Topic: IRS Ruling = Floodgates Open for Wall Street? (Read 4952 times)

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

quoted from your second link.

"Unfortunately the guidelines as published do not address the issues surrounding the taxation of bitcoin mining, and whether bitcoin will be treated as a currency for mining purposes or like gold or silver."

This is what I am waiting for.

I thought that CRA announced back in November basically the same rules the IRS just released.  Bitcoin is a commodity under Canadian tax law.  Purchases are barter transactions.

http://www.cra-arc.gc.ca/nwsrm/fctshts/2013/m11/fs131105-eng.html
http://www.coindesk.com/canada-revenue-agency-tax-rules-apply-bitcoin/

aminorex, DeathAndTaxes, anyone else - I've got a question. Any advice will of course be taken in the IANAL context, but any guidance or direction that could be given would be sincerely appreciated.  If this has a clear answer, I just have a lot of data to go back to my records, find, and properly format.
If the answer to this question is unclear, I may need to pull in a tax attorney or something else in addition to the CPA I just grabbed.



What about selling a casascius coin in exchange for electronic BTC?

My interpretation of the IRS guidance (and preliminary interpretation of my still-trying-to-absorb-the-info CPA) is that this qualifies as a taxable event, I need to consider that an exchange, note the value of the BTC at the time of exchange, and pay tax on the appreciated value of the BTC from the time of acquisition.
I would love to be wrong on this.

For example, let's say I bought a 1 BTC casascius coin directly from Mike when they were worth $5.
If I were to exchange that 1 BTC coin for 3 BTC, and the current spot price is $500, then at the time of the trade:

value of goods received = 3*500=$1500.
cost = $5.

Profit = $1495, taxes due on this amount.
Cost basis for the newly acquired 3 BTC = $500.

Or this example (No-one would ever do this, but it makes a point):
I buy a 1 BTC casascius coin, acquisition cost: $5.
I exchange that 1 BTC coin for 0.25 BTC, and the current spot price is $500.

Profit = value of goods received - cost, so ($500*.25)=$125, subtract acquisition cost of $5, taxes due on $120.
Cost basis for the newly acquired 0.25 BTC = $125

Does this seem correct?
The exchange of the goods is a taxable event?

It's the type of decision many expected. And the type of decision that they would be expected to make. It's quite possible it'll change. The UK did it.

Steering it away from being a viable currency into digital gold would suit them very nicely. It would generate a ton of money and largely neuter the threat to the dollar. It fits Wall St's remit neatly. The little guy less so.

I am very sceptic about the IRS Impact on bitcoin.
I think/fear it is a great threat.
First time I got doubts about bitcoin going Mainstream.
The huge Problem is the handling of "everyday-selling and everyday buying".

These made me lol

Too soon, wall street will take time. They have so much legal framework to worry about before hopping in.

Right, but it won't always act like a speculative investment, and if we want it to ever act like a currency, then this could be a problem.

Can I move there? Like right now? Yeah, I think that'd be awesome. Plus they have kringle and a slew of Michelin starred rated restaurants in Copenhagen. Of course, the trick would be transacting with bitcoin...

That's a good idea. Not sure how well that could fly though with the IRS. But it would work as a starting structure to hold longer term on bitcoin. That'd be fascinating to have different types of vehicles like that with crypto-currencies like bitcoin.

So will coinbase be submitting data to the IRS? They may do it like paypal, where they only submit info for accounts over a certain threshold ($20k for paypal). Maybe if you only own a couple bitcoins, you'll be in the clear.

thanks for that, I had the same gut feeling, but I wasn't sure.

here is how it should be done.

http://politiken.dk/oekonomi/dkoekonomi/ECE2244816/bitcoin-gevinster-kan-stikkes-direkte-i-lommen/

still waiting for a statement of tax treatment in Canada...

Although, if it is taxed at the source, you can put it in a Roth vehicle and then the gains are tax-free.  So it might behoove one to tax it at the source, depending on your timelines and your goals and your business structure.

Well not exactly, they are both capital gains.  One is a long term capital gain and one is a short term capital gain.  What your CPA was probably trying to get across is that short term capital gains are taxed at the same rate as "regular income".  Long term capital gains are taxed at a lower rate (potentially 0%).   If you hold an asset for 365 days it is a long term capital gain.  If you hold it for 364 or less days it is a short term capital gain.

I agree. Think about it differently: bitcoin mining machine producing bitcoin is similar to refrigerator producing frozen meat. In both cases you reduce entropy locally (bitcoin, frozen meat), but increase it globally-excess heat is produced to conform to the second law of thermodynamics (entropy of a closed system never decreases). What I am getting at is that nobody thinks of your frozen meat as income because it is for PERSONAL use. Same with bitcoin-you have it in your personal posession-it has no value. Value (taxable) should be assigned to bitcoin in transaction. This is, of course, just my opinion, but it is also my opinion that it is not beneficial for me to be involved in mining under the strict meaning of these rules. Thankfully, I can chose not to mine and just invest in bitcoin or refuse to participate in bitcoin alttogether. However, if most miners decided that it is not worth it, than bitcoin network will be devalued and bitcoin will never achieve what we all hoped it will.

IMHO, personal use exception (no tax before selling or exchanging for other property) should be applied here, but for now it is what it is.

Definitely, when I saw this I was like "what?"

But it's tricky, because when you get a payout (like from a pool) it akin to receiving stock and I think that's what they were aiming for. To have to calculate on a daily basis is crazy, but when you realize that most people set up payouts on a daily basis, you can kinda see what they're going for. Plus the price of bitcoin fluctuates so much it's no wonder they set up a daily threshold. Personally, I think they should do it on a payout basis at the most.

Although it's hard to justify with going on a different period just because of how quickly the price moves.

I think the mining component is crack smoke, batshit crazy.  Bitcoin is software.  When you mine, you are generating software, just as if you wrote code.  There is no taxable event until and unless you sell the software.  Producing is not taxable.  The tax courts will overturn the opinion eventually if it is not revised sooner.  I am not a lawyer.

I will say, I think that there could be many more players in terms of accessibility since now bitcoins will be treated more akin to stocks. That kind of clarification I think hurts more of the business side of things as it somewhat stifles transactions and forces a lot of the infrastructure to catch up, but on the speculative side, there is much more clarity.

other way around. holding 12 months = capital gain, less than 12 months = income.

source: certified CPA