Originally Posted by antonio8
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).
. 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.
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.
Originally Posted by Valor958
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 exchangeEdited by AlphaC - 3/26/14 at 9:19am