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Bitcoins taxed as property, not currency, IRS says

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posted on Mar, 25 2014 @ 05:03 PM
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Wading into a murky tax question for the digital age, the U.S. Internal Revenue Service said on Tuesday that virtual currencies such as bitcoin are to be treated, for tax purposes, as property and not as currency.

Putting bitcoin and other virtual currencies in the same category as stocks or bonds in some instances, the IRS said in a statement: "General tax principles that apply to property transactions apply to transactions using virtual currency."

Bitcoin is bought and sold on a peer-to-peer network independent of central control. Its value soared last year, and the total worth of bitcoins last week was about $7 billion.

Bitcoins taxed as property, not currency, IRS says

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Although I am not involved in the Bitcoin market, I know alot of folks here have been discussing this digital currency for a few years here on ATS.

Is the whole dig currency deal supposed to be anonymous to some extent? If so, how will the IRS enforce their plan? No answers from me, due to my complete lack of knowledge on this subject..

Does this move by the IRS affect the Bitcoin market? I don't know, just wanted to give folks in the know a heads up on this latest move by the gubmint...




posted on Mar, 25 2014 @ 05:12 PM
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Some point in the trade chain of bitcoin and other virtual currencies involves liquidation to fiat currency. The point of trade for currency is where I believe the IRS will step in for their share. It seems that virtual currency are classified as unrealized capital gains the same as stocks. Taxes aren't levied until the investment is liquidated for realized capital gains.

Since the IRS will have a problem determining whether the capital gain is long term or short term, they will probably tax it at the higher of the two tax rates, the short term rate.
edit on 25-3-2014 by eManym because: (no reason given)



posted on Mar, 25 2014 @ 05:12 PM
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Good luck finding them to tax them. IMO Darkcoin in the future, BTC is a scam.



posted on Mar, 25 2014 @ 05:20 PM
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So, if it's property, I guess government bodies can claim eminent domain when they see fit?

Hmmm.....



posted on Mar, 25 2014 @ 05:23 PM
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I think they will be able to monitor a good deal of those folks who convert BTC to cash. I know that the exchanges I am signed up with, like Kraken.com and Bitstamp.net, require a modicum of personal information and, I believe they are required to report transactions paid in USD.

In anonymous terms, a BTC to BTC wallet transfer is much harder to trace since wallets are not registered to any person in an identifiable manner. The thing is, if you do pay an individual directly with BTC for a good or service, it should generally follow the same tax liability as bartering with anything else. So, technically, people should be reporting their bartered assets.
Of course that probably doesn't happen too often and I would liken that to the same as having a yard sale and not reporting the $ from your items, although if you did and could claim depreciation for each item, you might even come out further ahead.

The thing about bartering and paying taxes on bartered items that doesn't sit well with me is that the items were already paid for and taxed at the time of the original sale. I believe that Bitcoins which I mine are generated with electricity and computer hardware that should be listed as a hobby venture or an investment venture and I should be able to claim some deductions for it. Now if it is to fall under the same rules as property, there is an allowance for depreciation and appreciation. (gains tax?)

In a way, this validates the Bitcoin a bit more and gives me a little more security in thinking that they are going to be around longer than most people have been guessing.

Disclaimer: I am neither a tax guru nor a source of investment information. I dabble in Bitcoins as a hobby. I am claiming the bitcoin mining rigs and electricity as well as my income on my taxes this year. Those here who would like to do the same should seek professional guidance or obtain the proper IRS documents/forms.



posted on Mar, 25 2014 @ 05:52 PM
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It's a rule aimed more at the large/institutional investors (think Wall Street banks or Winklevoss twins pumping large cash amounts into Bitcoins) - in these cases, the IRS had to have a rule for how to tax those bitcoin holdings.

For the small time BTCer, the IRS has no way of knowing how much BTC you have, at least not until you try to cash it out into a fiat currency.



posted on Mar, 25 2014 @ 06:10 PM
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Blackmarketeer
It's a rule aimed more at the large/institutional investors (think Wall Street banks or Winklevoss twins pumping large cash amounts into Bitcoins) - in these cases, the IRS had to have a rule for how to tax those bitcoin holdings.

For the small time BTCer, the IRS has no way of knowing how much BTC you have, at least not until you try to cash it out into a fiat currency.

This is true but if you are going to cash them in you will want to probably load them into another private wallet that you use just to send to exchanges. Once they have the wallet address of the transaction that sent the money to the exchange, they could audit/trace the bitchain for all transactions with that wallet address the money transferred to your "exchange wallet" would be anonymous with no proof of it belonging to you....

Anyhow, that's what I do...



posted on Mar, 25 2014 @ 10:02 PM
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reply to post by jrflipjr
 


Property not real estate



posted on Mar, 26 2014 @ 01:46 AM
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This is ridiculous, but expected from government

Casascius, a printer of "physical" bitcoins, had to stop operations by FinCEN (financial crimes enforcement network) because it was operating as a "money transmitter"

Now the IRS says it is not a currency, but a property. I'm no tax expert, but the hypocrisy is staggering

I wonder how this will affect Bitcoin payment processors like www.gocoin.com (outside USA) or bitpay.com (which is based in the US).



posted on Mar, 26 2014 @ 12:18 PM
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I've heard of Bitcoin, but I'm not techy enough to understand it.
I saw a thread yesterday, and a few articles about it, and decided to check it out.

I don't get it.
You have to do "mining"? And it's like a game of Keno??? Is that right?

Seems like a pain in the rear to me. Beyond my ken. Oh well. I don't have any, and for now I guess that's okay.



posted on Mar, 26 2014 @ 06:00 PM
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eManym
Some point in the trade chain of bitcoin and other virtual currencies involves liquidation to fiat currency. The point of trade for currency is where I believe the IRS will step in for their share. It seems that virtual currency are classified as unrealized capital gains the same as stocks. Taxes aren't levied until the investment is liquidated for realized capital gains.

Since the IRS will have a problem determining whether the capital gain is long term or short term, they will probably tax it at the higher of the two tax rates, the short term rate.
edit on 25-3-2014 by eManym because: (no reason given)


I agree. Other effects would also be in terms of acquiring property via bitcoins. It'd be a trade of property as opposed to a purchase and that's a pain to calculate. In other words, every purchase with bitcoins becomes a potential taxable transaction.



posted on Mar, 26 2014 @ 06:58 PM
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Valid point!

...I'm sure some pesky lawyer is already looking for the loopholes.




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