Selling BitCoins = Trouble!?

[BitCoinNewGuy]

Consider this scenario:

You have about 250 BitCoin and you want to sell on CoinBase or where ever. You sell all the coins and cash out @ current market value of $36,660. Everything goes fine, you report the income on your taxes, but then you are the unlucky 1.2% that gets audited. The IRS sees that you reported the income which is great!, but that you are not registered as a "Money Service / Transmitter Business". Do you have to be registered? Is this a FiCEN requirement for selling BitCoin? Does this only apply if you are running a "business"?

I wish that this statement applied to me, but I only have 1.5 BitCoin. I know A LOT of people selling like this and read about it all the time.

[Birdy]

Coinbase has to be registered as money transmitter in this case, not you.
They are transmitting the money for you.

[BitCoinNewGuy]

Coinbase has to be registered as money transmitter in this case, not you.

I'm not sure that is correct...
http://www.fincen.gov/financial_institutions/msb/definitions/msb.html

Money Services Business - The term "money services business" includes any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

(1) Currency dealer or exchanger.
(2) Check casher.
(3) Issuer of traveler's checks, money orders or stored value.
(4) Seller or redeemer of traveler's checks, money orders or stored value.
(5) Money transmitter.
(6) U.S. Postal Service.

An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger; check casher; issuer of traveler's checks, money orders or stored value; and seller or redeemer of travelers' checks, money orders or stored value. The threshold applies separately to each activity -- if the threshold is not met for the specific activity, the person engaged in that activity is not an MSB on the basis of that activity.

No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

Notwithstanding the previous discussion, the term "money services business" does not include:

    A bank, as that term is defined in 31 CFR 1010.100(d) (formerly 31 CFR 103.11(c)), or
    A person registered with, and regulated or examined by, the Securities and Exchange Commission or the Commodity Futures Trading Commission.

For the complete regulatory definition of "money services business", see 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)).

Note: Each money services business (MSB) is a financial institution. For the regulatory definition of "financial institution," see 31 CFR 1010.100(t) (formerly 31 CFR 103.11(n)).

Or does this only apply to the exchanges?

[Peter Lambert]

Consider this scenario:

You have about 250 BitCoin and you want to sell on CoinBase or where ever. You sell all the coins and cash out @ current market value of $36,660. Everything goes fine, you report the income on your taxes, but then you are the unlucky 1.2% that gets audited. The IRS sees that you reported the income which is great!, but that you are not registered as a "Money Service / Transmitter Business". Do you have to be registered? Is this a FiCEN requirement for selling BitCoin? Does this only apply if you are running a "business"?

I wish that this statement applied to me, but I only have 1.5 BitCoin. I know A LOT of people selling like this and read about it all the time.

If I understand the FinCen guidance, just selling your bitcoins for fiat makes you a user of the currency and therefore you do not have to register as a MSB. If you were running an exchange, then you would need to be registered.

Consider possible simmilar situations of having sold other investments: If you sell $30000 worth of Euros and have the money deposited in your account, do you have to register as a MSB? If you sell $30000 worth of gold and have the money deposited in your account, do you have to register as a MSB?

[BitCoinNewGuy]

If you sell $30000 worth of Euros and have the money deposited in your account, do you have to register as a MSB? If you sell $30000 worth of gold and have the money deposited in your account, do you have to register as a MSB?

Well, since I would have had to purchase the Euro's or Gold from somewhere with $USD, then exchange them back TO $USD, I am not sure how that is not acting as a money exchanger?

Paying $USD for BitCoin -> Holding onto BitCoin -> Finding Buyers -> Selling BitCoin $USD

Looks like a typical 'exchanger' to me. 

[Peter Lambert]

http://www.fincen.gov/financial_institutions/msb/definitions/msb.html

Money Services Business - The term "money services business" includes any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

(1) Currency dealer or exchanger.
(2) Check casher.
(3) Issuer of traveler's checks, money orders or stored value.
(4) Seller or redeemer of traveler's checks, money orders or stored value.
(5) Money transmitter.
(6) U.S. Postal Service.

An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger;

Or does this only apply to the exchanges?

So if you and Joe Schmoe from down the road exchange $2000 for 20 btc, both of you are required to be registered as MSB?

[Peter Lambert]

If you sell $30000 worth of Euros and have the money deposited in your account, do you have to register as a MSB? If you sell $30000 worth of gold and have the money deposited in your account, do you have to register as a MSB?

Well, since I would have had to purchase the Euro's or Gold from somewhere with $USD, then exchange them back TO $USD, I am not sure how that is not acting as a money exchanger?

Paying $USD for BitCoin -> Holding onto BitCoin -> Finding Buyers -> Selling BitCoin $USD

Looks like a typical 'exchanger' to me. 

Why would you have had to have bought the Euros with dollars? There are plenty of other ways to acquire euros. If you go to a currency shop with your Euros you got from selling your car to a gentleman from Europe and exchange those euros for dollars, are you acting as a MSB, or is the shop acting as a MSB?

[BitCoinNewGuy]

So if you and Joe Schmoe from down the road exchange $2000 for 20 btc, both of you are required to be registered as MSB?

Well then, who would technically have to register, ir not both? Someone technically would have to!

That is the question.

[Birdy]

This is using the currency, otherwise you would have to be a moneytransmitter if you buy stuff in the supermarket.
Because you transmit your dollars for food.

[BitCoinNewGuy]

I am just going to call the IRS and ask...

Service, Telephone number, Hours of operation. IRS Tax Help Line for Individuals, (800) 829-1040

[Birdy]

I am just going to call the IRS and ask...

Service, Telephone number, Hours of operation. IRS Tax Help Line for Individuals, (800) 829-1040

Chances are, you won't get someone on the phone who understands what Bitcoin is.

[DannyHamilton]

It won't help you to call the IRS.  This isn't an IRS question.  All the IRS cares about with regards to this question is whether or not you are paying the necessary income taxes on any income you get from the sale fo the bitcoins.  The IRS doesn't care whether you are registered as a MSB or not.

FinCEN is another entity entirely.  You need to find out how they would view the transaction.  Calling the IRS won't help you in that matter.  FinCEN has already released some guidelines.  If you can get clarification and further details from them on those guidelines it would be great, but so far they've avoided saying more than what's in the guidelines.  If you are exchanging bitcoins in the quantities you are asking about, it would be a good idea to get your own legal counsel to review the guidelines and advise you.

Unfortunately, until there are more courtroom precedents set, much of what is "required" will be educated guesses.  It may be a few years before we really know who needs to be registered and who doesn't.

[The second coming]

The world governments will never be able to prevent Bitcoin from spreading across the globe, for it is the One True Currency.

Sell your Bitcoins my son, and be Blessed.

[jeannie]

It just take the USA govt to stop Bitcoin and the rest of the world will have to obey

[johnpeter123]

what is today bitcoin rate

[Giant]

what is today bitcoin rate

http://bitcoincharts.com/

[Peter Lambert]

what is today bitcoin rate

About 8.3 USD/mB, how is that relevant to the current topic?

[cassieheart]

So lets say I sold BTC on my pay per view website. The customer used it only to buy time on my website and I also didn't allow them to withdraw the BTC from my site.I wouldn't need to be registered with FinCen as a Money Transmitter? If this is true could someone quote the certain guideline that proves this?
Not being able to sell btc easy to new Bitcoin Users is really going to cramp my website...

This is using the currency, otherwise you would have to be a moneytransmitter if you buy stuff in the supermarket.
Because you transmit your dollars for food.

[Shallow]

Just do a face to face cash transaction if you're worried.

[Open4lies]

Just do a face to face cash transaction if you're worried.

You might save the tax as well this way