Can someone explain to me HOW Bitcoin is property?
"Property" is treated as follows under US tax law:
When you buy it, you don't pay tax;
When you use it, you don't pay tax;
When you lose it, you don't pay tax;
When you sell (or exchange) it, you pay a tax based on its capital gain, which is defined as its value (in USD) when you sold it, minus its value (again, in USD) when you obtained it.
For tax purposes, BTC is pretty much like stock in a public company.
It's not like physical property, because it doesn't depreciate, and isn't used in business (like furniture or paper, for example).
Please correct me if I'm be wrong, but I don't think Bitcoin is subject to property tax.
I think the big difference between property and currency is when you use it to buy something. Since by US law it's property, you have to record its value (in USD) when you use it to purchase something, in order to correctly calculate capital gain. If it were currency, you wouldn't have to do this, but would wait until the end of your tax year and then figure out how much you have left and how much it's worth.
It seems to me that it's complicated either way, but there are many systems in place that can calculate your taxes when you deal with foreign currencies, so it would be much easier if BTC was in the same class. Usually, when tax entities (e.g. you) sell property such as inventory, real property, tangible property, or securities (e.g. stock), it is exchanged for USD, which makes the accounting fairly simply. If BTC is exchanged for something such as lunch, there isn't an easy way to put that in your books.
