
IRS Rules Bitcoin Is Property, Not Currency - bjenik
http://techcrunch.com/2014/03/25/irs-rules-bitcoin-is-property-not-currency/
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vijayboyapati
This strikes me as the most expected outcome. They are essentially treating
Bitcoin as gold (actually slightly better, since gold has a collectible tax
rate of 28% which doesn't qualify for the long term capital gains rate). The
trickiest and scariest consequence will be for miners, who might need to
report taxes at the time their bitcoins were mined and at the current market
rate. This will mean a lot of people will need to retroactively declare gains,
many of which may not have been realized. For small mining operations likely
the miners will avoid reporting and just sell for cash. But for large miners
who will need to use the exchanges, this becomes a real issue. Consult an
accountant!

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devindotcom
Of course for the many people who will do simple point-to-point purchases with
bitcoin, these rules won't really apply, since those transactions and gains
aren't detectable unless they're declared.

On the other hand, with retailers and 3rd-party apps adding Bitcoin payment
layers, an increasing amount of bitcoin purchases will be on record and
associated with an address or bank account in some way or another. I think
it's good - we get both worlds and bitcoin grows.

I think they also did a good job of doing this without having it come off
stiff or overly specific to Bitcoin. Doubtless things will be adjusted over
the next couple years, but this is a big step in the right direction. (I also
anticipate a couple small steps in the wrong one, but that's to be expected)

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scoofy
>these rules won't really apply, since those transactions and gains aren't
detectable unless they're declared.

Well, this is only assuming you use precautionary measures to protect your
identity. If you, for example buy a stereo from a store, and use bitcoin. If
you provide any information about yourself, such as your
name/address/email/etc. Then the gov't has easily obtainable information that
can connect you to other parts of the block chain. At which point, you're
toast if the feds want to come after you for tax evasion.

Bitcoin is a great tool, but don't think it's going to open up some anarco-
libritarian fantasy camp. It's not. Pay your taxes people.

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hisabness
if i buy $1 worth of bitcoin today and the price of bitcoin appreciates to $10
per bitcoin, i'm now wealthier and won't have to pay taxes as long as i
transact in bitcoin. for example, i can probably now by 10 cups of coffees
instead of one as long as i can pay for the coffees in bitcoin.

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gnaritas
> i'm now wealthier and won't have to pay taxes as long as i transact in
> bitcoin.

False, you clearly aren't understanding what's being said. Transacting is a
taxable event, you owe money on the gains.

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mcherm
So that means if I hold it over 1 year I can treat any gains as LONG TERM
capital gains, right?

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lutusp
> So that means if I hold it over 1 year I can treat any gains as LONG TERM
> capital gains, right?

The tax issues don't change because you've held an asset for Y years, it
depends only on the date when you sell the asset. Remember that capital gains
don't apply to assets that aren't sold -- this happens only when they're sold.

Any asset held for longer than a calendar year is taxed as long-term capital
gains, otherwise short-term. And short-term capital gains are taxed the same
as income.

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mcherm
You have an odd way of phrasing it.

I would have said that the tax issues DO change because you've held an asset
for Y years: if Y >= 1 year then you are taxed at one rate and if Y < 1 year
then you are taxed at a different rate.

Regardless, the tax consequences are now clear.

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lutusp
> I would have said that the tax issues DO change because you've held an asset
> for Y years: if Y >= 1 year then you are taxed at one rate and if Y < 1 year
> then you are taxed at a different rate.

Fair enough, but my point is that you aren't taxed at all until you sell the
asset. People who haven't invested much don't get that, and it's an argument
in favor of buy & hold.

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exelius
This can only be good for Bitcoin. If you can pay taxes on it; it increases
its legitimacy.

Bitcoin has never really been currency anyway; it's more of a pseudo-futures
contract than anything else. IMO an essential criteria for a currency is that
it is backed by an economy and a government with the power to ensure the
security of that currency.

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DanBC
> This can only be good for Bitcoin. If you can pay taxes on it; it increases
> its legitimacy.

Prostitutes are expected to pay tax on money they earn. Drug dealers are
expected to pay tax on money they earn.

Paying tax is nothing to do with legitimacy.

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ThomPete
Isn't that more a problem with legislation not with the basic principle?

I.e. Drugs and prostitution should not be illegal.

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amalcon
It's not limited to those things, though. For example, thieves need to pay
taxes on the proceeds from selling what they steal.

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easy_rider
And they can subtract their investments (e.g. handguns, crowbars ) from income
tax.

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gamblor956
You must pay taxes on all income, however earned. However, you are not
entitled to deduct all expenses. Expenses related to criminal endeavors cannot
be deducted.

IOW...you are taxed on your _gross_ criminal income.

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easy_rider
I am basing this on remembering one case here in The Netherlands where this
supposedly happened, when a bankrobber had to pay a sum of money, but he could
put up his pistol as expenses. [1] The Districts Attorney's office was quoted
on saying that in certain cases this could be done. Also stating that for
example in the cultivation of marijuana, you get taxed for an estimated income
amount. You could subtract your expenses n that estimation.

Maybe that's better in the U.S. then..

[1] [http://www.nu.nl/algemeen/472183/crimineel-kan-pistool-
decla...](http://www.nu.nl/algemeen/472183/crimineel-kan-pistool-
declareren.html)

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staticelectric
So, if military capabilities can detonate the planet in under a millisecond...

The "property" is so liquid that it can be taken away faster then it can be
processed, and acquired...

