Hi MoPac,
Thanks for your response. Please see my answers below.
but I have to echo those above who are curious about how you would actually do that.
I am currently developing the systems needed to automate these processes. I am a programmer in a previous life and have extensive experience in development systems such as this.
However, I do think it is very important that you provide up front some detail on how you intend to establish fair market value. My intention has been (unless I find out this is wrong) to check the MtGox value at the time of each dividend and report that dollar value as income. By recording the dollar value of the BTC I paid for a share at the time of share purchase, and the dollar value of the BTC I get back from a share at share sale, I can properly report my capital gain or loss.
The mtgox 24 hour average will be used to determine the value delivered when a payment is made similar to your system above.
It would be bad for everybody if mismatches started cropping up based on different ideas of BTC market value because of differences in averaging over time, or even looking at a different time on the same day, when the BTC price might have been volatile. You don't want to have people disputing a 1099 in some kind of four-way cluster---- between a shareholder, you, your lawyer, and the IRS. This could very easily happen if your lawyers are not well-versed in complex securities issues.
There will be one system of record. This system will be automated.
We also, of course, need a lot more assurance than we have right now about the protection of our tax ID information. This is a matter of routine for anyone asking for an SSN, as you know. But you also know as well as anybody that Bitcoin attracts very smart criminals and vandals who would just love the idea of dumping a gold mine of SSNs of shareholders from all over the community because they were held on an excel spreadsheet in the office of an issue-inexperienced lawyer who got in way over his head IT-security-wise.
All sensitive information will be encrypted in the database (if it is ever stored there) and backups will be stored on encrypted drives.
So I don't fundamentally have a problem with the basic idea of what you're doing. But I think that there is space here to have legitimate concerns at this point about how it's being done and by whom.
Thanks again for voicing your concerns in a reasonable manner. All data for the moment will be stored with Quentin until the internal systems are built to a production quality and the proper notices about data retention and security can be posted.
Best,
James