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IRS: Bitcoin Is Property, Not Currency
An anonymous reader sends this news from Bloomberg:
"The U.S. government will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions, the Internal Revenue Service said in its first substantive ruling on the issue. Today's IRS guidance will provide certainty for investors, along with potential income-tax liability. Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop. ... Under the IRS ruling, Bitcoin investors would be treated like stock investors. Bitcoins held for more than a year and then sold would pay the lower tax rates applicable to capital gains — a maximum of 23.8 percent compared with the 43.4 percent top rate on property sold within a year of purchase. For investors with losses, U.S. tax law allows taxpayers to subtract capital losses from any capital gains. They can also subtract up to $3,000 of capital losses a year from ordinary income.'"
...as you can offset a drop in the value of your bitcoins as a tax deduction.
Good luck getting anyone to declare they own any and therefore owe you money. Chumps.
This is actually good news. Tax on Bitcoin legitimize the currency, and is good for the common good since it will bring in more tax money.
And I use it to kick the IRS in the ass!
Not a currency, and instead merely a speculative instrument on par with stocks. Bitcoin is done.
Yet another reason *NOT* to use Bitcoin. But don't listen to me...listen to that guy in Omaha!
http://www.cnbc.com/id/101494937
This sounds remarkably fair coming from the tax-man. I've heard horror stories of certain investments that got taxed at a high value but then tanked and had little value for sale. I would have expected something terribly complicated and convoluted in regards to BC, but this actually seems to make sense.
It's self evident. And it doesn't especially "legitimize" Bitcoin. If you don't pay your taxes on profits from selling crack cocaine they can get you for that.
Like anything else someone thinks has 'value', you bought something and then you sold it or exchanged it for goods - that transaction is taxable.
The whole tax system is a illegal scheme to enrich private international bankers, which didn't exist before 1913, and Andrew Jackson did not renew the international bank's privileged to issue money at interest for the USA.
Yep, keep thinking the current tax system is fair in any way shape or form.
I like to think of it as fucking my asshole without making it bleed.
"Wow you really did fuck my asshole and violated my every right, but thanks for not making my asshole bleed!."
nope.
Common sense, despite all the hoopla, bitcoin really does make a poor "currency". It's really like buying commodities at a certain price, and selling them again at another price
Best example off the top of my head is Oil futures - since both that and BTC have a) a steady increase in value due to limited supplies and b) incredible volatility at times as the market itself is really controlled by big players
Exactly the type of market that Wall Street loves.
Make sure everyone's vote counts: Verified Voting
In effect, the IRS is treating Bitcoin like any other "foreign" currency, which amounts to the same thing as treating it as property. When you sell (i.e., spend) Bitcoin, you're realizing a profit or loss, depending on the value it had when you received (bought) it, compared to the value it had when you sold it.
IANAA, but as I read this, it means that if you get paid for work in Bitcoin, you would pay tax on its value at that time, and that value would be considered your cost-basis for future sales of Bitcoin, so you don't get taxed twice on the cost-basis amount.
If it weren't for deadlines, nothing would be late.
Its just a barter system, so that makes sense.
Still dont like the idea of the Feds trying to tax me more, but the concept of property is sound at least.
---- Booth was a patriot ----
Then exchanging bit coins for coffee is a barter transaction, and no tax applies.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
How does the IRS handle foreign currencies? What about stores and restaurants near the border that accept Canadian currency? Is it the exchange value at the time of sale?
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
I would think this is really bad news in disguise for bitcoin, because it discourages the use of bitcoin for commerce both because of the tax issue and because of the reporting requirements. (Who wants to deal with computing a wash sale just to buy a cup of coffee?) If people are inspired to sit on bitcoin until they cross the 1-year capital gains threshold, that behavior change could move bitcoin one step away from use as a currency, and put it in the same illiquid category as gold or bearer bonds.
Opening the new 'layout' of slashdot always makes me think my adblocker is broken .. .. anyone able to read those titles over these ad-banner-like images nearly as good as the other plain story-titles? I have a really hard time dechifrating this text over ad-images .. maybe as my brain automatically fades out banners?
One Bitcoin will always equal 100,000,000 satoshis.
Get free satoshi (Bitcoin) and Dogecoins
Let's start with the fact that it's capital gains liability. This means that the $1 would be considered taxable income, and taxed at whatever your current rate is. The other problem is with any non-fiat currency. Non-fiat currencies have nothing to fix their rate of exchange, which means their value bounces around. If you want a consistent exchange rate, than you have to use a fiat currency. Non-fiat currencies come with distinct advantages and disadvantages, and you can't complain when a government doesn't give it the advantages of it's own fiat currency.
I'm pretty sure you can declare yourself a ballerina if you want to. Who's going to check? The ballerina police?
Get free satoshi (Bitcoin) and Dogecoins
You CAN commit tax fraud. What happens next IS unknown, it could be jail ...
It was a response to saying MORE federal taxes are a good thing. More federal taxes do not result in more libraries.
Libraries, police, firefighters, most roads ... virtually all of the things pro-tax people put forth as good things paid for by taxes are mostly paid for with the ~ 8% local and state taxes. The feds take four times as much of your money and it doesn't go toward any of those things. Federal taxes do, however, pay for the NSA, billion-dollar bombers, and handouts to campaign contributors.
Arcademan just smacked that ass for ya son! Keep hatin on BTC. AC is done.
That seems very common-sensy, but it just raises questions/flames about what you're contrasting it to. Right away, you ought to be thinking, "If I did the same thing with Euros or Pesos, how would that differ?"
Oh.
I don't really know which (if either) of these policies is good (it's all so arbitrary) but I know at least one of them is stupid.
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
Did they just write "Bitcoin" in the new law or something more general that can include anything? Otherwise, Bitcoin is now regulated but LiteCoin, DogeCoin and all the other coins are not.
Get free satoshi (Bitcoin) and Dogecoins
I'm assuming that Slashdot administrators changed how the software handles non-breaking spaces after seeing how certain users have used them to post obscene ASCII art such as ASCII Goatse.
defaulting on the gold dollar has marked the beginning of the end of USA economy
You saying there has been no economic growth in the US sense the depression? No jobs created in that period. No increase in property and assets?
"01010101010101010101010111010101001010100101000101001"
Do you really think, that if your computer can compute some numbers this means you gain money ? ..
No you just gamble against some other idiots, who shoots first,
who will continue to believe.
All in all the IRS is wrong, it's currency because "you" need to believe in BITCOIN if "you" believe it's worth nothing, so it will be.
If enough people believe that they only need small cars, big cars will loose their value.
If enough people will drop the currency Dollar for the Rubel or else, the Dollar will loose value and the Rubel will gain value.
If you generate money from nothing and don't back money up it's worth that amount, you and many other believers think it's worth.
But this ponzi scheme has one advantage over all the maddoffs and other pyramid players .. it's called inflation,
the constant decline of value.
Yep, you don't have to pay capital gains on the appreciation of your property. Not the same thing as property tax. Property tax is dealing with the property's "current value". Since you are still holding the property, no capital gains (or losses) have occurred (yet).
What would your cost basis be for miners? Could you count the cost of electricity and equipment or would it be considered zero?
Gold is taxed exactly the same way.
How does one determine which specific Bitcoin (or fraction) was spent from one's owned pool to determine whether any appreciation is long-term or short-term? Is it a record-keeping thing only, much like tossing pennies in a jar every day and recording it in a ledger, then taking random pennies back out to pay and noting that they're the oldest, whether or not they are (or can be proven to be)? I foresee IRS challenges around long-term vs. short-term in audits, especially for folks with lots of transactions.
You need to read up on this guy some.. He ended the importation of slaves into the US. http://en.wikipedia.org/wiki/A...
It may not have regulated INTERNAL trade, but it stopped the import and export of slaves.
So if you take payments in bitcoin, they will be taxed as property, and not as currency?
Interesting, and messy.
Not only does he live in fear of the ballerina police, but he hasn't yet even tried pointing a gun at someone, and then declaring himself to be a ballerina, while watching in amusement as they treat him like a ballerina. "Ballerinas always stand on their heels." [cock gun and stand on toes, while aiming very carefully at "enhanced interrogatee"'s head] "How am I standing?"
If the IRS isn't empowered to force people to adopt their technical jargon, then I don't know why they'd even bother to show up for work. Making people play that game is what it's all about. BTW, everyone, you ought to try the "yes means no and no means yes; do you want me to hit you?" game. That one is awesome!
https://secure.downsizedc.org/etp/honest-money/
Free Competition in Currency Act
Rep. Ron Paul introduced a bill in the last two Congresses that would bring the above benefits. This bill, called the "Free Competition in Currency Act," was reintroduced in this Congress by Rep. Paul Broun (Bill Number H.R. 77). It has three parts . . .
The Honest Money portion would repeal the legal tender law, which gives the Federal Reserve a monopoly over the money supply.
The Competitive Currency section would repeal the words of Title 18 Section 489 of the U.S. Code, which gives the United States government a monopoly over the creation of coins for use as currency.
The Tax-Free Gold component of the bill would prohibit federal and state taxes, such as capital gains, on precious metal coins and bullion.
You can read the full text of the bill on our Background page.
If you're well versed in economics you may already know how these simple changes could . . .
Help end both inflation and recessions.
Help to End the Fed, by creating a free-market alternative to the Federal Reserve money monopoly.
If so, you can ask your elected representatives to co-sponsor these bills using our Educate the Powerful System on the right side of this page.
If you don't know the significance of repealing the legal tender law, the coinage monopoly, and taxes on gold, or you're looking for good talking points to use in your message to Congress, please read the article that follows, titled "End the Inflation Tax" . . .
The Legal Tender Law Creates a Monopoly
Every paper dollar you own carries the words "Federal Reserve Note" (FRN). This means they were authorized for issue by the Federal Reserve System (the Fed), a national bank created by Congress. The legal tender law gives the Fed a monopoly over what you use for money.
When a currency is legal tender you are legally compelled to accept it in payment for debts, even if you've made a contract to be paid in some other currency or commodity, such as gold. The Free Competition in Currency Act would free you to use other currencies, gold, silver, or all of them at the same time, including FRNs and would make gold contracts legally enforceable in court.
If this seems like a strange new world to you, please realize that you already live in this world to a certain extent.
When you check-out at a store you can already pay using cash, check, debit card, or credit card. You probably also have different accounts you use for various purposes. Repealing the legal tender monopoly would simply extend this process, giving you more choices.
How the FRN Monopoly Works
Choice is good because it allows competition. Monopoly is bad because it leads to price-fixing. Monopoly control over what you can use as money provides the greatest price-fixing power of all. It impacts ALL of your economic transactions. The Fed can manipulate the price of everything by increasing the number of circulating dollars (inflation), or by decreasing that number (deflation).
How the Fed is like a counterfeiting ring
Counterfeiters also inflate the money supply. They use their fake money to get something for nothing, taking wealth from others without creating wealth of their own. It's stealing. But the long-term consequences of counterfeiting are even worse than the initial theft.
If the counterfeit dollars stay in circulation they will trick businesses into making a disastrous mistake.
Assume you're a widget maker. The extra circulating counterfeit dollars will cause demand for your widgets to rise. This increase in demand is actually an inflationary bubble, and that means trouble . . .
Your widgets will start to fly off the shelves faster than you can make them. This will cause you to increase prices to maintain inventories, and to invest in new production and staff to meet the hei
(Because when you're a Bitcoin fan, *everything* is good news for Bitcoin!)
Good luck IRS on regulating Bitcoin. People are really going to be worrying about reporting a dollar savings on a cup of coffee. As intrusive and tyrannical as the IRS is, people are going to treat their regulation of their secret Bitcoins like most people report the taxes states demand they report when buying something online. It is not the desire to avoid taxes that will cause people to ignore these foolish rules, but from being fed up with the IRS and other government bureaucrats determination to control every penny people spend and make. Here in the small town I live in, if you pay with cash, many merchants just forgo the tax. I am all for paying fare taxes, but since the IRS has loaded up on tons of ammunition, I see them as a threat to our freedoms and have absolutely no respect for them are their money grubbing rules.
And as has been pointed out elsewhere - you can do the barter thing - but you'd still better come up with something your government considers money to pay taxes on all that bartering, 'cuz the government isn't interested in a couple gallons of goat milk or a few dozen eggs, or borrowing your car on the weekends. Savvy?
Because you needed another reason not to live in the world's freeest country. ;-)
Nothing has changed much. Don't mess with the US Government - it's about like a mouse messin' with a gorilla.
Until you have done that, please stop posting here on /. IQ's used to be a lot higher when UID's were lower. *Sigh*
The really attention-grabbing thing about the IRS guidance is Question 8 under the FAQ, which reads:
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.
(emphasis in the original)
This sounds like an enormous amount of record keeping for individual miners to keep track of.
First off if you're in a state that actually spends only 8% of it's SDP you're in a minority. Most states are in 9% or 10% range. More people live in one state that's above 11% (Cali) then all sub-9% states combined.
The Feds support a lot of state-level spending through indirect programs. Student aid like Pell Grants, Race to the Top money, and support for police allows a lot of libraries to be built.
The NSA, billion-dollar-bombers, and campaign contributors only actually add up to a small fraction of the Federal budget. A huge chunk is transfer payments set up before most campaign contributors were born. Medicare and Social Security alone are a majority of Federal spending in the 2010-2019 period. Medicaid is another fairly large chunk, this year ObamaCare subsidies kick in, with Pell grants, Earned Income Credit, military retirements, the VA, etc. I'd estimate 2/3-3/4 of Federal spending is simply the Feds shuffling money from the accounts of some Americans into the accounts of American who American voters have decided deserve the money more.
The "Billion-dollar-bombers" could be gotten rid of easily in theory. In practice those pesky American voters tend to look on defense cuts as encouraging Putin to be Hitler Mk. II, so it's unlikely they'll be cut. Whatever it's other crimes, the NSA budget is a rounding error (literally: $11 Billion is under 1/3 of a percent of the total) on the Federal total. "Handouts" to campaign contributors tend to be exaggerated. There's generally no quid-pro-quo. What happens is the company that would be a shoe-in if the government decided to study the effect of dung beetle blood on the flu virus finds a candidate who supports studying dung beetle blood and sends him a check. If Congressional votes could actually be easily bought then we wouldn't have a DRIC project, we'd have a second span to the Ambassador Bridge.
Which means that when Federal spending cuts get talked about proposals tend to be both ambitious and vague (ie: every Paul Ryan "budget" ever) or specific and miniscule (like your proposal, which the NSA's 0.31% off Federal spending). The specific/miniscule cuts that could actually get passed would almost certainly include most support for states and cities because Congress doesn't get yelled at when Jindal has to expel scholarship students from Louisiana State.
Uh, governments invented money.
- you should just stop at 'Uh', because you have nothing else but "Uh", it's "Uuuuuuuuuhhhhh", that's all you can provide us with, with that kind of insight. I find your existence on this planet to be both morally and intellectually indignant.
roman_mir
"I don't believe in imaginary property" was a popular anti-IP catchphrase here on Slashdot. It seems like it could apply here too.
Who cares what they think? This is a brand new invention and maybe we haven't decided what it is yet. For one thing we've sidestepped 99.99% of economic theory by not assuming there is an infinite supply of everything and growth just continues forever.
Ahhh the Finance Industry. They've done nothing but leech for 500 years but we still go running to them for a judgement on something they couldn't possibly understand.
Hmmm... So what idiots would tell the IRS how many bitcoins they have, or what they used 'em for? Holey moley, they must think people are really really stoopid. I couldn't care less about bitcoins, but I have even less respect for the IRS. I'll be waiting to see how many actually report their hoards of virtual money. Right.
Good luck with that.
How would you provide proof of the transactions showing you made a loss? Would you need to give them transaction IDs etc? If so it seems like a good way to get a list of wallets attached to a list of people.
One mans inefficiency is another's contingency planning. All that road capacity looks like a waste at anything other than peak times.
IRS knows about your stock trades because your broker sends them a Form 1099 with all that information. I doubt any Bitcoin exchange will be sending the IRS information about your Bitcoin trades.
They also were forward-thinking in their deliberations. Originally they wanted "Life, Liberty and Property" but there was debate on how that could be used to CONTINUE slavery, so they settled on "Life, Liberty and pursuit of happiness". That was one of many compromises that were made.
All these discussions would be MOOT if people educated themselves about the FAIR TAX and then pushed their governments, friends, family, total strangers to help support it and get it passed into law.
I'm not an accountant, this is not tax advice.
It seems that miners need a daily log of the coins mined and the closing prices on an acceptable exchange. Each day's coins may have their own basis, the number mined multiplied by the closing price on the exchange. This basic seems to be counted as income.
Equipment and electricity are probably not factored into the basis. They are most likely a separate deduction.
It is not a law, it is just a guidance, that is, their current interpretation of the law. It can change easily.
And until changes are made they will fine you and apply penalties if you deviate from their guidance. Their interpretation is not optional, it carries weight until a court or congress says otherwise.
This is an absolutely insane ruling, that simply can't be applied to reality. If I bought .01 btc at $2 and another .04 at $16 , and another .00001 at this price , and another.00000001 at another price , they all get lumped into a single sum in your wallet. It would be nearly impossible to tell, 'which' one you spent. Especially if bought and sold/used at fractional amounts. They are not stored as separate units like gold coins. It's more like buying pieces of gold that melt into a single brick, and you chip off the pieces you need as you go. What piece was this bought at what price? You have no clue. Nor do they. It's a ruling impossible to enforce, and frankly nobody is going to abide by it.
Each and every ledger entry has a cost basis. For incoming coins the new coins have a value based on the time they were received. The old coins returning to you based on when they were new. For outgoing coins (not including those coming back) it would probably be like other accounting practices where a first in first out (FIFO) system or a last in first out (LIFO) system is used. In either case the basis of the outgoing coins are known.
The odd thing would seem to be that as the outgoing coins are spent its necessary to determine if a gain (coins being paid at a price higher than basis) or a loss (coins being paid at a price lower than basis) is being recognized.
Ex. You buy one coin at $500 and another at $600. Coins are priced at $800 at the time of a future purchase. You buy something for $1,200, 1.5 coins. Using FIFO your basis for the outgoing 1.5 coins is $500 + $300 = $800, and the basis for the returning 0.5 coins is still $300. You experienced a gain of $400 on the 1.5 coins at the time of the sale and that $400 would seem to be taxable income. Apologies if I botched the math, its late, hopefully the point gets across.
Is all this a royal pain in the ass, yes. But basis, gains and losses seem perfectly calculable.
Any sort of in game currency where there isn't any value isn't going to be an issue since, well, there's no value. Now I know WoW gold is sold by Chinese farmers, but over all it is a zero value item. Blizzard doesn't allow sales, they'll ban you if you buy or sell, etc, etc. It isn't the kind of thing anyone buys as an investment or speculation or anything. It also isn't worth very much, and you find most IRS rules exempt things under a certain amount.
Particularly if YOU don't buy or sell it then there isn't really any issue. They aren't going to come after you for something you never exchange for currency, if for no other reason than they aren't going to monitor it at all.
In general game currency is likely to be left alone just because the amounts aren't likely to get that high. Plus most games have a highly inflationary economy. There is no limit to money, there's no "Horde Reserve Bank" that issues gold. The game just generates it whenever you do something that is programmed to give gold, and you can do it as much as you like. So buying gold to hold on to would basically always be a money losing proposition.
And they thought it would be the real world.
It seems most BTC proponents are either people who are scammers, traders trying to make a quick buck, or true believers with an extremely poor understanding of economics. Most of the true believer types think that BTC would be great because there would be no taxes to pay on them and taxes are evil!
They never bothered to think about the fact that the government isn't likely to just give up on trying to collect taxes, nor what would happen to society if taxes were not able to be collected. It is just a selfish "I could have more money without doing anything, and so I like it!" attitude.
The IRS has no say in the matter. First, the seperation of powers grants only the courts to make rullings.
Bitcoins are an internation currency, and the IRS has no say in the matter. The IRS claim to authority is not recognized.
Not just taxes, but a whole slew of other things... an "extremely poor understanding of economics" greatly underestimates the case. And that's without considering the "gubments are ev1l" tinfoil hat nutters.
All I can say is I am glad I'm all in alt coins now, http://freelitecoin.com all the way!
All I can say is I am glad I'm all in alt coins now, hell with mtgox & irs http://freelitecoin.com all the way!
This will crush BC. Now you'll have to keep trading transaction and purchase records for the IRS. I can't image how that would be fun! Basicly everyone involved will be audited for sure!
I doubt that is what happened. Nonetheless, if it did and cryptocurrencies continue to succeed, they will change it.
Governments can't control what people use for money. They can control what they use for money, and what you must use when dealing with them. You are required to keep accounts of your income etc. in dollars (most people have those accounts maintained by somebody else and mailed to them before tax time). Once you have calculated your taxes, you need to pay dollars to the government. If you get goods or services from the government that must be paid for (stamps, park entry fees, etc.), they must be paid in dollars. If you lose a lawsuit, and are ordered to pay money, it will be given as dollars and you will be required to pay dollars if you can't make other arrangements.
Other than that, yup, you can use whatever you want for money, as long as a few other people will agree to use it.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
What about Bitcoin miners? Would one be able to leverage the $3,000/year write off for the expenses incurred to mine Bitcoin? (electricity usage and hardware investments) Or does this just address investors who purchase Bitcoin from others?
Basically, I want to know if I can purchase a $3k mining rig and write it off. Any thoughts?