Bitcoin Forum

My friend holds some bitcoins from long ago, some bought on MtGox, some mined with Deepbit mining pool, and keeps them in a Trezor. But he would prefer to keep them in an official institution, like Circle or Coinbase, for insurance, security and estate planning reasons. The question is, if he deposits it into a Circle account, what's his immediate tax liability? He can't really prove anything about the origin of coins. He has a few emails from Mtgox and Deepbit, but these emails are easily forgeable and don't even account for all of the coins. Does that mean he has to pay 39.6% + state tax + social security + medicare etc?

Moreover, these coins have been bought/mined while being a resident of another country, and imported into US (though again, there is no proof of it). As far as I understand capital imported by immigrants is not taxed.

legalization of bitcoin is a big issue. yet not a single country has legalize it. but i am hopeful that they must be thinking about it. and hope that in near future you will see that most of the countries has legalize it.

Op, as to address your concerns. There is no way for any institution e.g. IRS at this point to track origin or every bitcoin owned by people.
Bitcoin is not easy to track or 'prove country of origin' (would it mean country where it was mined, or maybe where first transfer of freshly mined cons to wallet occurred? or something else here?)
and I am sure if BTC will ever be fully legalized every existing bitcoin will be 'cleaned' so you don't have to worry about origin of your coins at all.

legalization of bitcoin is such a big problem. in previous days i have read a statement that japan and China has passed some bill in favour of bitcoin. they gave the right to the people that they can use bitcoin just like other currencies.

yes i also agree with you. but i think this problem should be solve now because it will impose a very bad effect on the status of bitcoin. i think china has now taken a step about the legalization of bitcoin.

Not all states legalize bitcoin but I hope that all countries are slowly but surely will
legalize bitcoin like japanes country that already use bitcoin as its currency .

do you have any proof that Japan legalize bitcoin. i think there is yet not such conformation about the legalization of bitcoin in Japan. and it true i think that will be a remarkable change in the world of bitcoin.

legalization of bitcoin is the problem of  most of the countries of the world. some countries have consider bitcoin as illegal but some are still thinking about it either to legalize it or consider it as illegal.

I believe the issue affecting Bitcoin is the threat its going to pose to the country's legal tender as this will go a long way in even the legality of being subjected to tax in the first place... My 2 cents

yes the legalization issue really affecting the value of bitcoin. if the problem is solved i think the bitcoin will hit the market. it willl then become a legal currency just like our local currencies. but it will be use equally in all over the world.

Last month when I was going to withdraw my money to my bank account then I was asked for the proof of the source of income, so I send them the link of exchange from where i earn with trade, I also send them the link of this forum and told them the way that how I earn here, plus I also send them the links of my websites and blogs from where I earn through ad network. So they accepted it. I think he should have to do like that.

i think that is their legal process and they are bound to do conformation about the income of a person and specially when he is earning in using internet. but that is a good thing that they accept your statements and proof of income.

Bitcoins are legal until a law is passed to make them illegal.

I can mine bitcoins in one remote village in China, travel down to the U.S. to spend it and no one will know where I got it from. Bitcoin wallets are not like bank accounts where you need proof of address and government ID to operate.

yes in present time bitcoin legalization is the main issue of bticoin. and if the problem solve then you will see that bitcoin will become more popular and effective. it will keep its position more stable then.

i think you will have converted your bitcoin into your local currency and you have paid tax on your fiat money, and your bank was just verifying your source of income that is why they accept your proof. but it does not mean that your band accept bitcoin.

bitcoin is a currency and no one has the right to introduce another currency in a state again the national currency of the state, and if  person is doing so he is breaking the law and he will be put in jail. so legalization of bitcoin is really a big issue and that issue must be solve very soon.

i think legalization of bitcoin is the man issue, and this issue must be solve on priority basis because it will make bitcoin more reliable and trusted and more and more people will start using bitcoin in future,

legalization is the main problems of bitcoin if this problem solved bitcoin will become more stable.

Legalization of bitcoin is an interesting issue and differs across continents.  I believe you have to pay taxes once you sell the bitcoins for "regular currency", eg USD.  If you are sending them from a wallet to an exchange I do not believe there is a tax liability until you officially take profits by converting them into the currency of your country.

I do not think that there are tax when you have bitcoin as your declared asset or something.  I do not know if the country you are into legalized already bitcoin.  Plus, the computation if ever the bitcoin is already legal in your country will depend on how much or how many it is.  What is the value of it.  There is a percentage count for how much you have. 

why is there the need for him to prove its origin, the circle requires it?
i would stay away from such official institution if that is the case after all it isn't safe still even if he send his btc to them. can't he just deposit it somewhere else.

Thank you, I was going to write exactly that.  These responses are like from people who've never stepped away from their computers and gotten out in the real world.  If bitcoin hasn't had a law passed banning it, it's legal.  At least in the US.  You cannot mint your own currency, but that isn't what's happening with bitcoin anyway.  And the IRS and everyone knows about it, and they just haven't passed laws regulating it yet.  Ack.  This is just another topic that baits the worst in bitcointalk.

my best suggestion for your friend is to deposite his money in bank step by step in small small amount per month . by selling btc . in this way he can transfer his all momey without tax in 5-6 month .

i think legalization is the the main problem of bitcoin and if this problem i think bitcoin will become more and more popular in this world .

many country not yet make legalization of bitcoin and not make statement about bitcoin is it legal or not so i think your friend don't have to pay anything since bitcoin itself has free from tax. and i think better your friend move the bitcoin into another wallet like trezor or bitcoin wallet for pc to keep the bitcoin.

most of the countries has not yet legalize bitcoin, even they have no statement about bitcoin that either it is legal currency or illegal, and that is the reason that still people are using it freely having no restriction on it.

Bitcoin is under great scrutiny in some parts of the world, Russia is taking strict action against bitcoin , they have blocked localbitcoins in Russia, and the Russian government is in the works to pass a law which will make Bitcoin use strictly illegal, and the people when found using Bitcoin could be prosecuted, it is very far off but totally possible that some governments could  come  down very hard on Bitcoin users in their respective countries for the fear of losing power.

in most of the countries legalization is is the main problem, as yet no country has given any statement about bitcoin that either it is a legal currency or not therefore people are still using it, but if we want bitcoin a permanent currency then we need to legalize it.

yes that is a fact that still not a single country has given any statement about bitcoin that either it is legal or illegal, and that is the main problem of bitcoin, i think governments should now take positive step and should consider bitcoin as legal currency.

Bitcoin is independent of any country and for using it it doesn't matter where did you get it. In this way it is global money already. Basically, it you have your btc in an online wallet, I guess it would even be incorrect to say that you bring them into country, because there are in the Internet. WHy should your friend proof anything about the origin of coins?

greeting all sir,..the legality of the financial resources that we get is always in question and, as it is already a fixed rule in developing countries ,,,,