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Topic: Bitcoin as property; btc to usd is a refund, why money transmitter licenses? (Read 1624 times)

legendary
Activity: 1120
Merit: 1003
I was thinking about this, if Bitcoin is treated as property in the USA, then why the need for money transmitter licenses for exchanges based/operating in the US?

If you think about it.. as an exchange you're taking back a product "Bitcoin" (property) and "refunding" for USD. Wouldn't every store, which has a refund policy, need a money transmitter license?

The government clearly wants it both ways. Cryptocurrencies are a real bitch for them because there is no one to point a gun at and make it stop.
legendary
Activity: 2632
Merit: 1023
I was thinking about this, if Bitcoin is treated as property in the USA, then why the need for money transmitter licenses for exchanges based/operating in the US?

If you think about it.. as an exchange you're taking back a product "Bitcoin" (property) and "refunding" for USD. Wouldn't every store, which has a refund policy, need a money transmitter license?

this "contradiction" has been touched on here
https://bitcointalk.org/index.php?board=74.0
sr. member
Activity: 476
Merit: 250
Not if the 2 bitcoin merchants are okay with accepting eachothers returned merchandise. If you bought a bitcoin for $450 from another merchant and needed to refund it to me because I'm almost out of product, I would not mind refunding you $500.
That isn't refunding.
A refund is when someone returns the funds you gave them.

Quote
Look at gold, you can go to one coin shop for $1000 an oz, and 3 days later sell it back to another coin shop for $1200.

Exactly, you are selling it to another shop, they aren't refunding it.
legendary
Activity: 1302
Merit: 1008
Core dev leaves me neg feedback #abuse #political
If I mine an alt coin then send it to an exchange and sell it first for bitcoin and then sell bitcoin for litecoin then how should i consider this for my "income tax" for mining it ??
I wouldn't.  Anything you mine is not taxable until it is converted for dollars (and usually not even then).  (IANAL and especially IANYL).

And this is why it is a very bad idea to try to get advice from random participants in an internet forum.  Most of them just make up answers that they like the sound of rather than informing you of the facts.  That's a great way to get yourself into trouble.  Somehow, I doubt the IRS will accept "But BitchicksHusband said it was ok?" as an explanation of why you didn't pay the required taxes.

Specifically in IRS Notice 2014-21:

http://www.irs.gov/pub/irs-drop/n-14-21.pdf?utm_source=3.31.2014+Tax+Alert&utm_campaign=3.31.14+Tax+Alert&utm_medium=email

Quote
Section 4. FREQUENTLY ASKED QUESTIONS

Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?

A-8: Yes, when a taxpayer successfully “mines" virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income , for more information on taxable income.




Re:bad advice, sort of true, but then again, when misinformation is posted, there are usually several posters ready willing and able to jump in to save the day as you just did. (I was about to say something similar,
Although you did it better than I would have with the link and everything.) ,...my point is, a forum CAN be a good place to learn if one uses the tool properly.
legendary
Activity: 3472
Merit: 4801

I wouldn't.  Anything you mine is not taxable until it is converted for dollars (and usually not even then).  (IANAL and especially IANYL).

keywords: dollar, FIAT

if you touch THEIR property (banknotes are trademarks of banks/government.. not individuals) then you have to play by THEIR rules.

so tax is only enforcable when converted to FIAT

And this is why it is a very bad idea to try to get advice from random participants in an internet forum.  Most of them just make up answers that they like the sound of rather than informing you of the facts.  That's a great way to get yourself into trouble.  Somehow, I doubt the IRS will accept "But franky1 said it was ok?" as an explanation of why you didn't pay the required taxes.

Specifically in IRS Notice 2014-21:

http://www.irs.gov/pub/irs-drop/n-14-21.pdf?utm_source=3.31.2014+Tax+Alert&utm_campaign=3.31.14+Tax+Alert&utm_medium=email

Quote
Q-3: Must a taxpayer who receives virtual currency as payment for goods or services include in computing gross income the fair market value of the virtual currency?

A-3: Yes. A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received. See Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services.


legendary
Activity: 3472
Merit: 4801
If I mine an alt coin then send it to an exchange and sell it first for bitcoin and then sell bitcoin for litecoin then how should i consider this for my "income tax" for mining it ??
I wouldn't.  Anything you mine is not taxable until it is converted for dollars (and usually not even then).  (IANAL and especially IANYL).

And this is why it is a very bad idea to try to get advice from random participants in an internet forum.  Most of them just make up answers that they like the sound of rather than informing you of the facts.  That's a great way to get yourself into trouble.  Somehow, I doubt the IRS will accept "But BitchicksHusband said it was ok?" as an explanation of why you didn't pay the required taxes.

Specifically in IRS Notice 2014-21:

http://www.irs.gov/pub/irs-drop/n-14-21.pdf?utm_source=3.31.2014+Tax+Alert&utm_campaign=3.31.14+Tax+Alert&utm_medium=email

Quote
Section 4. FREQUENTLY ASKED QUESTIONS

Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?

A-8: Yes, when a taxpayer successfully “mines" virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income , for more information on taxable income.

sr. member
Activity: 378
Merit: 255
Not if the 2 bitcoin merchants are okay with accepting eachothers returned merchandise. If you bought a bitcoin for $450 from another merchant and needed to refund it to me because I'm almost out of product, I would not mind refunding you $500.

In that case you have $50 of capital gains (which is how the IRS is asking you to treat it).

Assuming that you pre-arranged to purchase an item for $450, for the sole purpose of sending that item to someone so that they could collect the refund.  If you, the recipient, and the merchant all worked out this plan ahead of time, you might find that FinCEN treats that as money transmission.  If the process was arranged specifically to hide illegal activity, it would almost certainly be treated as Money Laundering by the FBI.

Look at gold, you can go to one coin shop for $1000 an oz, and 3 days later sell it back to another coin shop for $1200.

Don't gold merchants need to register as a Money Service Business in some states?

Capital gains are fine, its only 20% now. You could make a billion dollars, and only pay 20% vs the 40% if it were legit income.

It's 0% if you are married and make less than $73,600 in non-long-term-capital-gains income.
legendary
Activity: 4410
Merit: 4788

I wouldn't.  Anything you mine is not taxable until it is converted for dollars (and usually not even then).  (IANAL and especially IANYL).

keywords: dollar, FIAT

if you touch THEIR property (banknotes are trademarks of banks/government.. not individuals) then you have to play by THEIR rules.

so tax is only enforcable when converted to FIAT, and money transmitter licences are enforcable to businesses (working as middlemen/agents) passing large amounts of FIAT between different people
sr. member
Activity: 378
Merit: 255
a refund would be returning your property for the price you originally paid.
That isn't what exchanges do.
Actually, if I buy a candybar at walmart, I can turn around and return it to Kmart. Thus being against company rules, probably is illegal to do so. The same being if one store sells it for $1.25 and the other for $2, you will earn $0.75 but usually in store credit because of no receipt, then buy a prepaid visa.

This isn't a "refund".  It's "theft" or "fraud".

A refund is when you return a product to the business that you bought it from and get in return the same amount that you paid for it.


It's only fraud if you lie to them about where you got it.  If they agree to return someone else's product, then it's fine.
sr. member
Activity: 378
Merit: 255
Refund?

I would say this though:
Since Bitcoin is considered property then exchanges should be considered real estate agents or classifieds directory where people list their property for sale.
 


I wonder how much thought they put into the IRS rules.. If I mine an alt coin then send it to an exchange and sell it first for bitcoin and then sell bitcoin for litecoin then how should i consider this for my "income tax" for mining it ?? maybe i consider the price of the alt coin at the time it hit my wallet from mining as the income tax ?? then i send it to the exchange where i do my trades to turn it into other coins and this is not taxed, or is it ?? maybe i consider the exchanges of alternate coins into other coins at an exchange as part of my mining ?? i might pay more or less "income" taxes if i were to do that way ?? i don't know .. whatever.

I wouldn't.  Anything you mine is not taxable until it is converted for dollars (and usually not even then).  (IANAL and especially IANYL).
hero member
Activity: 700
Merit: 500
that's a point I've been wondering about.

Amazon doesn't need a money transmitter license to sell goods, nor do most companies that sell property.

FinCEN should be taken to court on this issue by BTC Foundation, Bitpay, Coinbase.

they're playing both sides of the fence.

And yes, of course they're playing both sides of the fence.  The question is can they play both sides of the fence?  We won't know until it is litigated.  



Edit:  Apparently Amazon does carry money transmitter licenses in all 50 states for their payments systems, so maybe they're not the best example, although the primary point that to sell goods a company does not need such a license still holds.

http://garzikrants.blogspot.com/2014/04/on-amazon-and-bitcoin.html
legendary
Activity: 1310
Merit: 1000
Not if the 2 bitcoin merchants are okay with accepting eachothers returned merchandise. If you bought a bitcoin for $450 from another merchant and needed to refund it to me because I'm almost out of product, I would not mind refunding you $500.

In that case you have $50 of capital gains (which is how the IRS is asking you to treat it).

Assuming that you pre-arranged to purchase an item for $450, for the sole purpose of sending that item to someone so that they could collect the refund.  If you, the recipient, and the merchant all worked out this plan ahead of time, you might find that FinCEN treats that as money transmission.  If the process was arranged specifically to hide illegal activity, it would almost certainly be treated as Money Laundering by the FBI.

Look at gold, you can go to one coin shop for $1000 an oz, and 3 days later sell it back to another coin shop for $1200.

Don't gold merchants need to register as a Money Service Business in some states?

Capital gains are fine, its only 20% now. You could make a billion dollars, and only pay 20% vs the 40% if it were legit income.
legendary
Activity: 3472
Merit: 4801
Not if the 2 bitcoin merchants are okay with accepting eachothers returned merchandise. If you bought a bitcoin for $450 from another merchant and needed to refund it to me because I'm almost out of product, I would not mind refunding you $500.

In that case you have $50 of capital gains (which is how the IRS is asking you to treat it).

Assuming that you pre-arranged to purchase an item for $450, for the sole purpose of sending that item to someone so that they could collect the refund.  If you, the recipient, and the merchant all worked out this plan ahead of time, you might find that FinCEN treats that as money transmission.  If the process was arranged specifically to hide illegal activity, it would almost certainly be treated as Money Laundering by the FBI.

Look at gold, you can go to one coin shop for $1000 an oz, and 3 days later sell it back to another coin shop for $1200.

Don't gold merchants need to register as a Money Service Business in some states?
legendary
Activity: 1310
Merit: 1000
a refund would be returning your property for the price you originally paid.
That isn't what exchanges do.
Actually, if I buy a candybar at walmart, I can turn around and return it to Kmart. Thus being against company rules, probably is illegal to do so. The same being if one store sells it for $1.25 and the other for $2, you will earn $0.75 but usually in store credit because of no receipt, then buy a prepaid visa.

This isn't a "refund".  It's "theft" or "fraud".

A refund is when you return a product to the business that you bought it from and get in return the same amount that you paid for it.


Not if the 2 bitcoin merchants are okay with accepting eachothers returned merchandise. If you bought a bitcoin for $450 from another merchant and needed to refund it to me because I'm almost out of product, I would not mind refunding you $500.
Look at gold, you can go to one coin shop for $1000 an oz, and 3 days later sell it back to another coin shop for $1200.
legendary
Activity: 3472
Merit: 4801
a refund would be returning your property for the price you originally paid.
That isn't what exchanges do.
Actually, if I buy a candybar at walmart, I can turn around and return it to Kmart. Thus being against company rules, probably is illegal to do so. The same being if one store sells it for $1.25 and the other for $2, you will earn $0.75 but usually in store credit because of no receipt, then buy a prepaid visa.

This isn't a "refund".  It's "theft" or "fraud".

A refund is when you return a product to the business that you bought it from and get in return the same amount that you paid for it.
legendary
Activity: 1310
Merit: 1000
I was thinking about this, if Bitcoin is treated as property in the USA, then why the need for money transmitter licenses for exchanges based/operating in the US?

If you think about it.. as an exchange you're taking back a product "Bitcoin" (property) and "refunding" for USD. Wouldn't every store, which has a refund policy, need a money transmitter license?

How is it a refund?
The exchange didn't sell you the BTC in the first place, so how are they refunding it to you?
And even if you had happened to have bought the BTC from that particular exchange, a refund would be returning your property for the price you originally paid.
That isn't what exchanges do.

Actually, if I buy a candybar at walmart, I can turn around and return it to Kmart. Thus being against company rules, probably is illegal to do so. The same being if one store sells it for $1.25 and the other for $2, you will earn $0.75 but usually in store credit because of no receipt, then buy a prepaid visa. I may, or may not have done this with $15 dollar off coupons for diapers before, it also works if the item was on sale and no longer when you bring it back.
If we all become merchants, you will be able to get a refund for your coin no matter where it came from, it wont be against company policy to refund if you "made" your "product" or if you bought it from another merchant.
legendary
Activity: 1092
Merit: 1000
Refund?

I would say this though:
Since Bitcoin is considered property then exchanges should be considered real estate agents or classifieds directory where people list their property for sale.
 


I wonder how much thought they put into the IRS rules.. If I mine an alt coin then send it to an exchange and sell it first for bitcoin and then sell bitcoin for litecoin then how should i consider this for my "income tax" for mining it ?? maybe i consider the price of the alt coin at the time it hit my wallet from mining as the income tax ?? then i send it to the exchange where i do my trades to turn it into other coins and this is not taxed, or is it ?? maybe i consider the exchanges of alternate coins into other coins at an exchange as part of my mining ?? i might pay more or less "income" taxes if i were to do that way ?? i don't know .. whatever.
legendary
Activity: 3472
Merit: 4801
I was thinking about this, if Bitcoin is treated as property in the USA, then why the need for money transmitter licenses for exchanges based/operating in the US?

It is only treated as property by the IRS for tax reporting purposes.  It is still treated as currency by FinCEN and the FBI for Money Laundering purposes.

There are no specific laws yet about crypto-currencies in the U.S. so each department is deciding for themselves how it should be handled relative to their oversight.  The fact that the IRS is treating it like property doesn't mean that the entire U.S. government now treats it like property, it just means that it is reported like property when computing your tax obligation.

If you think about it.. as an exchange you're taking back a product "Bitcoin" (property) and "refunding" for USD.

Except you can "return" your bitcoin somewhere that you didn't purchase it, and when you "Return" it you might end up with a profit or a loss.  Additionally, you can send your bitcoin to someone else and they can "return" it for a different amount of money than what you spent to purchased it.

hero member
Activity: 784
Merit: 1000
https://youtu.be/PZm8TTLR2NU
I was thinking about this, if Bitcoin is treated as property in the USA...
Bitcoin is not treated as property in the US, because Bitcoin doesn't exist "in the USA". The United States is a landmass. Bitcoin is a decentralized, global digital curency. Think of it as "Earthcoin".

The IRS ruling is a bad joke. It would be like ancient Rome attempting to levee a tax on the forging of every sword worldwide, because they believe they are the "masters of the sword" or some shit.

Licenses, laws, fees - these things are all just as silly and irrelevant to Bitcoin as they would be if governments tried to apply them to torrents. It's basically the same technology.

The important thing to understand about the relationship between any global cryptocurrency and any local nation-state government is this:

The technology has ALL the power, the government has NONE. Think about the inevitable way this will play out, long-term.

Governments will bend over and take Bitcoin right in the ass. They'll be begging for it when (notice I didn't say IF) their clownish fiat-scrip plunges into the darkest depths of worthlessness.

That fact, ladies and gentlemen, is why every holder of 1+ BTC is already very, very rich. The world just hasn't figured it out yet. Be patient and

hero member
Activity: 1582
Merit: 502
Refund?

I would say this though:
Since Bitcoin is considered property then exchanges should be considered real estate agents or classifieds directory where people list their property for sale.
 
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