Originally Posted by Chakravant
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.