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[GIZ] IRS Declares Bitcoin Is Property and Must Be Taxed As Such - Page 12

post #111 of 199
Quote:
Originally Posted by kishagi View Post

wasnt bitcoin created to avoid these kinds of things from happening?

Yeah, I'd be very surprised if this was taken seriously by the Bitcoin/*coin communities.
post #112 of 199
And now we wait for the audits.
Glad I never seriously gotten into mining.
    
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post #113 of 199
lol this kinda sucks
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post #114 of 199
I can see the rise of coins with anonymous transactions.

Time to jump on Darkcoin

    
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post #115 of 199
Quote:
Originally Posted by Ghoxt View Post

Would that be funny if the IRS came after you for making a profit on the Auction House for that 2 million Gold you sold in game and made a 500k profit, "Mr Leeroy, we um need you to pay the IRS , and if not you will be charged with Tax evasion" biggrin.gif that of course is the not so plausible example.

The plausible example are those that make a living from the selling of virtual goods "Mined" in MMO's. Not that I would or have in the past rolleyes.gif ahem but there are tons of sales of virtual characters and items "Gold" where Paypal has been used for years to purchase with Cash $$$.

The enforcement is the problem of course.

Not applicable to MMOs...

Any virtual money or items acquired in an online game remain the property of the company that runs the game. If you actually sell something to some one else for real world money they are paying you for your time/luck to acquire the item...in other words you are providing a service. The ownership of the data never changes. Though technically you probably should report any income generated from providing this service just like the game company does. However, that falls under existing laws that have been in place for...well...about as long as tax existed so it isn't really part of this discussion.

With virtual currencies you actually own the hash codes...the bits of data are yours thus you are responsible for them. And selling them for real world money is very similar to raising live stock or farming. You put time, money, and resources into something and produce product that you own and sell it for real world money. And note that I can take three head of cattle and trade them to some one for a horse and that isn't taxed. So people could still trade in virtual currencies...they just need places and people to accept them. As long as they are never turned into official money there will be no tax.

I don't think there can be any argument against this decision.
Edited by Vagrant Storm - 3/26/14 at 8:48am
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post #116 of 199
if this tax is adopted by the world (not likely) probably see the price of bitcoin drop as the big players move away into another tax free haven.
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post #117 of 199
How would they be able to tell with certainty the amount of digital currency you have? Isn't the only way to positively identify what you actually have through the unique hash of each 'xxx'coin? IF that's the case, then that would basically be mandatory gov't oversight and intrusion on the entire theme of crypto currency, am i correct? IF they have all hashes and who they're registered to, then they can track every single thing you do, and basically shut down the whole market on a whim due to having all unique hashes at their disposal. Also, if the oversight agency for these was hacked, and hashes stolen, wouldn't that completely ruin whichever currency was stolen?
Admittedly, my knowledge of the whole crypto-currency craze is limited, since I don't mine, but these are legitimate concerns I'd say.
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post #118 of 199
Quote:
Originally Posted by antonio8 View Post

Pretty sure might have been answered. But from question 7 and 8. I understand 7. It is basically like buying and selling stock to get a gain/loss.

But question 8 gets me. They are saying that I have to include the BTC as gross income the at the value I get it at that time? So if it is valued at $625, then I must include it as gross income for the year? Then when I sell it at $650 I have to pay a capital gain tax of the $25 it went up in value? That sounds like double taxation. If so I have been out of school many moons, isn't that illegal?
Warning: Spoiler! (Click to show)
Q-7: What type of gain or loss does a taxpayer realize on the sale or exchange of virtual currency?

A-7: The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A taxpayer generally realizes capital gain or loss on the sale or exchange of virtual currency that is a capital asset in the hands of the taxpayer. For example, stocks, bonds, and other investment property are generally capital assets. A taxpayer generally realizes ordinary gain or loss on the sale or exchange of virtual currency that is not a capital asset in the hands of the taxpayer. Inventory and other property held mainly for sale to customers in a trade or business are examples of property that is not a capital asset. See Publication 544 for more information about capital assets and the character of gain or loss.

Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?

A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.

Read more: http://www.businessinsider.com/irs-bitcoin-is-property-not-currency-full-release-2014-3#ixzz2x2TzWZwy
US government is stuffy old people so they didn't clarify when it is "fair market value". Most tax people believe when it hits your BTC address from the pool (since you control it then). I personally believe it should be when it hits an exchange since it is then able to be converted to USD , but it's not about what you believe (lol).
Quote:
. So, you will be able to register your receiving mining addresses and we will monitor them. Whenever any coins arrive at that address, we'll automatically assume it's mined (either solo or from a pool) and we'll assign it a cost basis. So when it is spent we already are able to calculate the gains.
https://bitcointaxes.info/blog#blog20140325

The amount you attain it as is your cost basis.

Capital gain/loss = sell cost - acquisition/purchase cost

Even if it is double taxation it wouldn't be the first time. You are taxed on your ordinary income and then taxed yet again on any gains from stocks/property.
Quote:
Originally Posted by Valor958 View Post

How would they be able to tell with certainty the amount of digital currency you have? Isn't the only way to positively identify what you actually have through the unique hash of each 'xxx'coin? IF that's the case, then that would basically be mandatory gov't oversight and intrusion on the entire theme of crypto currency, am i correct? IF they have all hashes and who they're registered to, then they can track every single thing you do, and basically shut down the whole market on a whim due to having all unique hashes at their disposal. Also, if the oversight agency for these was hacked, and hashes stolen, wouldn't that completely ruin whichever currency was stolen?
Admittedly, my knowledge of the whole crypto-currency craze is limited, since I don't mine, but these are legitimate concerns I'd say.

Exchanges all report to FinCEN due to AML (Anti money laundering)/KYC (know your customer)

Pools can be subpoenaed

Unless you're not using exchanges or pools , it's identifiable

If you buy something using bitcoin via coinbase merchant services (i.e. they have your address) , it's identifiable.

Anyone that is a US citizen and gave ID to exchanges and plans on not reporting is an IDIOT , because the IRS will find out quite easily

Blockchain is public, they can just use the exchange's cash out address and subpoena the email used at the exchange
Edited by AlphaC - 3/26/14 at 9:19am
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post #119 of 199
Quote:
Originally Posted by absh4x0r View Post

Good thing I don't live in the US.

If a US citizen buy 1 gold bar, would he be taxed ? IMO Bitcoin is taxable at the same extend as buying material and hoping it's price goes either up or down.

Yes, if a us citizen trades 1 gold bar for a another good or services, then it is taxable.

For example. If I was to have you wash my house for 1 year and I would give you my car as payment for that service, then you would be required to find fair market value on the car and declare it on the tax.


Lets say that you are wondering around the beach one day and you find 10 million dollars of gold in an hole. You are require by law to declare that property and you will be taxed.

Lets say that you are wondering around downtown and you find an old lady selling a 1930 Rolls Royce Phantom 1. You ask her the price, she says she is willing to give it up for 1000 dollars. You buy it on the spot.

On your taxes, you will have to declare that car as bought property that was bought for 1000 dollars

But if the old lady was to give you the car as a gift?

You would have to pay the tax on fair market value of the car. IE the car's fair market value is 150,000 dollars.
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post #120 of 199
Quote:
Originally Posted by Valor958 View Post

How would they be able to tell with certainty the amount of digital currency you have? Isn't the only way to positively identify what you actually have through the unique hash of each 'xxx'coin? IF that's the case, then that would basically be mandatory gov't oversight and intrusion on the entire theme of crypto currency, am i correct? IF they have all hashes and who they're registered to, then they can track every single thing you do, and basically shut down the whole market on a whim due to having all unique hashes at their disposal. Also, if the oversight agency for these was hacked, and hashes stolen, wouldn't that completely ruin whichever currency was stolen?
Admittedly, my knowledge of the whole crypto-currency craze is limited, since I don't mine, but these are legitimate concerns I'd say.

They don't care how much you have...you can mine and and mine and mine and they don't care. When you take it to an exchange and sell it for a taxable currency is when they care...and that will have records of where the money went. And they've already been cracking down on people who've been money laundering and trying to fudge where the money is going.

The same for the stolen currency...until it is transferred into US dollars the IRS doesn't care about it.
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