I still don't agree with this logic. Has the government recognized "Bitcoin" as an asset? Has it issued any notice stating that gains from the crypto-trading can be treated as capital gains? I am asking this because in my country only profits from stock trading, sale of bullion, sale of real estate.etc is specifically considered for capital gains. The income tax department has never issued any circular regarding Bitcoin.
I don't know where you live, but under US tax law, none of this is unclear. The IRS released a memo several years ago defining Bitcoin and other virtual currencies as "property" which subjects it to capital gains taxation.
Our tax laws were written loosely to capture all types of income. Signature campaign income would be taxable at the time of receipt as ordinary income. If you gain thereafter by selling for fiat, you'd be liable for capital gains tax as well.
It doesn't matter if you get compensated in cash or company stock or bitcoins -- all have a fair market value and are taxed as income. The IRS memo mentioned above also elaborates on how to deal with income tax when compensated in digital currency:
Quote
Q-10: Does virtual currency received by an independent contractor for performing services constitute self-employment income?
A-10: Yes. Generally, self-employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. Consequently, the fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self-employment income and is subject to the self-employment tax.
Q-11: Does virtual currency paid by an employer as remuneration for services constitute wages for employment tax purposes?
A-11: Yes. Generally, the medium in which remuneration for services is paid is immaterial to the determination of whether the remuneration constitutes wages for employment tax purposes.
A-10: Yes. Generally, self-employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee. Consequently, the fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self-employment income and is subject to the self-employment tax.
Q-11: Does virtual currency paid by an employer as remuneration for services constitute wages for employment tax purposes?
A-11: Yes. Generally, the medium in which remuneration for services is paid is immaterial to the determination of whether the remuneration constitutes wages for employment tax purposes.
