Why would you want to help a competing currency, instead of your own?
Do you really think that paying taxes on income you get means you are supporting one currency over another? And what currency is mine? I do not make claim that I "own" the US Dollar nor Bitcoin as a whole. I do "own" some of each.
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We are not taking about paying taxes on income, we are talking about paying taxes on holding a currency.
Here is an analogy, lets say you store $10000 at home in your desk, do you pay taxes on the $10000 dollars? you do not pay taxes on the currency if it is dollars.
Lets say you hold 100 BTC in your desk on a paper wallet or usb drive, now you are expected to pay a tax. A tax on what? the bitcoins a year later will still be 100 BTC. unless you believe you should pay an inflation tax.
Activities that you do generate income, a currency by itself does not generate income.
Lets say that you do a job and earned $1000, well you pay taxes on the income that you earned, lets say you are left with $700, now the $700 do not generate income by themselves, what generated the income was the job that you did independent of the currency.
here is the analogy.
lets say you get paid in BTC and earned 2 BTC, and then after taxes you are left with 1.4 BTC, the 1.4BTC can not generate income on their own, just like the dollars, the $700 dollars have no further tax, why should the 1.4 BTC taxed forever. This type of taxation where the currency itself is taxed and there is no activity of any sort generating income is what completely destroys savings.
The only difference I can see here is that the dollar is inflationary and bitcoin is deflationary, so they are basically asking to pay the inflation tax.
By our own currency I meant bitcoin, we have no control over the dollar, and with bitcoin the rules that define the currency from the beginning were clear and precise, and we all had a voluntary choice of accepting it which I did, the dollar on the other had does not even comply with the US constitution if it did it would be a much better currency in my opinion.
One of the properties of Bitcoin is that is pseudo anonymous, and with a little bit of advice from a tech person it is anonymous.
I think the fact that some transactions could be considered anonymous is fine. I do not think that all transactions are anonymous. With a "public" ledger, and some hard work a lot of what you think could be anonymous is not anonymous at all, and if you try to keep it that way you could have a ton of work FOREVER to make sure that a transaction cannot be linked back to you. I think you could make BTC transactions totally anonymous but it would require a lot of effort. I am not doing anything that I think needs to be kept secret. Doing purchases online without the need to give up my credit card number, expiration date, and secret code on the back of my card makes BTC plenty anonymous for me. No one can use that data to take more money from me.
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It can be certainly be made anonymous with some precautions.
It is clear that transactions that require ID are not anonymous, all others can be made anonymous.
And that creates a financial mess that costly for everyone, for example an ATM can cost as little as $1200 but a USA compliant ATM costs $20000, about 18 times more expensive due to all the overhead due to "know your customer laws".
Plus the IRS ruling it is illegal on several counts:
1. The ruling is retroactive.
2. It states you are not allowed to have a competing currency against the dollar which is contrary to the constitution.
3. It challenges the FINCEN ruling, FINCEN says it is money, and the IRS says it is property, it obviously can not be both at the same time, it also challenges the state of NY, since FINCEN was first I would guess that unless the ruling of FINCEN is ruled void, then the IRS ruling has no standing. I am not a legal expert I am using common sense that you can not have contradicting laws.
The Fincen ruling was also retroactive, and the victims were Mtgox, Mutum Milligium, and Dwolla, and everyone that used those services.
I am not asking on my OP if you think the ruling is legal or not. There are plenty of people who think the IRS as a whole is illegal, and plenty of those people are sitting in jail because of their belief system. By the tone of my post I wish to comply with the IRS notice. This thread is not to debate the legalities of the ruling, there are other threads for this already started. This thread is to discuss what tools could be in place to help those that plan to comply with the IRS.
If it is property why do people that exchange large amounts of bitcoins get money laundering charges if it is not money, why does FINCEN requires an MSB license if it is properly, will the IRS require a PSB " Property Service Business" license?
You know Money Laundering does not have to involve currencies correct? In fact it normally does not involve a second currency, it involves some other sort of legitimate business or product. The whole point of Money Laundering is to get money gained in illegal means into the financial system thru legal means. (Get money selling drugs, move that money into buying and selling cow hides, put money from cow hide sales into the banking system, money is now laundered). The IRS ruling actually helps people who do sell BTC for US Dollars in that the IRS has said BTC is property. Being Property should mean that you do not need a MSB license or be registered as a MSB. FINCen has also said that if you sell BTC that you had invested in as a personal investment, you do not need a MSB to sell BTC. If you do it as a business, or for a 3rd party, then you do need a MSB.
Charlie Shrem got falsely accused of money laundering when his exchange did not deal in money only property based on the IRS own ruling.
Money Laundering typically involves property, goods or services.
As you guys can see the ruling it is spaghetti code with extreme poor planning just to make a quick buck, which different government agencies are saying different things, until they get their shit together, I would use common sense since if compliance with one creates violations to the other, you do not want to be in such a situation.
The planning is so poor that it is hard to believe it was not an attack against bitcoiners.
FINCen tells me I do not need to be a MSB so long as I am selling my own personal investments, like stock certificates. This is great news! IRS tells me that if I sell my property and made a profit on it I need to pay taxes, like any other property that I own. I do not see these rulings as offsetting each other nor attacking BTC users at all. If BTC was deemed a foreign currency I think it would have much worse tax implications, as does my CPA. I am quite happy to have BTC considered my property.
Creating such a tool is impossible since bitcoin is fungible, that is all bitcoins in the wallet are equal, the IRS is saying they are not, bitcoin has been in use since 2009 will the coins being fungible, so do you believe the IRS that the coins are not fungible?
To create such a tool you would be treating the coins as not being fungible which is against the spirit of any decent currency.
If you really think that bitcoin is not fungible the caos and fiasco it would create would be of a huge magnitude, so it is clear most of us believe bitcoin is fungible.
Again, I do not see the IRS challenging this at all. Instead you are just setting a cost bases for your coin. There are several ways that you can calculate your taxes, the method that I am going to use is FIFO or First In First Out. That is not the way that you would have to report your taxes, the IRS has not stated which way is required and there is flexibility. You could buy 1 BTC per day for a year and never spend 1 BTC. At the end of the year you add up the total cost of your purchases, you divid this total cost by 365, this is now your cost basis. Next yeat on Jan 1, ALL of your BTC are considered to have a cost basis of the number you came up with last year. They are all considered the same, there is no difference between 1 BTC and another. Fungibility is still in tact.
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In the strict working of the law your method does not work, since it is an average of the price, the law expects for every bitcoin transaction to put a dollar value when you obtained the coin, and sale ( a sale that does not take place if you do not sell), and fungibility is destroyed, since a bitcoin transaction is based on many inputs, when you send someone 0.5BTC there can be hundreds of inputs in which you do not choose which one are used it is done automatically, and unless you follow those inputs you will not know the dollar value of each input at the time that input was created, this is insanity.
Most tools that try to be compliant will probably do an average like you mention, however in the strict ruling of the law that is not what it says.
The law destroys fungibility since a bitcoin from 2009 would be valued at 1 cent, versus one from late 2013 at $1200, thats is simply insane. all bitcoins are equal.
The part where you put a value on bitcoin is also nonsense, since if you look at the way an exchange works, there is not a single price everyone puts their own price for sell, and buy, and then when buyers and sellers that agree on the price are matched, and to complicate things a little further different exchanges have different prices. With bitcoin everything is voluntary and that is the beauty of it, if you are selling a bitcoin a bitcoin at a different price than others it will sell when someone agrees that is the value of it, and everyone has different prices exchanges, ebay, craiglist, localbitcoins, atms, and it makes perfect sence, but by force having to put a value into to it at a time that you have no desire to sell or buy makes no sense.
Also since it is based on voluntary participation there is no such thing as an official value.
just my 2 satoshis
Thank you for your thoughts, but I was really hoping to find some tools with my post, if you know of any please let me know!
I would follow the path of Satoshi, if you read his paper you will understand that not only he was very smart, he was brilliant, a true genius, and that is something we should all have a very deep respect for.
Bitcoin has a purpose and in my opinion we should do the best to keep politicians out, bitcoin is very resilient but it will take a huge teamwork to keep bitcoin under our control. The goverment next step is most likely going to try to alter bitcoin so that is not anonymous, and make it inflationary, that is something that we must never allow.
I would hope that the IRS would revise their ruling and make it so that bitcoin gets treated equally to the dollar, so the playing field is leveled.
