what stop miners from mining btc to fresh wallet and sold it in black market or oversea?
What stops generating income from any kind of black market business. In general nothing. Some people do get caught (and some miners doing this would get caught), but there is certainly still a large black market economy. |
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All I'm saying is that you can pick yourself which BTC purchases match up to which BTC sales, just like with stock.
No you can't. It's LIFO. With stocks it is LIFO unless you identify specific shares when you sell. I haven't seen anything to say that bitcoin will be different that stocks, but who knows what is coming next. EDIT: Correction stocks are FIFO (not LIFO) by default. |
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Sure, but would you owe taxes?
Under the recently published rules you probably would. Better keep backups. What about theft, malware, hacking, Trojan... Things do happen. Or an exchange fails... See above. Answered. |
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Sure, but would you owe taxes?
Under the recently published rules you probably would. Better keep backups. EDIT: if you are running a business (including a sole proprietorship aka self employed) then you would deduct that as a casualty loss and probably not pay taxes. As an individual (hobby) there are some limitations on casualty losses so you probably would. 100K of mining is probably a business. In fact the IRS will probably force you to run it as a business because they want self employment tax. |
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I also think it's odd they don't specify what exchange people should use for valuation. In my neighborhood BTC isn't worth anything, it's $0, and I don't know how to sell (half playing devil's advocate here). So I mean, they aren't worth anything because I asked my wife to buy my Bitcoins, she said "no", and my neighbors said the same. So exactly where do I price them? I heard about a mountain called Gox, do they have the correct pricing?
"Fair market value." You first get to decide what that is. If they don't agree with the method or number you use, you accept their number or you reach a compromise or you go to court. |
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please re-read my posts regarding the question remaining, how do you know which cashed out BTC, are from which exact mined BTC.
It helps zero to know, you received x btc at x price.
You need to know, that xyz bitcoin was recieved at xx price, and those same xyz bitcoin fraction was sold at yy price.
You keep records. Then you apply these rules. Not really that hard, especially with these high tech gadgets we have now called computahs |
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You could argue that any product you produce or manufacture, digital or hard goods, has value... Whether you are making copies of a script or software package, selling music CDs, DVDs of movies you produce, or you make widgets that have real value in the marketplace... Unless you sell them, there is no taxable event. Mining is a process in which something is made. The bitcoin does not exist before you mine it. The block ledger is not prewritten. If it was, their ruling would apply as it would be a transfer of something that is already in existence.
But Bitcoins don't exist before they are mined. Not in any way shape or form. Otherwise people would make them before the block got that far ahead. They are manufactured through a process. After which, they are a product. Shelve them.
Except there is a "transaction" that mines the block. That transaction has counterparties (the rest of the network). If you manufacture a CD and put it on a shelf, it is true you don't pay taxes on it. But if you sell that CD to a warehouse and the warehouse puts it on a shelf, you do pay taxes on it. Think of the blockchain as a warehouse. Again, this is not the only rule they could have written (and not the rule I would have written) and there are ways of looking at it that make sense and other ways of looking at it that don't. That likely could be said for any rule. |
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I am new here sir i beg you if i did offend you pls forgive me but i really need this cash ok if it is too much okay pls lend me $0.02 i will manage it pls payback any time you like pls help my life perhaps i dont have a computer i am using my nokia c1 to post pls help me
Declined. Those darn flakey credit computers. Can't get them to approve scammers to matter how hard I try. |
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If they are going to treat it as property, how would mined coins by a company set up as a corporation be treated? My impression is that per the IRS's position, bitcoins mined would be the same as a the creation of a product you create/produce for sale but does not sell. It becomes on the shelf inventory, and there is no taxable event until it sells. This applies to all companies that make products through a process, hard materials or digital. If you own a software application, or a script (plugin) you developed, and sell it for $50 per copy, and make 1000 copies on CDROM, you don't owe the IRS taxes on the copies until they sell. It's all 1s and 0s, so what difference is there between using computers to create scripts or plugins or software, or bitcoins? All property right? You just have to view it from a manufacturing standpoint. And the fact that they have ruled it is property, the manufacturing stance would in my opinion apply. Manufacturing being the creation of something tangible "property" from the use of labor, machines, raw materials, and energy resources. So you mine the coins, put them on paper wallets as inventory to sell. But hold them... For sale at a later date, which would be taxable. You'd have to set up an s-corp to do this, or is my thinking way off??
They are essentially saying that mining is more like receiving in trade than creating it yourself. It's a rule they made, in some sense doesn't have to be logical (as long as they can defend it in court), but if you want a logical basis for it, that's it right there. |
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I need $0.05 loan pls payback 5 days i promise 1AX5DBAL245Bg6szAX4hGVe9tuwTojziDF
Declined Run the credit check again? He's posted everywhere - it must be legit.  Came back declined again. Must be a computer glitch. Sorry Stan, I wish I could help (actually I don't, but ssssh). |
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I need $0.05 loan pls payback 5 days i promise 1AX5DBAL245Bg6szAX4hGVe9tuwTojziDF
Declined |
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"Hashers" are employees of the pool
Vendors (of a service) or contractors, not employees (no supervision or control by the pool over the hasher, etc.). In other respects I agree with you. |
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So when you say "hold onto" bitcoins ... what exactly are you referring to? The private keys, or a password to a Coinbase account, (or god forbid Goxx account), or something else?
It makes little difference. If coinbase holds it and you have a claim against coinbase to give it to you, then your claim constitutes an asset. |
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A solo miner isn't given those bitcoins - he creates them, analogous to a painter creating a painting. Again, the painter isn't taxed on her creation until (if) she sells it.
Eh, maybe. You can't really mine a block without the whole network cooperating with you. There is more to it than a painting. Analogies work, but only to a point. We all know that bitcoin is somewhat different than anything that came before. Likewise with the tax rules. The same tax rules I would have written had they asked me (fat chance)? Probably not. Totally misguided and absurd (as one might reasonably imagine they could have been)? No. |
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And if it is the private keys, what if they have been destroyed because all I have now is a brain wallet?
IP can have value even if it is just in your head. I would argue the private key (or some other bit of information that can be used to render the private key) is the asset with value, but that's just me, I'm not the IRS. |
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I'm not a tax guy, and I'm not starting an LLC, so how or why exactly would I report a bunch of activity from an unprofitable hobby? I mean, taxes are applied to profits, not revenues, and none of this gear can be depreciated because the useful life is under 1 year. I'm just not seeing it, can anyone clear me up?
Schedule C (if run as a business) or Schedule A (if a hobby). If you don't understand the difference or don't know what to do, which seems to be the case from your question, get good advice. |
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However, if you are mining on a pool you are not really creating bitcoins, you are providing a service to the pool and being paid a fee (usually in bitcoins) based on some formula related to the quantity of service you provided. This is a lot being an employee or independent contractor. The IRS rules are less goofy in this case, though I doubt this was really their intent. Sort of a goofiness-reducing accident. Agreed that this does complicate the issue. However, it is also akin to a group of people working together to create something, as in the software engineers above. Only if you actually have some participation in operating the pool, as opposed to merely using it. It seems possible there might be public a pool organized as a coop where the miners could vote on decisions about running the pool, etc. but I'm not aware of one. But in general that's not how pools work, aside from private pools organized by a small group of miners, and those could fit your description. The pool is a separate business and you are contracting with it. |
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Network triggerable "identify unit" LED
Power LED
Status LED: Green = mining, Red = not mining
+1 Second power LED not really needed, btw. Green: mining, Red: not mining, Off: off. |
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The handling of mined coins seems inconsistent and problematic. A painter is not taxed the value of her painting as she paints. She's taxed when she sells her creation. A closer analogy is a team of software engineers creating a game. They're not taxed as they code; they're taxed on the income from the sale of the game.
The software engineers are taxed as they code. It's called salary. Even if they are paid in stock they might be taxed on the value of the stock (complex rules apply). As an individual, though, yes this is somewhat different. If you create something as an individual you are not taxed on it right away. The IRS rules are somewhat goofy in that sense. However, if you are mining on a pool you are not really creating bitcoins, you are providing a service to the pool and being paid a fee (usually in bitcoins) based on some formula related to the quantity of service you provided. This is a lot being an employee or independent contractor. The IRS rules are less goofy in this case, though I doubt this was really their intent. Sort of a goofiness-reducing accident. |
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"Bitcoin miners -- those people who validate Bitcoin transactions on their home computers -- will now be subject to tax on gains.
That makes it sound like pool participants are not miners; they don't validate transactions. I think the tax treatment is likely to be the same though, you are a provider of computing services to the pool which pays you a fee (revenue when received). |
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