Way to write an honest poll there, buddy.

As a wise prophet once said, "Let's not start sucking each other's dicks just yet."

There is no law against digital currencies in Kentucky.  The guy is an idiot.

The OP should have responded that he was an undercover agent trying to catch people, and to shut up before he blows his cover!!

You are assuming that there will not be other sources of demand.  The world's  black market is huge.  Imagine how useful to people in this market an anonymous digital currency would be. 

Owning bitcoins is not the same thing as money laundering.

Also there are no laws against 'alternative currency', as you are trying to claim.

Regardless of whether there was or not, a lot of the people who own bitcoins arent even in the US.  Stop acting like America rules the world, it makes the few of us normal Americans look bad.

Think of all the sockless children you could outfit in a new pair of Alpaca wools!!

Actually you just think people won't buy stocks over $100 a share because that is the standard range of prices in the US.

In some other countries, stocks are traditionally split when they reach 2 digits.  Other countries not until they reach 4.

Wait a minute, are you telling me there is no tiger meat in Chinese tea???

No, what I have done is stated facts.  You can live in your little fantasy world where taxes are voluntary, because the IRS cannot possibly catch every single tax evader.

You haven't made any salient points.  You are simply making an argument that is already discredited by the government agency that regulates that particular aspect of society.

That means that anyone following your 'advice'  is setting themselves up for a long visit to pound me in the ass federal prison.  Especially if that person happens to have a decent amount of money that the IRS can seize.

You can go ahead and believe that you are correct, and the US government, the IRS, the entire US legal system, and the entire US law enforcement system is wrong.  However, spreading that nonsense here just makes it easier for governments to attack bitcoins as an illegal attempt to evade taxes.  What mainstream company or retailer is going to want to be associated with that type of nonsense?

Every single person who owns a bitcoin, should condemn your nonsense, as it is a huge threat to the idea of bitcoin itself.

To launder money, you take cash, and convert it somehow into regular money in the banking system, called "settled funds".  Usually to do this, you have to pay a fee to someone to launder it (someone who owns a cash business for example, like a laundromat), and also you have to pay taxes on the money.  Essentially enough of the people running the world need to get their cut, before illegal money can become legal. 

When you try to buy a house, you better already have your downpayment in the bank, because if it is under your mattress, the bank doesn't know whether you earned that money legally, or from selling drugs, or whatever.  They sort of freak out about that.  It's a pretty recent change because of 9/11 and the PATRIOT act.  The banks have to do a lot of stuff now that they never had to do regarding verifying source of funds, identities, etc.

Sounds like a good way to get scammed.  Whats to stop scammers from trading with your bitcoins, then telling you they lost money.  Or whats to stop them from sharing the profits, and then disappearing when there are losses to share?

US dollars are legal currency.    What this means is that if someone wants to repay a debt and they offer you US dollars to do it, you are legally required to accept them.  However, if it is not a debt, but just an actual transaction (buying groceries for example), they are not legally required to accept USD.

Second currencies are allowed, but no one uses them for many reasons, Greshams law being one of them, but also because it is just impractical as so few people are generally willing to accept them.

As for laundering money, you are misunderstanding how money laundering works.

Using your example of a bank robber who wanted to launder his funds, what he would have to do is funnel them into a cash business as extra revenue.  They would then come out on the income statement as ordinary income, which he could then pay taxes on, and viola, laundered money.

If someone robs a bank, then buys bitcoins and launders then, then turns them back into USD, he has accomplished nothing except wasting transaction fees, as he still has a pile of cash.

Barter is legal, however when you barter, you are also legally responsible for paying taxes on the value of whatever it was you received in the barter transaction.

This is also incorrect.  If you gift bitcoins, you will not have to pay a gift tax, but that doesn't change the fact that you received the bitcoins, the government will still want to collect tax on it, whether it is income tax or capital gains tax.

I am an accountant, and literally everything you are saying is wrong.  I am not trying to be a jerk or anything, but this is very bad tax advice.

Whether someone wants to pay taxes on their bitcoins or not is a moral question for themselves to answer, but legally speaking, capital gains are considered part of your income, and are subject to capital gains taxes, which are NOT 0% if you make under $34.5k unless those are LONG TERM capital gains, which is a very important distinction.

That's certainly an ambitious argument, personally I don't think the IRS will go for it, but you can give it a shot.  I can see them claiming that if bitcoins are used as a currency, when you receive them, it's the same as receiving currency. 

They definitely are not going to go for the idea they are mined as a mineral, unless bitcoin users are willing to spend big bucks lobbying them into those tax breaks, like the actual mining companies have.

I have a feeling we will find out soon whether it even matters, as bitcoin values either seem headed towards the stratosphere or back down to being worth pennies.

Please get a job with the government and pass this idea onto them!!!
 

The thing that's gonna kill bitcoin faster than anything, is having idiots posting ridiculous conspiracy theories about taxes being voluntary, that the IRS has specifically pointed out as being bullshit.

http://www.irs.gov/taxpros/article/0,,id=159932,00.html#_Toc284193999

Go read that site.  The government office that is responsible for enforcing the tax code says that anyone following your advice is committing income tax evasion.  When law enforcement people read posts like yours, they certainly document them to use in future cases against bitcoin and various affiliated groups like mt gox, bitlaundry, etc.

If Central banks wanted to get rid of bitcoins, they would simply make them illegal to use in their country.

This would prevent them from ever being accepted as mainstream. 

It's actually somewhat of a difficult question, because digital currencies in the past were purchased outright with regular currency, not mined in the way that BTC are.

Any gain from sale of BTC that was purchased, not mined, is going to be a capital gain.  

Any gain from sale of BTC that were mined, is going to be essentially uncharted territory.  I think you can make the argument that since it is 'earned', in the sense that people purchase equipment, configure it to run certain software, pay for electricity, etc.  In this case, it would simply be treated as business income.  You could then deduct your expenses and arrive at net taxable income.  Some expenses would have to be depreciated over time, such as computers which would last longer than one tax year.

It is possible, however, that the IRS might take the position that since bitcoins are 'awarded' in a somewhat random fashion, that they might be considered 'gambling winnings'.  If this is the case, you wouldn't be able to deduct any of your expenses used to generate them.

Really it would be great if the IRS would issue a statement on this to give clear guidance, but bitcoins specifically are probably not even on their radar.

1.  If I convert BTC to USD on Monday, then that same USD to BTC on Tuesday, is capital gains tax still due?  If it is, then would it be better to wrap all one's BTC transactions in a holding company, so that profit becomes the element that is taxed?

If you sell BTC and buy USD, then you have a capital gain.  If you use those same USD to buy bitcoin the next day, it doesn't change the amount of capital gain for the previous transaction.  The only thing that could decrease that gain would be a capital loss on another similar transaction.  It does not matter if you have a holding company or not.  At the end of the year, you sum your capital gains and losses, and only pay the tax on the net. (or take a deduction if you have a net loss)


2. If the answer to the first question is "no", then what stops me converting all my gross income to Bitcoins and declaring no net income?  I can then drip my Bitcoins back to native currency (if I even have to) as I need to and in this way use Bitcoins to smooth my tax bill over the lean years and fat years.

You are misunderstanding capital gains and net income.  Whenever you get paid, whether it is in USD, bitcoins, chickens, or gold; you have income.  Regardless of whether you transfer that income to another form of money or spend it on hookers and blow.  For example, if you earn $1000 at work, then come home and buy $1000 worth of bitcoins, you still have $1000 income.  This is just the same as if you came home and spent the $1000 on stock shares or investment grade beeny-babies.

Now, assuming that you convert 100% of your income into bitcoins, there would be no capital gains until you sell the bitcoins, either for USD or another currency.  However, you would still have net income.

I am an accountant in the US, but the principles are the same in the UK.