Topic: Here again with another tax question. (Read 2601 times)
I was very happy when bitcoin remains taxing in ownership, because it does not have the bitcoin own physical form as the currency that exists now, besides, bitcoin can only be used in the virtual world, as cryptocurrency, so if we do not have an internet connection, then of course we will not be able to use bitcoin as a currency ...
Capital gains tax is due on your gain, so that's one BTC in your case.
No it isn't.
Okay so i understand that all bitcoin i receive is taxed as income and then taxed for capital gain once i sell but say this happens- I loan 10 bitcoins out and then at the end of the month i get 11 bitcoins back with the 10 being my principal and the extra 1 as interest. would i only need to pay taxes for the 1 bitcoin since i payed taxes already on my other 10 or is there something wrong with my assumptions?
That extra 1 BTC is interest income. It's just like being paid cash interest. Find the daily price on the day you received it and report it as income, unless the borrower sends you a 1099-INT, in which case you should use that figure.
I believe that you are correct regarding fair market value of the bitcoin paid as interest at the time it is received. This will be your cost basis for this bitcoin.
I think the much more complicated question is that of chargeoffs when a loan is determined to be noncollectable. The question is when you sell collateral and are only able to collect, say 90% of the amount lent, how would you handle this on your taxes? Also, generally speaking you must send a tax form (I believe it is a 1099-MISC) when you 'cancel' debt to allow your to take a tax deduction however you generally not collect a borrower's social security number when lending
so i should treat that one bitcoin as income? but then what happens once i sell it does it go back to the capital gain tax?
Yes, it's income, and from that point on you own it with a cost basis of that same income value on that date. So when you sell/spend it in the future you will use that work out the different as being your gain (or loss).
So, if you received 1 BTC yesterday, you report $365 income. (you can choose to use any reliable and consistent exchange rate source). If you sell it in a month for $400, you also have to report $35 short-term capital gains...which is taxed as income. If you sold it for $300 in a month, you could declare a loss of $65, which can be offset against your income, so reducing your tax bill.
so i should treat that one bitcoin as income? but then what happens once i sell it does it go back to the capital gain tax?
P.S. thanks for all your help guys
P.S. thanks for all your help guys
Capital gains tax is due on your gain, so that's one BTC in your case.
No it isn't.
Okay so i understand that all bitcoin i receive is taxed as income and then taxed for capital gain once i sell but say this happens- I loan 10 bitcoins out and then at the end of the month i get 11 bitcoins back with the 10 being my principal and the extra 1 as interest. would i only need to pay taxes for the 1 bitcoin since i payed taxes already on my other 10 or is there something wrong with my assumptions?
That extra 1 BTC is interest income. It's just like being paid cash interest. Find the daily price on the day you received it and report it as income, unless the borrower sends you a 1099-INT, in which case you should use that figure.
Capital gains tax is due on your gain, so that's one BTC in your case.
Idont know about your particular case but to me, the tax avoidance possible with bitcoin will force governments to move away from inefficient and distorting forms of taxation (income, corporate profits, capital gains etc.) and into more efficient taxes (consumption, land).
I see this as a big win, because vested interests and stupid people currently stop governments from doing this now, but when bitcoin takes over there will be no choice.
I see this as a big win, because vested interests and stupid people currently stop governments from doing this now, but when bitcoin takes over there will be no choice.
Okay so i understand that all bitcoin i receive is taxed as income and then taxed for capital gain once i sell but say this happens- I loan 10 bitcoins out and then at the end of the month i get 11 bitcoins back with the 10 being my principal and the extra 1 as interest. would i only need to pay taxes for the 1 bitcoin since i payed taxes already on my other 10 or is there something wrong with my assumptions?
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