No. But someone certainly will. All the way up to the Supreme Court I would bet.
And you will be right there, carrying a placard outside, right?
My $.02.
Topic: Bitcoin Is Property Not Currency - page 10. (Read 14762 times)
And you will be right there, carrying a placard outside, right?
My $.02.
So what happens when you sell? You have accumulated coins over the months, but how do you know which particular coins you are selling? Maybe you're selling 5% of the coins you mined at $600, 2% of the coins mined at $630, 6% of the coins you mined at $510
Do you see where I'm going with this?
Do you see where I'm going with this?
Those amounts are regular income taxed at regular income rates. Your mining pool, if complying with US law, is required to report these transactions to the IRS if they exceed $600 during the year.
The profits that you gain by holding onto them are taxed at a lower capital gain rate. Your exchange, if complying with US law, will have to report the sale of your of your bitcoin if it exceeds $600 during the year.
If the IRS audits you, you will have to come up with documentation that explains the reported transactions.
You could argue that any product you produce or manufacture, digital or hard goods, has value... Whether you are making copies of a script or software package, selling music CDs, DVDs of movies you produce, or you make widgets that have real value in the marketplace... Unless you sell them, there is no taxable event. Mining is a process in which something is made. The bitcoin does not exist before you mine it. The block ledger is not prewritten. If it was, their ruling would apply as it would be a transfer of something that is already in existence.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
Except there is a "transaction" that mines the block. That transaction has counterparties (the rest of the network). If you manufacture a CD and put it on a shelf, it is true you don't pay taxes on it. But if you sell that CD to a warehouse and the warehouse puts it on a shelf, you do pay taxes on it. Think of the blockchain as a warehouse.
Again, this is not the only rule they could have written (and not the rule I would have written) and there are ways of looking at it that make sense and other ways of looking at it that don't. That likely could be said for any rule.
I take it you have never heard of inventory tax?
My $.02.
No. But someone certainly will. All the way up to the Supreme Court I would bet.
You could argue that any product you produce or manufacture, digital or hard goods, has value... Whether you are making copies of a script or software package, selling music CDs, DVDs of movies you produce, or you make widgets that have real value in the marketplace... Unless you sell them, there is no taxable event. Mining is a process in which something is made. The bitcoin does not exist before you mine it. The block ledger is not prewritten. If it was, their ruling would apply as it would be a transfer of something that is already in existence.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
Except there is a "transaction" that mines the block. That transaction has counterparties (the rest of the network). If you manufacture a CD and put it on a shelf, it is true you don't pay taxes on it. But if you sell that CD to a warehouse and the warehouse puts it on a shelf, you do pay taxes on it. Think of the blockchain as a warehouse.
Again, this is not the only rule they could have written (and not the rule I would have written) and there are ways of looking at it that make sense and other ways of looking at it that don't. That likely could be said for any rule.
If they are going to treat it as property, how would mined coins by a company set up as a corporation be treated? My impression is that per the IRS's position, bitcoins mined would be the same as a the creation of a product you create/produce for sale but does not sell. It becomes on the shelf inventory, and there is no taxable event until it sells. This applies to all companies that make products through a process, hard materials or digital. If you own a software application, or a script (plugin) you developed, and sell it for $50 per copy, and make 1000 copies on CDROM, you don't owe the IRS taxes on the copies until they sell. It's all 1s and 0s, so what difference is there between using computers to create scripts or plugins or software, or bitcoins? All property right? You just have to view it from a manufacturing standpoint. And the fact that they have ruled it is property, the manufacturing stance would in my opinion apply. Manufacturing being the creation of something tangible "property" from the use of labor, machines, raw materials, and energy resources. So you mine the coins, put them on paper wallets as inventory to sell. But hold them... For sale at a later date, which would be taxable. You'd have to set up an s-corp to do this, or is my thinking way off??
They are essentially saying that mining is more like receiving in trade than creating it yourself.
It's a rule they made, in some sense doesn't have to be logical (as long as they can defend it in court), but if you want a logical basis for it, that's it right there.
You could argue that any product you produce or manufacture, digital or hard goods, has value... Whether you are making copies of a script or software package, selling music CDs, DVDs of movies you produce, or you make widgets that have real value in the marketplace... Unless you sell them, there is no taxable event. Mining is a process in which something is made. The bitcoin does not exist before you mine it. The block ledger is not prewritten. If it was, their ruling would apply as it would be a transfer of something that is already in existence.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
Fine and good.
I trust that you will be the one to argue this before a court?
right
My $.02.
If they are going to treat it as property, how would mined coins by a company set up as a corporation be treated? My impression is that per the IRS's position, bitcoins mined would be the same as a the creation of a product you create/produce for sale but does not sell. It becomes on the shelf inventory, and there is no taxable event until it sells. This applies to all companies that make products through a process, hard materials or digital. If you own a software application, or a script (plugin) you developed, and sell it for $50 per copy, and make 1000 copies on CDROM, you don't owe the IRS taxes on the copies until they sell. It's all 1s and 0s, so what difference is there between using computers to create scripts or plugins or software, or bitcoins? All property right? You just have to view it from a manufacturing standpoint. And the fact that they have ruled it is property, the manufacturing stance would in my opinion apply. Manufacturing being the creation of something tangible "property" from the use of labor, machines, raw materials, and energy resources. So you mine the coins, put them on paper wallets as inventory to sell. But hold them... For sale at a later date, which would be taxable. You'd have to set up an s-corp to do this, or is my thinking way off??
They are essentially saying that mining is more like receiving in trade than creating it yourself.
It's a rule they made, in some sense doesn't have to be logical (as long as they can defend it in court), but if you want a logical basis for it, that's it right there.
You could argue that any product you produce or manufacture, digital or hard goods, has value... Whether you are making copies of a script or software package, selling music CDs, DVDs of movies you produce, or you make widgets that have real value in the marketplace... Unless you sell them, there is no taxable event. Mining is a process in which something is made. The bitcoin does not exist before you mine it. The block ledger is not prewritten. If it was, their ruling would apply as it would be a transfer of something that is already in existence.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
If they are going to treat it as property, how would mined coins by a company set up as a corporation be treated? My impression is that per the IRS's position, bitcoins mined would be the same as a the creation of a product you create/produce for sale but does not sell. It becomes on the shelf inventory, and there is no taxable event until it sells. This applies to all companies that make products through a process, hard materials or digital. If you own a software application, or a script (plugin) you developed, and sell it for $50 per copy, and make 1000 copies on CDROM, you don't owe the IRS taxes on the copies until they sell. It's all 1s and 0s, so what difference is there between using computers to create scripts or plugins or software, or bitcoins? All property right? You just have to view it from a manufacturing standpoint. And the fact that they have ruled it is property, the manufacturing stance would in my opinion apply. Manufacturing being the creation of something tangible "property" from the use of labor, machines, raw materials, and energy resources. So you mine the coins, put them on paper wallets as inventory to sell. But hold them... For sale at a later date, which would be taxable. You'd have to set up an s-corp to do this, or is my thinking way off??
They are essentially saying that mining is more like receiving in trade than creating it yourself.
It's a rule they made, in some sense doesn't have to be logical (as long as they can defend it in court), but if you want a logical basis for it, that's it right there.
On the other hand, the day the IRS can tell me how much wealth I have in my (vastly larger quantity) brain wallet is the day I pay taxes on my true wealth.
Spoiler: This day will never come.
Spoiler: This day will never come.
Unless you mined those coins in your brain wallet yourself, the IRS doesn't really care what you have in it until you convert it back to fiat. That's when you calculate your capital gains.
By the time I would actually need to convert my brain wallet wealth back to fiat, there will be no fiat left to convert back to.
The IRS will soon be as irrelevant as Blockbuster Video, and there is nothing anyone can do to change that.
You think so, eh?
Ima write down that one!
LOL!
My $.02.
If they are going to treat it as property, how would mined coins by a company set up as a corporation be treated? My impression is that per the IRS's position, bitcoins mined would be the same as a the creation of a product you create/produce for sale but does not sell. It becomes on the shelf inventory, and there is no taxable event until it sells. This applies to all companies that make products through a process, hard materials or digital. If you own a software application, or a script (plugin) you developed, and sell it for $50 per copy, and make 1000 copies on CDROM, you don't owe the IRS taxes on the copies until they sell. It's all 1s and 0s, so what difference is there between using computers to create scripts or plugins or software, or bitcoins? All property right? You just have to view it from a manufacturing standpoint. And the fact that they have ruled it is property, the manufacturing stance would in my opinion apply. Manufacturing being the creation of something tangible "property" from the use of labor, machines, raw materials, and energy resources. So you mine the coins, put them on paper wallets as inventory to sell. But hold them... For sale at a later date, which would be taxable. You'd have to set up an s-corp to do this, or is my thinking way off??
On the other hand, the day the IRS can tell me how much wealth I have in my (vastly larger quantity) brain wallet is the day I pay taxes on my true wealth.
Spoiler: This day will never come.
Spoiler: This day will never come.
Unless you mined those coins in your brain wallet yourself, the IRS doesn't really care what you have in it until you convert it back to fiat. That's when you calculate your capital gains.
By the time I would actually need to convert my brain wallet wealth back to fiat, there will be no fiat left to convert back to.
The IRS will soon be as irrelevant as Blockbuster Video, and there is nothing anyone can do to change that.
this is all great and fine with everyones examples of 1 BTC...but what about the other 99% of us who mine like .1/.2/.3 btc/day for example.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
Look at your receiving address(es) that you use for mining on blockchain.info. It will show all of the time and amounts of received btc. I'm pretty sure that the blockchain.info api has a function to show what it was worth at the time of the transaction, since my android blockchain wallet will tell me the "now" and "then" values in USD on each transaction.
Not impossible if you have a computer connected to the internet and your receiving address(es).
So what happens when you sell? You have accumulated coins over the months, but how do you know which particular coins you are selling? Maybe you're selling 5% of the coins you mined at $600, 2% of the coins mined at $630, 6% of the coins you mined at $510
Do you see where I'm going with this?
this is all great and fine with everyones examples of 1 BTC...but what about the other 99% of us who mine like .1/.2/.3 btc/day for example.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
Look at your receiving address(es) that you use for mining on blockchain.info. It will show all of the time and amounts of received btc. I'm pretty sure that the blockchain.info api has a function to show what it was worth at the time of the transaction, since my android blockchain wallet will tell me the "now" and "then" values in USD on each transaction.
Not impossible if you have a computer connected to the internet and your receiving address(es).
this is all great and fine with everyones examples of 1 BTC...but what about the other 99% of us who mine like .1/.2/.3 btc/day for example.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
So exactly which part of the system is "property"? Did the gurus at the IRS define that precisely?
Is it the private keys, or the blockchain entry, both, either, niether or something else entirely?
And if it is the private keys, what if they have been destroyed because all I have now is a brain wallet?
I just do not see how they could successfully legally define any part of the system as "property", in the usual context of "property law". Awaiting the court cases with popcorn ready.
Is it the private keys, or the blockchain entry, both, either, niether or something else entirely?
And if it is the private keys, what if they have been destroyed because all I have now is a brain wallet?
I just do not see how they could successfully legally define any part of the system as "property", in the usual context of "property law". Awaiting the court cases with popcorn ready.
Well, they just freakin' did it, so you are going to take them to court over the matter, right?
That's what I thought.
Thank you for your input.
My $.02.
Maybe he won't directly, but others may.
The handling of mined coins seems inconsistent and problematic. A painter is not taxed the value of her painting as she paints. She's taxed when she sells her creation. A closer analogy is a team of software engineers creating a game. They're not taxed as they code; they're taxed on the income from the sale of the game.
If a famous painter hires a team of brush-strokers to do the tedious work, these bush-strokers are employees and would be effectively "taxed as the paint." Similarly, most software engineers are effectively "taxed as they code" via income tax withholding.
Independent innovators--be it engineers or artists--pursuing their own ideas would be taxed if these ideas eventually generate a financial reward.
In my opinion, the logical ruling would be that hashers are liable for taxes incurred as they are awarded payment, while miners are liable for taxes should they realize a financial reward. But I think the guidance was fair, as expecting the IRS to understand the subtly between hashers and miners would be expecting a lot at this stage.
Please enlighten us!
Hashers simply supply computing power to a mining pool--they essentially rent their equipment to the pool to earn income. Hashers join pools because they want low volatility and no responsibility outside their "hashing" duty. They are the very definition of employees earning income.
Miners run a full node and represent independent sovereigns in the bitcoin network. They may innovate with code changes, decide which transactions to include in their blocks, organize defences against network attacks, and establish ethical policy regarding double-spending, blockchain forking, etc. It is from the behaviour of the many bitcoin nodes and miners that the character and properties of the bitcoin network emerges.
Hashers hash for the income. Miners mine for many reasons.
The handling of mined coins seems inconsistent and problematic. A painter is not taxed the value of her painting as she paints. She's taxed when she sells her creation. A closer analogy is a team of software engineers creating a game. They're not taxed as they code; they're taxed on the income from the sale of the game.
If a famous painter hires a team of brush-strokers to do the tedious work, these bush-strokers are employees and would be effectively "taxed as the paint." Similarly, most software engineers are effectively "taxed as they code" via income tax withholding.
Independent innovators--be it engineers or artists--pursuing their own ideas would be taxed if these ideas eventually generate a financial reward.
In my opinion, the logical ruling would be that hashers are liable for taxes incurred as they are awarded payment, while miners are liable for taxes should they realize a financial reward. But I think the guidance was fair, as expecting the IRS to understand the subtly between hashers and miners would be expecting a lot at this stage.
I'm not sure I understand the difference!
Please enlighten us!
Thanks in advance!
My $.02.
So when you say "hold onto" bitcoins ... what exactly are you referring to? The private keys, or a password to a Coinbase account, (or god forbid Goxx account), or something else?
It is just not clear what it means to be in possession of the thing you are referring to ...
It is just not clear what it means to be in possession of the thing you are referring to ...
An IRS-tax-compliant entity has to reports trades of "property" worth more than $600 in a year under threat of penalty (this is how they enforce tax compliance on a bartering system)
Your tax accounting should match up to these reports if you get audited.
Seems like lots of the 'Newbies' are suddenly well-schooled in the practices, jargon and expectations of the IRS ... almost like some positive educational messaging campaigns I've seen before.
On the other hand, the day the IRS can tell me how much wealth I have in my (vastly larger quantity) brain wallet is the day I pay taxes on my true wealth.
Spoiler: This day will never come.
Spoiler: This day will never come.
Unless you mined those coins in your brain wallet yourself, the IRS doesn't really care what you have in it until you convert it back to fiat. That's when you calculate your capital gains.
Wrong.
Read the ruling.
My $.02.
The handling of mined coins seems inconsistent and problematic. A painter is not taxed the value of her painting as she paints. She's taxed when she sells her creation. A closer analogy is a team of software engineers creating a game. They're not taxed as they code; they're taxed on the income from the sale of the game.
If a famous painter hires a team of brush-strokers to do the tedious work, these bush-strokers are employees and would be effectively "taxed as the paint." Similarly, most software engineers are effectively "taxed as they code" via income tax withholding.
Independent innovators--be it engineers or artists--pursuing their own ideas would be taxed if these ideas eventually generate a financial reward.
In my opinion, the logical ruling would be that hashers are liable for taxes incurred as they are awarded payment, while miners are liable for taxes should they realize a financial reward. But I think the guidance was fair, as expecting the IRS to understand the subtly between hashers and miners would be expecting a lot at this stage.
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