IRS: bitcoin is property and taxed as such

[Balog]

Should be of interest to some of the folks around here, especially AZred if he's not banned.

http://gizmodo.com/irs-declares-bitcoin-is-property-and-must-be-taxed-as-s-1551321725

[Scout26]

No, he is not banned.

It would appear they are treating it like stocks.

[dogmush]

Isn't one of the whole points of bitcoin that it's really hard to prove someone has or doesn't have it short of the actual file?  Is there anyone tech-savy enough to use bit coin that isn't savvy enough to encrypt it?

While I wouldn't condone tax fraud, and I have no bitcoins, this seems like a prime example of a policy they have no hope of enforcing.

[Fitz]

Yep. If people know how much bitcoin you have, you're doing it wrong

[Balog]

Isn't one of the whole points of bitcoin that it's really hard to prove someone has or doesn't have it short of the actual file?  Is there anyone tech-savy enough to use bit coin that isn't savvy enough to encrypt it?

While I wouldn't condone tax fraud, and I have no bitcoins, this seems like a prime example of a policy they have no hope of enforcing.

But to have any real value it has to be converted to FRN's. If I have a baseball card collection I paid $100 for, and it is now theoretically worth $1,000 I would think (I am not a tax lawyer) that it would only be a taxable gain when I actually sold it. My understanding is that bitcoin is kind of like that. Have all the theoretically valuable encrypted files you want on your computer, but when you convert that to cash then the feds get a cut.

[dogmush]

But to have any real value it has to be converted to FRN's. If I have a baseball card collection I paid $100 for, and it is now theoretically worth $1,000 I would think (I am not a tax lawyer) that it would only be a taxable gain when I actually sold it. My understanding is that bitcoin is kind of like that. Have all the theoretically valuable encrypted files you want on your computer, but when you convert that to cash then the feds get a cut.

Nope. They want to tax you when you get it: (bolding mine)

Q-5: How is the fair market value of virtual currency determined?

A-5: 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.

[Headless Thompson Gunner]

It looks like they want to tax bitcoin like any other investment.  You pay tax on your gains when you sell or trade it off.

[Balog]

Nope. They want to tax you when you get it: (bolding mine)

That's for how they determine it's market value. Again, not a tax lawyer, but you only pay capitol gains tax when there's an actual gain right?

[dogmush]

Also not a lawyer, but they're taxing it as Property, not Capitol Gains.

Q-3: Must a taxpayer who receives virtual currency as payment for goods or services include in computing gross income the fair market value of the virtual currency?

A-3: Yes. 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. See Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services.

That reads to me that if someone pays me it Bitcoin, and I still have it, I need to pay taxes on that income as if they had paid me in gold, or chickens or whatever.  Market value on the day I received it.

But I could be wrong.

[Balog]

Also not a lawyer, but they're taxing it as Property, not Capitol Gains.

That reads to me that if someone pays me it Bitcoin, and I still have it, I need to pay taxes on that income as if they had paid me in gold, or chickens or whatever.  Market value on the day I received it.

But I could be wrong.

That seems right, but taking it as payment would seem to be different than merely possessing it right?

I love how simple and straightforward our tax code is...

[RevDisk]

Nope. They want to tax you when you get it: (bolding mine)

Both, technically.

If it appreciates in value, you may have to pay taxes when you sell it, as a capital gain. It's calculated by FMV at buying and at selling.
If you are paid in bitcoins, it's a transaction rather than investment and to be treated as income. It's calculated at time of transaction.

Not new, art folks have to deal with it all the time.