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[GIZ] IRS Declares Bitcoin Is Property and Must Be Taxed As Such - Page 19

post #181 of 199
This is what I am wondering...they aren't liking virtual currency to "property". They are liking it to things like gold and silver. If I found a gold mine in my back yard I would be forced to pay tax on it if I traded the gold for anything. Technically even if I just filled my basement with it and rolled around in it...but there is no way they would find out about it if I don't trade it or report it.

However, the difference is that the US government recognizes the value of gold and would except gold at market value to pay for the tax I need to pay. I don't think they are going to accept Doge coins...or are they? I can trade livestock for some other good without paying tax because the government doesn't look at that trade as a sale and a purchase for the parties involved...they don't recognize livestock as currency...even though it does have a market value. I was thinking that trades could still happen with virtual currency as long as the trade never manifested into dollars, but if they are going to say something has a certain value...this could get interesting.

I don't even mine... tongue.gif Though I have bought and sold...though that's going to have to wait for next years taxes.
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post #182 of 199
Quote:
Originally Posted by Vagrant Storm View Post

This is what I am wondering...they aren't liking virtual currency to "property". They are liking it to things like gold and silver. If I found a gold mine in my back yard I would be forced to pay tax on it if I traded the gold for anything. Technically even if I just filled my basement with it and rolled around in it...but there is no way they would find out about it if I don't trade it or report it.

However, the difference is that the US government recognizes the value of gold and would except gold at market value to pay for the tax I need to pay. I don't think they are going to accept Doge coins...or are they? I can trade livestock for some other good without paying tax because the government doesn't look at that trade as a sale and a purchase for the parties involved...they don't recognize livestock as currency...even though it does have a market value. I was thinking that trades could still happen with virtual currency as long as the trade never manifested into dollars, but if they are going to say something has a certain value...this could get interesting.

I don't even mine... tongue.gif Though I have bought and sold...though that's going to have to wait for next years taxes.

Well, contemplating taxing it, means indirectly they do contemplate endorsing it as a valid currency.
I don't get why people are sad about that...yes, they won't keep 100% of what their wallets have now, but that's how "laundering" through works.
And no pun intended.

You could pay your taxes in Doge or BTC, pretty much the same way retailers are accepting cryptos now: they actually receive $ through an exchange that keeps a commission and does the exchange @ the current rate. It is like paying with a US credit card @ a European e-shop...they don't care what you do or how many banks it goes through, they will get their € regardless, minus a set % of bank commissions. They get their money right there.

Sure, your BTC might go 10% up next day, making your purchace 10% more expensive...same could be said to a lesser extend with $ vs €, and has happened in the past. This "risk" is innate to currency trading.
Edited by pcfoo - 4/1/14 at 4:09pm
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post #183 of 199
Quote:
Originally Posted by Vagrant Storm View Post

but what if you never sold them for US dollars? Is the IRS going to accept Doge coins as payment? Will the IRS force a person to sell them for US dollars in order to pay the tax on them? I am going to try to find and read "Pub 525" and see if it sheds any light on it.
If you never sold them for money, then in the eyes of U.S law it is not income. And until that point at which you generate revenue/income from it in a recognized currency, it is not taxable. But if you sell those doge coins then it is still considered income. I'm surprised that the U.S isn't taxing virtual currency as a whole. But then I guess they would have to recognize it as a legitimate currency and that won't happen anytime soon.
Edited by 8800GT - 4/1/14 at 4:22pm
post #184 of 199
Quote:
Originally Posted by 8800GT View Post

Quote:
Originally Posted by Vagrant Storm View Post

but what if you never sold them for US dollars? Is the IRS going to accept Doge coins as payment? Will the IRS force a person to sell them for US dollars in order to pay the tax on them? I am going to try to find and read "Pub 525" and see if it sheds any light on it.
If you never sold them for money, then in the eyes of U.S law it is not income. And until that point at which you generate revenue/income from it in a recognized currency, it is not taxable. But if you sell those doge coins then it is still considered income. I'm surprised that the U.S isn't taxing virtual currency as a whole. But then I guess they would have to recognize it as a legitimate currency and that won't happen anytime soon.

This is how I've understood the federal and most state income taxes to work as well, but in that quote from the source that got me fired up it flat out states that a person should be taxed on the mere mining of the virtual currency...not just the selling of it. I just don't see how that doesn't go against tax codes that have existed for decades...maybe since tax was invented in the US.
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post #185 of 199
Quote:
Originally Posted by Vagrant Storm View Post

This is how I've understood the federal and most state income taxes to work as well, but in that quote from the source that got me fired up it flat out states that a person should be taxed on the mere mining of the virtual currency...not just the selling of it. I just don't see how that doesn't go against tax codes that have existed for decades...maybe since tax was invented in the US.
That is a bit of a loophole I guess. Like I said, in theory they would have to declare bitcoin a legitimate currency for it to be taxed. I'd say until that point, mining anything does not have to be declared until you generate income. If the government even tried to hassle you about it, I would seek council with the local MP/MPP (not sure what it is in the U.S) and explain it.

Unfortunately currency laws have been developed over the course of hundreds of years. bitcoin has been around 10 at most, and only been recognized as viable for less than 3. As such it is a huge grey area in the law. Having said that, that isn't for us to worry about, it is for the government to worry about. Until they do then they are liable for their lack of action.
post #186 of 199
Quote:
Originally Posted by 8800GT View Post

bitcoin has been around 10 at most, and only been recognized as viable for less than 3.

It was released in 2009. Just an fyi smile.gif
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post #187 of 199
Quote:
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.

Great. Can't wait until I file my 2014 taxes for the transactions that have taken place
So far I have done three transactions on the exchange and received USD for them. Currently have some BTC on coinbase, and apparently, if I understand the article correctly, the income is reported as a FMV when you receive the btc/usd.

In terms of taxing the mining, I really don't see how this can be done in real-time on an individual/company that mines so little such as myself. I'm talking .50 LTC max a day. There really should be differential treatment on this. Another question that just popped in my head: are pools being taxed for the services they provide?
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post #188 of 199
oh maan. the price on those 290x are gonna drop real low..hoping for 400 bucks a piece smile.gif
post #189 of 199
Quote:
Originally Posted by rudyae86 View Post

oh maan. the price on those 290x are gonna drop real low..hoping for 400 bucks a piece smile.gif

It is going to take a while for that to happen...probably a couple years. I am sure most people are just going forward thinking they won't report anything...but if the IRS gets the transaction data from the exchanges people will start getting bills in the mail and then I am sure you'll see a lot of gear from alt-coin mining setups going cheap.

Though if the IRS can't get the data or can't analyze it properly...nothing will change.
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post #190 of 199
Quote:
Originally Posted by Vagrant Storm View Post


Though if the IRS can't get the data or can't analyze it properly...nothing will change.

Should be good to go.
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