That is because the bookmaker pays the duty, i.e. it is already deducted from the gains. It does not matter to HMRS if they collect taxes from bookmakers or gamblers as long as they collect taxes at some point. In 1997 I opened an account with an English bookmakingfirm online via telephone. When I placed a bet I could chose to pay 10 % tax (I think that was the rate, maybe 15%) on the bet or the earnings. If I chose to pay on the earnings I did not pay tax if I lost. This concept was entirely novel to me, and I looked into the matter and it was due to UK tax laws (albeit I was not a U.K. resident).

Regarding the information from the securities lawyer; I only glanced at the Global bitcoin stock exchange and did not notice that it was a securities exchange, per se. So the lawyer did not state that Bitcoins are "securities". He thought the concept was very new and did not have a clear answer; he thought it functioned a bit like a derivative, although it was too far a stretch to actually call it a derivative. I would not consider Bitcoin to be a derivative, as it has no underlying asset, unless you consider the hardware or opensource code to be the assets. I still think there is a case for Bitcoins to be classified as "securities" as it is a code which may be used by a person to initiate an electronic fund transfer. Am I positive that this is the case - no.

EDIT: The part about hardware or opensource code being the underlying asset is intended as a pun; of course USD is what would back Bitcoin if it were a derivative, but due to the volatility of Bitcoin it defies both common sense, and more importantly, derivative laws (I do not know derivative laws in any detail) which obviously have stipulations against "assets" appreciating/depreciating 20-60 % per day (not only Mtgox, but other exchanges too) and 100% + per week. Although in the case of Bitcoin, it would be some kind of inverse calculation of asset appreciation/depreciation as Bitcoin itself fluctuates and not USD.

Unless:

I'm sorry, but that is simply not the case: General betting duty

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000255&propertyType=document

http://www.guardian.co.uk/business/2009/aug/05/betfair-gambling-tax-offshore

I do not live in the U.S. but Sweden, however I know more about U.K. law than any other jurisdiction. Of course there are variations, but the laws of the FIRE sector have since the deregulations in the 80ies become more aligned, and today the developed world, in particular the U.S., the E.U., Japan have very similar provisions FIRE sector provisions in order to operate on a level ground, which they continously extend to emerging markets who are disadvantaged due to less capital and less input regarding the regulatory framework.

No doubt it would/could/maybe will be a real legal challenge getting any funds back from Mtgox, however, a big difference between EVE and Bitcoins is that EVE money was never intended to be used outside of the game envrionment, which even contradicted the End User License Agreement.

I'm not patient nor understanding - but nonetheless not at all surprised.

My girlfriend earned $1000 on Tradehill, but all I got was goxed.

Appluads all around.

I do not simply listen to any professional and go with what he/she thinks; the wording of section 916(c) of the Electronic Fund Transfer Act describes the functioning of Bitcoin. It is not Intellectual Property, I went through that many hours ago, when some poster suggested it would be Intellectual Property. I would not accept a usb with bitcoins stored on it, as the usb would only be a medium used to store the code. By that reasoning a cd containing Windows 7 would be a "goods" whereas it is "intellectual property".

The tax statement is broad - but in which jurisdiction do the tax authorities say - hey, make a quick buck by selling any random article for a higher sum than you just bought it for, and keep the dough - no probs!

I'm ready...no, I'm prepared for disappointment, and irratability due to a malfunctioning website.

Having read a different topic, a person posted that he had spoken to a securities lawyer, and they had reached the conclusion that public trading on the "Global bitcoin stock exchange" (and hence any exchange in the US dealing with securities) would subject it to SEC and relevant laws. A security is defined as:

 "(3) the term “security” means—

(A) a note, stock certificate, treasury stock certificate, bond, treasury bond, debenture, certificate of deposit, interest coupon, bill, check, draft, warrant, debit instrument as defined in section 916(c) of the Electronic Fund Transfer Act, money order, traveler’s check, letter of credit, warehouse receipt, negotiable bill of lading, evidence of indebtedness, certificate of interest in or participation in any profit-sharing agreement, collateral-trust certificate, pre-reorganization certificate of subscription, transferable share, investment contract, voting trust certificate, or certificate of interest in tangible or intangible property;"

US Code Title 18 § 513. Securities of the States and private entities.

Considering the fact that a securities lawyer has a far superior legal comprehension than myself, I concur that Bitcoins are not considered Barter. Also, it cannot be considered both a barter and a security, which I fallaciously argued earlier. However, as Bitcoin is a "debit instrument as defined in section 916(c) of the Electronic Fund Transfer Act" ("As used in this section, the term "debit instrument" means a card, code, or other device, other than a check, draft, or similar paper instrument, by the use of which a person may initiate an electronic fund transfer.") any Bitcoin exchange based in the U.S. is subject to the SEC and relevant laws. And, of course, in the globalized financial business sphere, all stock exchanges in the world are subject to similar legal provisions and all defintions of "securities" are likewise or very similar, and due to "harmonization" the laws and definitions are being aligned continuously.

So all Bitcoin exchanges, wherever situated are subject to the exchange laws of the host nation, as Bitcoin is a kind of "security", I contend. Exactly which tax laws that are applicable is beyond my current knowledge; although the only point that we have agreed upon so far is that gains on Bitcoin trades are subject to some kind of tax.

Having argued a lot about a lack of disclosure of information, and considering the new evidence regarding the transfer of 420k + bitcoins, that many people with computing knowledge appear to agree proves that Mtgox are in possesion of the Bitcoins, and also in consideration to the almost certainty that the hacked account did belong to Mtgox, I too think that in the interest of the market and the overwhelming majority of the traders a rollback call is the lesser evil option. As JoelKatz says, there is even less conflict of interest, although some people have suggested that Mtgox could have been hoarding Bitcoins which would entail a conflict of interest; some Bitcoins might be for traders and some might be Mtgox's own Bitcoins. However, under no circumstances at all would this be known by anybody apart from Mtgox, so it should not be considered a factor.

That said, the lack of information during the whole process, and false claims, has displayed a lack of consideration to the interest of the market and traders.

Actually, the fractional reserve trolls do try to demonize supporters of the gold standard as some looney conspiracists. It would not come as any surprise if they attempted to do this against a gold and silver exchange based on bitcoins. But still it is much better than being, however erronously, associated with drug sales. Guilt by association is a stupid term, although it has been used for ages and does enjoy some support.

Sadly, I don't think such an exchange would work in practice due to human greed. Gold price is so high that the financial incentive to fraud would be very high. Someone could even trade for weeks or months and build up a good reputation and then commit a fraud amounting to many thousand dollars in a weeks time. And due to the anonymised nature of Tor it would be impossible to remedy. Even if a few traders did not rip off their customers, I envisage a monopolistic situation were almost all buyers purchase from a very select number of sellers, although I doubt trade would continue after hundreds of people being defrauded.

If a person bought $5 million worth of silver and sold it for $5 million within a short time-span, than I agree with you that a 1099-b would not be required. If instead they sold it for a profit of $5000 a form is required. The IRS would presumably have a lot of problems enforcing the law upon thousands of traders based in the U.S., which is why they are more than likely to enforce the law upon the exchange.


Again I am in agreement with you; however similar laws exist in the U.K., Australia, China taxes virtual money trading despite having outlawed the practice, in South Korea "a court ruled in September of last year that profits from the trading of "cyber money" should be subject to 10 percent value added tax (VAT)". So such laws are either global or definately globally expanding. Most of Bitcoin traders are located in advanced economies where the likelihood of such laws already being in existence is high.

http://www.koreatimes.co.kr/www/news/nation/2010/01/116_58775.html

CryptoCommodity; none of these exceptions are applicable to Bitcoins. The issue of "Internet Based Barter" and "Trade Dollars" is multifaceted as Bitcoins have several uses. It can be traded for USD, it can be traded for other goods and services. If you purchase 10 Bitcoins for $100 and sell them for $200 you earn $100. Is that to be considered as a strict capital gain, or do you "earn trade or barter dollars through a barter exchange"? You could be right that this is not considered a barter exchange, however I believe that it is. You could purchase 10 Bitcoins for $100 and after an aprreciation of value exchange them for goods or services valued, say, $200. In this case it is clear that the transaction is considered a barter, in which $100 has been earned which may or may not (due to specific circumstances) be subject to tax.

benjamindees What are you talking about - you cannot pay U.S. taxes with Dwolla, Pound Sterling or any other currency but USD.

Maybe I expressed myself wrongly; of course a soverign nation may delegate powers, but such powers must expressly be delegated. No sovereign nation has delegated powers to issue "money" or "currency" to an entity that is not controlled or officially affiliated to the nations governance. If in any nation another legal "money" or "currency" was issued, how would tax be paid on such transactions? There is no country that accepts payment of tax in a "money" or "currency" not issued by the sovereign nation.

As no sovereign nation has delegated powers to Bitcoin to issue "money" or "currency", Bitcoin is not deemed as such according to law.

I was blatantly wrong about the The Securities Exchange Act of 1934, inexusably so. However, from 1099-b must be filled when:

"A broker or barter exchange must file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for each person:

    For whom the broker has sold (including short sales) stocks, bonds, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, etc., for cash,

    Who received cash, stock, or other property from a corporation that the broker knows or has reason to know has had its stock acquired in an acquisition of control or had a substantial change in capital structure reportable on Form 8806, or

    Who exchanged property or services through a barter exchange"

http://www.irs.gov/instructions/i1099b/ar02.html

I still argue that Bitcoins fall under the scope of what IRS defines as "Internet-based Barter" and "Trade Dollars"

Suppose we call it Bitcoin credit; credit must be debited. A Bitcoin account is credited with X Bitcoins whereas a $ account is debited with X dollars. It therefore still constitutes barter according to the law.

Only sovereign nations are allowed to issue "money" or "currency". The legal status of Bitcoin is certainly not money/currency. According to US law, Bitcoins are a barter. I have posted on this subject at "Opening a BitCoin exchange is futile - read why" http://forum.bitcoin.org/index.php?topic=21174.0;all Other sovereign nations have similar provisions.

The IRS defines barter as:


http://www.irs.gov/businesses/small/article/0,,id=113437,00.html

So Bitcoins are, per se, legal. However, Bitcoins are subject to multiple laws, e.g. tax laws. In the U.S. (for example) any person engaged in barter "may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss."

http://www.irs.gov/businesses/small/article/0,,id=188095,00.html

The authorities in respective countires are the ones who will define whether BTC are regarded as a "currency" or a "commodity", it does not matter what other people associate BTC with.

Interpol have also taken interest in the growth of virtual money and seek to influence lawmakers. Although Interpol would only become involved due to criminal use, the "Silk Road" internet outlet which prompted US politicians to discuss legislation could also prompt Interpol to become involved.


The Financial Services Authority in the U.K. has devised new regulations on e-money; a fundamental issue is the definition of e-money.


http://www.fsa.gov.uk/pubs/international/approach_emoney.pdf

An exchange based in the U.K. might be advised to actually transfer bitcoins in all purchases, and not, as it is suspected to have been done by Mtgox, devise some kind of fractional scheme. Scuh a fractional scheme might be deemed as "issued on receipt of funds for the purpose of making payment transactions". If actual bitcoins are transmitted it might be deemed as "funds" instead of "receipt of funds". Issue is defined by merriam-webster as amongst others "to send out for sale or circulation"; so even only circulating funds might fall under the scope of "e-money".