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Author Topic: Capital gains and Bitcoin  (Read 9914 times)
jaimedimon
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June 09, 2011, 12:14:26 AM
 #41

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.
I doubt you could count bitcoin mining as gambling. The returns are just too consistent. Perhaps you could treat it like a commodity like a mineral mined from the ground.
I've been book keeping on the assumption that mined bitcoins are like inventory being created at a factory. That is it incurs expenses, but has no taxable value until it is converted into local legal tender. Of course I'll change if I receive different advice on how to go.

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.
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June 09, 2011, 05:31:42 AM
 #42

From Free Talk Live conversation : If a robber puts a gun to your head and says "Give me all your money", and you give him $100 from your wallet, and don't give him the $100 in your sock - have you cheated the robber?

Alternatively, you could keep your wealth in Bitcoins, and never realize a gain, and have no income.

Side note, I am TIRED of the US Govt inflating my dollars, making my assets' nominal value go up,
and calling it income.
TECSHARE
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June 09, 2011, 06:02:32 AM
 #43

"Rather, jurors delivered zero guilty verdicts. Three defendants, all workers, were acquitted as well as Kahre’s mother, who worked as a runner for her son’s businesses. Two other defendants were partly acquitted — the jury hung on one count each. The jury also hung on all counts faced by Kahre, Loglia and Kahre’s sister, resulting in mistrials."

http://www.rapidtrends.com/robert-kahre-vs-the-irs-and-doj/

Fact recheck - he was not convicted that case from 2003. At that point he became part of the IRS shitlist.
The link you posted: http://www.lasvegassun.com/news/2009/nov/17/businessman-robert-kahre-sentenced-tax-fraud-schem/
is from 2009.

This time he was convicted - mind you, because he declared the capitol he owned in federal reserve notes in order to leverage them for loan applications. He claimed the face value of the coin to the IRS and the federal reserve note market value of the coin on his loan application. He made two primary mistakes which I specifically mentioned earlier.

1) He converted his coins into federal reserve notes (by receiving FRNs from the bank based on that as collateral)

2) He consented to declaring a federal reserve note value of the capitol by simply filling out the application and signing it.

The federal reserve system is VOLUNTARY. If you do not use the system you are not liable for taxes paid into it. The moment you use federal reserve notes you give your consent to being bound by this contractual agreement. Most people don't understand that your income taxes don't go to build roads and schools, 100% of it goes directly to the PRIVATE bank known as the federal reserve. All the services that help maintain our communities are paid for with your property and sales taxes within the state. This system is a giant black hole imploding our economy, as well as the worlds. For the love of god stop feeding it!


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.

What you have done:
1) Called me a Idiot

2) Called me a "conspiracy theorist"

3) Referenced the very same private for profit company that benefits from the populace remaining ignorant about their financial rights.

What you haven't done:
Address a single one of my points. Personal attacks are consistently the tool of choice for the ignorant. Additionally I never claimed to be offering tax advice. Anyone who files their taxes in accordance to advice from random people on the internet without any research on their own would eventually get themselves into trouble WITHOUT my so called advice.

BITCOINTALK STAFF SELECTIVELY ENFORCE THE RULES IN AN ATTEMPT TO CREATE A CHILL EFFECT AND PERMANENTLY REMOVE ME AND OTHERS FROM THIS FORUM AS RETALIATION FOR SPEAKING OUT ABOUT THEIR ABUSIVE BEHAVIOR, AND THAT OF THEIR PERSONAL CLIQUES.
jaimedimon
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June 09, 2011, 01:43:15 PM
 #44

"Rather, jurors delivered zero guilty verdicts. Three defendants, all workers, were acquitted as well as Kahre’s mother, who worked as a runner for her son’s businesses. Two other defendants were partly acquitted — the jury hung on one count each. The jury also hung on all counts faced by Kahre, Loglia and Kahre’s sister, resulting in mistrials."

http://www.rapidtrends.com/robert-kahre-vs-the-irs-and-doj/

Fact recheck - he was not convicted that case from 2003. At that point he became part of the IRS shitlist.
The link you posted: http://www.lasvegassun.com/news/2009/nov/17/businessman-robert-kahre-sentenced-tax-fraud-schem/
is from 2009.

This time he was convicted - mind you, because he declared the capitol he owned in federal reserve notes in order to leverage them for loan applications. He claimed the face value of the coin to the IRS and the federal reserve note market value of the coin on his loan application. He made two primary mistakes which I specifically mentioned earlier.

1) He converted his coins into federal reserve notes (by receiving FRNs from the bank based on that as collateral)

2) He consented to declaring a federal reserve note value of the capitol by simply filling out the application and signing it.

The federal reserve system is VOLUNTARY. If you do not use the system you are not liable for taxes paid into it. The moment you use federal reserve notes you give your consent to being bound by this contractual agreement. Most people don't understand that your income taxes don't go to build roads and schools, 100% of it goes directly to the PRIVATE bank known as the federal reserve. All the services that help maintain our communities are paid for with your property and sales taxes within the state. This system is a giant black hole imploding our economy, as well as the worlds. For the love of god stop feeding it!


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.

What you have done:
1) Called me a Idiot

2) Called me a "conspiracy theorist"

3) Referenced the very same private for profit company that benefits from the populace remaining ignorant about their financial rights.

What you haven't done:
Address a single one of my points. Personal attacks are consistently the tool of choice for the ignorant. Additionally I never claimed to be offering tax advice. Anyone who files their taxes in accordance to advice from random people on the internet without any research on their own would eventually get themselves into trouble WITHOUT my so called advice.

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.
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June 09, 2011, 03:17:03 PM
 #45

Again, less with the personal attacks and glittering generalizations - more with the discussion of the issue.
Not sure how many times I have to repeat myself before you understand, but I AM NOT OFFERING TAX ADVISE. This is a thread for discussion of taxation issues, and that is what I am doing. Try to see past the blinding misdirected rage for long enough to have a discussion, if you can manage.

BITCOINTALK STAFF SELECTIVELY ENFORCE THE RULES IN AN ATTEMPT TO CREATE A CHILL EFFECT AND PERMANENTLY REMOVE ME AND OTHERS FROM THIS FORUM AS RETALIATION FOR SPEAKING OUT ABOUT THEIR ABUSIVE BEHAVIOR, AND THAT OF THEIR PERSONAL CLIQUES.
eturnerx
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June 09, 2011, 04:11:52 PM
 #46

I doubt you could count bitcoin mining as gambling. The returns are just too consistent. Perhaps you could treat it like a commodity like a mineral mined from the ground.
I've been book keeping on the assumption that mined bitcoins are like inventory being created at a factory. That is it incurs expenses, but has no taxable value until it is converted into local legal tender. Of course I'll change if I receive different advice on how to go.

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.
Oh - there are no tax breaks for mineral miners in my jurisdiction.

WatchMine - get Bitcoin prices and pool stats on your Mobile
buttcoin
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June 09, 2011, 09:46:24 PM
 #47

Just put buttcoin gains in the same place you put "Coke Rewards Points" on your taxes, it's all the same.

Goldenmaw
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June 09, 2011, 09:58:58 PM
 #48

lol

I love the site, buttcoin.
realnowhereman
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June 10, 2011, 09:11:39 AM
 #49

Here's another angle that's just occurred to me.

Gambling profit in the UK is now tax free.

If I "invest" 1 BTC in a game of chance and win, is that then a capital gain, or a gambling win?


1AAZ4xBHbiCr96nsZJ8jtPkSzsg1CqhwDa
mikegogulski
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June 18, 2011, 01:10:17 AM
 #50

The federal reserve system is VOLUNTARY. If you do not use the system you are not liable for taxes paid into it. The moment you use federal reserve notes you give your consent to being bound by this contractual agreement.

This is a nice dream. It falls apart, though, when men with guns break down your door.

I highly recommend that you read this (http://www.nostate.com/116/the-penalty-is-always-death/), and then think about how voluntary it is.

FREE ROSS ULBRICHT, allegedly one of the Dread Pirates Roberts of the Silk Road
TECSHARE
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June 18, 2011, 03:16:03 AM
 #51

The federal reserve system is VOLUNTARY. If you do not use the system you are not liable for taxes paid into it. The moment you use federal reserve notes you give your consent to being bound by this contractual agreement.
This is a nice dream. It falls apart, though, when men with guns break down your door.
I highly recommend that you read this (http://www.nostate.com/116/the-penalty-is-always-death/), and then think about how voluntary it is.

That's an interesting bed time story. As I stated in my original thread, the question is  - how much is your freedom worth to you? You have the legal right. Does that mean the government won't kick in your door? No.

BITCOINTALK STAFF SELECTIVELY ENFORCE THE RULES IN AN ATTEMPT TO CREATE A CHILL EFFECT AND PERMANENTLY REMOVE ME AND OTHERS FROM THIS FORUM AS RETALIATION FOR SPEAKING OUT ABOUT THEIR ABUSIVE BEHAVIOR, AND THAT OF THEIR PERSONAL CLIQUES.
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