As far a the country I pay taxes in is concerned, if I told them I'd like to declare an income of 100BTC, they'd have no fucking clue what weird funny money I'm talking about.
Governmental recognition and adoption of BTC alongside existing currency is the best case scenario for everyone, governments and BTC community alike.
"If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U.S. dollars."
Please note the domain name of the link.
If you want to model your BitCoin transaction as a barter transaction, the IRS probably won't mind too much. (I'm not promising the degree to which they mind will be zero, but it'll certainly be substantially less than if you give them no money.) Either way, they're going to want and get taxes based on a fair market value. And if you don't pay them, either way, you're going to be in trouble if they find you.
They're a lot more difficult to confuse on the basic matter of "does the IRS get some money out of this transaction" than some people seem to think.
> "you must immediately translate into dollars all items of income, expense, etc. (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Use the exchange rate prevailing when you receive, pay, or accrue the item."
This is fairly straightforward -- if you get paid in EUR, you have to use the exchange rate from when you get paid and declare your income in equivalent USD. Given that bitcoin calls itself a currency, I would expect the IRS to treat it the same way.