when bitcoin touches the dollar in direct contradiction of the IRS.

It is not.

Here you go. As far as regular income is concerned, the IRS doesn't actually care whether you receive money, currency, or property, you have to pay tax on the fair market value of the income you received for your services (and you'll have a hard time convincing anyone that mining isn't a service).

Yes, inflation is fraud. What's your point? You pay far less in CGT than you would have lost if you held dollars, so keeping all your wealth in dollars to avoid tax isn't really a smart idea.

How is that in any way a valid comparison?

Depends on which dollars you're talking about. If your talking about Canadian dollars, or Australian dollars, or any other foreign dollar, than it is obvious that any gains from trading those currencies as well as any income received in those currencies is indeed taxed, so why would Bitcoin be any different?

You are sorely mistaken. Gains from such trades are taxable, and you may face penalties for not reporting such exchanges.

Which may be why they consider it property instead of currency. That only affects capital gains though, not regular income tax.

FinCEN never said anything about taxation.

A currency by itself does not generate profits, only on the exchange vs the dollar, and that is because the dollar is inflationary and because bitcoin it is being bootstrapping that is gaining adoption, once bitcoin has gained massive adoption over the years the only aspect of the currency that will give an apparent gain of value will be its anti inflationary aspect just like gold, compared to gold in the far future it will behave very similar as far as value.

when was the last time you had to pay a tax on the gains of the dollar?  probably never since you do not pay taxes on the currencies themselves.
When was the last time you got a tax refund based on the debasement of the dollar? probably never that is the purpose of the inflation tax, which hurts everyone that wants to save, and people that need to retire.

You pay taxes on activity that you do,  work, sell something, gamble, gift, etc but that is completely independent of the currency.

True you always had to pay taxes on profits made with bitcoin( work, sales, service, etc) , but this ruling is different it is taxing bitcoin itself.
And as far as mining went you did not pay any taxes since officially bitcoin was not money, currency or property, if you think it was under the law please provide such link, and I believe most fiat currencies do not pay taxes  either for their creation.
If I am wrong, which I could be I would appreciate a link on which the FED pays their taxes on the newly created dollars.


At time X
Let say in the far future 1 microbitcoin buy 1 liter of milk
Lets say that same liter of milk costs $10 dollars.

Lets say at time X + 20 years.
the 1 liter of milk still costs 1 microbitcoin, and in dollars it costs $100
If you had bitcoins would you say in those 20 years you made a 100% profit, or that the dollar lost most of the value.
That is one reason money itself is not taxed, only activity done to get money.

If you hold $1000 dollars on a safe at home you do not pay taxes.
if you hold the equivalent in bitcoins in the same safe you are expected to pay taxes.
That is fraud, since the rules that are being applied to the dollar are not the same rules being applied to bitcoin.

In regards to mining, we can compare that to the FED in the case of dollars, does not FED pay taxes on the creation of new dollars, most likely not. If the FED does not pay taxes on the creation of news dollars, why should bitcoiners pay taxes on the creation of new bitcoins.?

The ruling is retroactive, there is not ruling anywhere where the bitcoin currency itself is taxed, and it is not obvious that bitcoin as a currency could be taxed since dollars are not taxed.

I have been in the town of San Ysidro, CA, USA where Mexican pesos have high acceptance rate, and are exchanged for the dollar on many exchanges, I would like to point out that such exchanges are anonymous, and you do not a property tax or any tax on the exchange, you do pay a commission to the exchange, and the exchange have to pay taxes based on their profit, but the Mexican peso itself is not taxed, why should bitcoin be taxed.

Bitcoin also can not be considered a foreign currency since it is mined everywhere.

Bitcoin is one of the creates things that has happened in this century, it proves many thing, one of them being that deflationary currencies based on market economics works, and not only works but works well, but if the playing field is altered by politicians in favor of the dollar they can make bitcoin look bad and I buy doing that they are trying to destroy the bitcoin revolution that is taking place.

It is very hard for the politicians to accept that 1 man (Satoshi) is a lot smarter that their whole team of financial advisors.

Bitcoin is based on math, and computer science, now the IRS wants to tax math and computer science due to its usefulness, that is insanity.

Not only that but the IRS ruling contradicts the FINCEN ruling, that basically said as long as bitcoin does not touch the dollar you are ok, in direct contradiction to the IRS ruling.






 

But this ruling isn't retroactive. Bitcoin profits have always been taxable. The IRS has done nothing but tell us what we already knew, but some people refused to acknowledge.

Not only they want to discourage the holding, but all bitcoin activity.

This will create a nightmare in the USA to use bitcoin as a currency legally, the current price drop is in great part due to this ruling and in part by the China rumor.

It is in our best benefit to challenge this corrupt law, one method of getting a law to change is to show no respect for it, and it is also a law that can not be enforced, they do this to protect the FEDS which have been inflating the dollar.

Bitcoin can be used freely in places outside the USA.
the mining portion is not enforceable.
The sales portion can only be enforced if they ID you.

Sometimes I wonder how we can speak of the law, if retroactive laws are illegal, this law is illegal since it is retroactive.

A miner trying to comply with the law could end up in a situation that he can not pay the taxes due to lack of money and end up with negative income, in such a situation applying for welfare could be highly encouraging.

Absolutely.

When the law is broken to create a law, it is the best way to go since it is not an ethical law.

All retroactive laws are illegal, this is one good reason to protect your privacy, since it is impossible to tell what future laws will do to your existing present.

Well in the  spirit of Crypto currencies, which one of the many goals is to avoid the inflation tax and debasement of the currency, the current IRS law is not enforceable.

By the same token we should start calling the dollar property see if they like that, that way we can compare which is a better property the dollar or bitcoin.





 

This^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Seems like they want to discourage hodling.

Do the same as apple and btc-e
https://www.youtube.com/watch?v=d4o13isDdfY offshoring naver has been more easy then with bitcoin!
Denmark is a match better deal.

I recommend just ignoring them.

Sign in a Petition:(US citizens only)
AMEND IRS NOTICE 2014-2Taxing virtual currency/bitcoin as property stifles new technology&creates untenable requirements
https://petitions.whitehouse.gov/petition/amend-irs-notice-2014-2taxing-virtual-currencybitcoin-property-stifles-new-technologycreates/z7WtKZGY

I'm missing how this is retroactive. If he bought a Lamborghini last year, why would he have to pay taxes on it now? Wouldn't it only apply to the spending of bitcoins now? And how can it be proven at what rate you obtained your bitcoins?

The IRS can only scare you into giving them your bitcoins. They certainly can't collect or prove income unless you're selling something  through bitpay.

Agreed..but as they delayed a ruling for so many years, people who bought in good faith, that at that time the increase in value was not taxable as the Govt was treating it as a "currency alternative" and now face a tax bill because the left hand govt cant get in step with the right hand IRS or worse have conspired to do an about face then they have moved the goal posts to retroactively collect tax. This is unfair and a case could be made to challenge. whether it could eventually be won is another matter but the publicity/propaganda value ( and the Russians/Chinese may be willing to finance that lol)   may be worth it  

The cost of the case/multiple cases for the Govt is probably vastly more than what they could possibly collect given the (relatively) small amounts involved.

Tax is pretty much always robbery since you don't get a choice. But this is no worse than any other tax. You make gains = you pay tax, this is nothing new. It will only bother those people who thought Bitcoin was magically exempt from tax just well, because Bitcoin.

ps  Potential solution to avoid the "highwayman".

Sell them offshore and spend/invest them offshore and never repatriate the profits..

does that sound doable?

American miners beware


http://www.zerohedge.com/news/2014-03-26/irs-slams-bitcoin-retroactive-tax-rules-gold-next


Here’s the quick summary:

    1) While a number of governments (including the United States to a degree) have officially pronounced Bitcoin to be a ‘currency alternative,’ the IRS disagrees.

    

    2) According to the IRS, Bitcoin is -property- and should be taxed as such… similar to, for example, a piece of rental property or collection of fine wine.

    

    3) This means that the sale of Bitcoins is taxable based on capital gains. If you bought Bitcoins at $1 and sold them at $501 several years later, you would have to pay long-term capital gains tax on the $500 difference, currently 23.8%.

    

    4) If you hold Bitcoins for shorter periods of less than 1-year, you can be taxed at ordinary income tax rates on your gains.

    

   5) To the extent that you mine Bitcoins as a trade or business, the Bitcoin income from mining activity is not only subject to income tax, but also self-employment tax.

    

    6) If you trade your Bitcoins for some other property that exceeds your cost basis, you are subject to tax. This is a huge ruling that effects all the ‘Bitcoin millionaires’ out there– early adopters who purchased Bitcoins at a dollar or less.

So let’s say you were one of the first Bitcoin adopters and bought 5,000 bitcoins at $0.05. Last year when Bitcoin was valued at roughly $1,000 in paper currency, you traded 250 of them for a brand new Lamborghini.

The IRS would say that you had a cost basis of $12.50 for those 250 coins. But you traded them for other property with a fair market value of $250,000. This means you have a taxable gain of $249,987.50.

SO therefore ANYTHING you have purchased or wll purchase with bitcoins that have increased in value whilst in your possession attracts tax

looks like retroactive and continuous highway robbery to me.