Bitcoin Forum

Dear IRS: Bitcoin is like cash that exists, and can be spent, in two places in the world at once. Or 20 places. Or 10,000 places at once.

I have decided to share my private key with 28 of my most trusted friends. We come from 14 nations around the world.

I alone do not have the authority to spend those coins, only by a two thirds majority decision, can any coins be spent.

If Bitcoins are property, as you say, this private key and the blockchain address it accesses are now "communal property" of people all over the world

You can't tax it without United Nations authority, I guess.

28 people, sounds safe.

http://31.media.tumblr.com/c61b6c4bfcf72506fb65fc4b56a0bbe2/tumblr_mmcwbufLmC1r5xzspo1_400.jpg

Legally speaking, it's safe from the grubby hands of any nation state, and that's good enough for us. Perhaps anarchists think differently than you do.

“Disobedience, in the eyes of any one who has read history, is man's original virtue. It is through disobedience that progress has been made, through disobedience and through rebellion.”
-Oscar Wilde

And the IRS's Response: When you gave them your private key, did you remember to pay your gift tax?

I didn't give them "my" private key. It was never my property to begin with! The bitcoins associated with this private key were mined communally in a mining pool. Guess who the miners were?

Do you really think that you've invented a novel system for tax avoidance that doesn't run afoul of the laws and regulations?  You haven't.  I don't know the details of your system but there is definitely a way that the IRS can tax you.

Let's say that your system is as follows:

27 overseas people mine bitcoin.  You are the 28th person, and the only American.  By a 2/3rds vote it is decided to spend the money to buy ebooks on Kindle, with each of you getting a copy.

How would the IRS handle this?  They would consider all 28 of you to be partners in a partnership.  When you receive the ebook that would be classified as income.  You would be required to report its market value as income and pay income taxes on that income.

In reality, you would probably not report this and the IRS would never find out.  They know that people evade taxes on small transactions all the time and they don't really mind.  However if we're talking about big money then we're talking about big penalties for non-compliance.

Ok so you have your group of people structured some other way?  No problem, the IRS has some other way to tax you.

Then all you're describing is a partnership.  Your income is 1/# of miners, unless you have some agreement saying you get more or less than that, and you'll get taxed on this.  Take money out, and you have taxable income.  Leave the money in there, and the partnership is subject to taxation.  Either way then, you still owe taxes.

And lack of documentation has never been a great defense to play with the IRS.  You'll piss them off, but that's about it.

That really opens a can of worms  :D

Interesting.

You don't pay a gift tax when you give a gift

http://en.wikipedia.org/wiki/Gift_tax_in_the_United_States

Interesting.

I did notice this, though:

God, you are so deep and edgy.

Tell me more about how anarchists use public forums to post tumblr memes.

This would never work..You'd be in a partnership.

well in theory then isnt bitcoin kind of like a universal currency? 

something like a universal tv remote that works on all tvs.  bitcoin is a currency that works in every country?

Taxation by what nation? How can a nation-state tax international income that supercedes the sovereignty of the nation-state? Sorry, does not compute.

Let's say our group received this money as a donation - we didn't mine it ourselves. Let's say we can only spend it by group consensus.

An international partnership which transcends any single nation's laws! If the USA can tax the PRINTING/ GENERATION of international, worldwide money, can every other nation do the same?

So each time we mine BTC we are forced to pay income taxes to all 14 of the nations in which all of us live? Does that sound reasonable to you? No, it doesn't. Because it's highway robbery.

BITCOIN IS SOVEREIGN. LEARN IT. ACCEPT IT. LOVE IT.

You would pay taxes on your earnings as a US citizen.  Same as before.  The US would tax: Total BTC Mined x (# of US people in pool / Total # of people in pool).

Simple way to think about this: If it was this easy, why wouldn't any of the major multi-national accounting partnerships or law firms do this?

O RLY? Cool! Now it's not 28 people, but 28,000 people in my consensus-based, communal money mining pool.

Please tell me how the IRS will go about legally proving me a liar when I make this claim.

One more thing I forgot to mention. It's also pseudonymous - our pool, I mean. We don't know the others identities, only how many of us there are.

All decision making happens on a public internet forum. Now what?

The slaves have invented their way out of fiat-slavery, and there's nothing you can do about it. Or the IRS.

What if such situation arises in 2020's and all govt. propose UN bitcoin tax ?

*shrug*

By 2020 fiat will be dead, and the advent of cryptocurrency will have changed the socio-political make up of our planet in profound and far-reaching ways.

I found something: https://www.youtube.com/watch?v=fvqkQvOWgeo

It won't work. They'll just say that you spent the coins so you realized the gain and you have to pay taxes on it.