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[GIZ] IRS Declares Bitcoin Is Property and Must Be Taxed As Such - Page 5

post #41 of 199
Quote:
Originally Posted by BulletSponge View Post

Well, this just means my utility/internet cost is now a business expense as well as all the hardware I've bought recently. This is one of those times I'm really glad my father is retired IRS.

I've probably made $10,000 in "profit" but under that concept, between a couple case labs upgrades, X99, Maxwell, 5960X and purchases, it'd all go under the business expense category. I'd probably break even.

What happens to the old hardware that I sold? SInce you're selling it for less than you bought it for, you shouldn't be taxed on it either right?
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post #42 of 199
Quote:
Originally Posted by b.walker36 View Post

It actually does distinguish you chose not to read it. The tax rules only apply to Convertible Virtual currencies which by definition gold in wow doesn't fall into. You can try and argue semantics that it does but it really doesnt. Bit coins has an equivalent value in real currency, or acts as a substitute for real currency, wow gold doesn't really follow that. The gold AH for diablo may have counted since there was an actual exchange but wow gold doesn't hold up to that.


There may not be an auction house for wow gold but it certainly has a set price. Like 3 dollars per 10k or something like that. And while it may not be within reason now, it might be within reason in say 10 years. Just because of how its worded they could take advantage of it a long time down the road because well its already been passed.
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post #43 of 199
Quote:
Originally Posted by BulletSponge View Post

Well, this just means my utility/internet cost is now a business expense as well as all the hardware I've bought recently. This is one of those times I'm really glad my father is retired IRS.

You would need to create a company then. You can't write it off as a business expense against your 9-5 if its only for mining. You would nneed to make your mining operation a company and pay the taxes that come with it.
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post #44 of 199
Quote:
Originally Posted by b.walker36 View Post

Quote:
Originally Posted by BulletSponge View Post

Well, this just means my utility/internet cost is now a business expense as well as all the hardware I've bought recently. This is one of those times I'm really glad my father is retired IRS.

You would need to create a company then. You can't write it off as a business expense against your 9-5 if its only for mining. You would nneed to make your mining operation a company and pay the taxes that come with it.

You certainly can't count your mining profits without taking into account how much you've spent to get the profits...
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post #45 of 199
Quote:
Originally Posted by b.walker36 View Post

You would need to create a company then. You can't write it off as a business expense against your 9-5 if its only for mining. You would nneed to make your mining operation a company and pay the taxes that come with it.
Quote:
Originally Posted by BulletSponge View Post

Well, this just means my utility/internet cost is now a business expense as well as all the hardware I've bought recently. This is one of those times I'm really glad my father is retired IRS.

I've got that covered. biggrin.gif
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post #46 of 199
Quote:
Originally Posted by Chakravant View Post

Activision/Blizzard and EA stand to lose billions under this ruling. That seems like a good enough reason to me.
At best, businesses could use long term capital gains exceptions to limit their tax liability. Using profits to purchase property does not mean you do not pay taxes on those profits prior to purchasing the property. That's why the property has a fair market value. The IRS ruling goes into how to figure the fair market value of all virtual currencies as property, not just those that have a real world exchange rate.

Read the ruling. It's that bad.

Edit: I'll help you out.

For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt. If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.

all that quote says is that on your taxes in the field where it ask about virtual currency gain, dont put 22 bitcoins, put XXXXX USD. It is talking about filling out forms not the actual law. The only part that seems to be unclear to be and i could see being a problem is the definition of mining virtual currency.
"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."

If companies have to double dip and pay taxes on thier gains from rendering the currency and also form the sale of currency, that could be a problem for them. This is of course a Q and A summarized statement of the law not the real paper so it could be worded differently there. I dont think thats how it would work tho in the real law.
post #47 of 199
Quote:
Originally Posted by Shiftstealth View Post

There may not be an auction house for wow gold but it certainly has a set price. Like 3 dollars per 10k or something like that. And while it may not be within reason now, it might be within reason in say 10 years. Just because of how its worded they could take advantage of it a long time down the road because well its already been passed.

You can convert BC to USD freely you cannot really do that with wow gold. The farmers don't really buy it they only sell it. So its not like anyone can take the gold and convert it. It completely misses the other part as its not actually used as payment. I don't know of any place that accepts wow gold for real goods or services. If you sold wow gold then yes I would accept it requires taxes paid under this ruling but companies that actually sell virtual currencies already pay taxes on the income.

This ruling states that if you are paid in bitcoins you need to pay taxes on it as if it was income, and if you realize capital gains on it you need to pay taxes on it. Well I have never heard of people being paid in wow gold (on any real scale one or two weird crazy circumstances don't count) and there is no real exchange so I'm not sure where you are getting that fair market value.

Like I said Diablo gold is the only one that really pushes it with the AH but since the AH is gone so is that problem.
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post #48 of 199
Quote:
Originally Posted by Syan48306 View Post

What happens to the old hardware that I sold? SInce you're selling it for less than you bought it for, you shouldn't be taxed on it either right?
Business tax laws are complicated and you probably wouldn't want to take anything on this forum as advice if you're really in that situation.

My guess would be if you deduct the full price as a business expense, then you probably have to claim the sell price as income. But you might not be able to (or want to?) claim the full price up front anyway, I know there are rules about depreciated assets too but that's questions for an accountant or something... tongue.gif
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post #49 of 199
Quote:
A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

So if you were given a bitcoin when it was worth $1000 you owe on $1000 even if you didn't cash it until it was worth much less or not at all?

I guess, basically... a lot miners are going to get screwed.
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post #50 of 199
Quote:
Originally Posted by Wakalakaz View Post

all that quote says is that on your taxes in the field where it ask about virtual currency gain, dont put 22 bitcoins, put XXXXX USD. It is talking about filling out forms not the actual law. The only part that seems to be unclear to be and i could see being a problem is the definition of mining virtual currency.
"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."

If companies have to double dip and pay taxes on thier gains from rendering the currency and also form the sale of currency, that could be a problem for them. This is of course a Q and A summarized statement of the law not the real paper so it could be worded differently there. I dont think thats how it would work tho in the real law.
It is talking about how you determine the XXXXX USD amount, giving guidance on how to determine it for virtual currencies that have no exchange rate value. All Bitcoin style virtual currencies have exchange rates, so this explanation would only be necessary if the law applied to more than just Bitcoin like virtual currencies. This is also expanded on later in the QA, when it addresses taxation on payments made in property.

"Payments made using virtual currency are subject to backup withholding to the same extent as other payments made in property. Therefore, payors making reportable payments using virtual currency must solicit a taxpayer identification number (TIN) from the payee."

The virtual currency doesn't need a market value or presence. It never needs to be converted from property into real world currency. Just accumulating it as property is subject to taxation in this case.
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