MSN article on BTC and taxes.

[A.Delaney]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

[1714172855]

1714172855

[1714172855]

1714172855

[HabBear]

The IRS is really trying to scare you into reporting your transactions.  

Is it really a scare tactic when the IRS is trying to make sure US citizens follow the existing laws. It's probably helpful that they're releasing articles and reminders like this. The penalties for tax evasion are serious. I'd rather read an article like this than one about some new "Burt W" getting dragged through felony convictions for not reporting investment gains. The laws are simple. Bitcoin and other crypto currencies are an investment. If you sell your investment for dollars you should be paying the taxes on the gains or getting a tax credit for the losses.

If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

First, you don't incur taxes if you purchase BTC. You incur a tax liability when you sell it back for Dollars.

The tracking is the same as if you were to win big a casino or sell your car. It's limited how well the IRS can track the transactions, but the responsibility to pay taxes owed is on the tax payer.

If you walk into your bank with $10,000 or more you have to file a form explaining exactly where you got the money. So, yes, your Banker will ask you about it.

The questions are precisely made to verify that you don't own the cash illegal, i.e,. through selling drugs or money laundering or any other illegal transaction.


If you want to manage your tax liability I propose two things:

(1) Don't spend or sell your Bitcoin and you won't initiate a taxable event, or

(2) If you do intend to spend your Bitcoin, use a BitPay debit card which allows you to load the debit card with dollars converted from bitcoin in larger and price-consciously timed transactions. That way you're not incurring tax with each purchase, only the transfer to load the card.

If you think Bitcoin is a way for you to evade existing laws within your country, you are opening the opportunity for Governments to want to make more laws about the use of Bitcoin.

[A.Delaney]

What doesn’t make sense to me in the article is that if you make a purchase with btc your selling it for cash and then purchasing with it since it is property. How are you selling it for cash? If I buy a cell phone from you and give you .002 btc for it. Where is the cash conversion? There was no conversion. It’s a property to property trade. Also since it’s property. If I sell you a 100 bucks worth of btc for 100 cash. Then it’s a property purchase like I sold you that cell phone for a 100 bucks. People sell stuff all the time on eBay and Facebook with no income taxes paid.

[South Park]

What doesn’t make sense to me in the article is that if you make a purchase with btc your selling it for cash and then purchasing with it since it is property. How are you selling it for cash? If I buy a cell phone from you and give you .002 btc for it. Where is the cash conversion? There was no conversion. It’s a property to property trade. Also since it’s property. If I sell you a 100 bucks worth of btc for 100 cash. Then it’s a property purchase like I sold you that cell phone for a 100 bucks. People sell stuff all the time on eBay and Facebook with no income taxes paid.

Maybe they are using the old gold excuse, in many countries you cannot use gold to buy for stuff so even if you had a bunch of gold you cannot buy anything with it, you need to convert it to dollars first and then you can use those dollars to buy whatever you want, I suppose they are trying to make it seem as if the reason the person from which you are buying a product is the value in dollars of bitcoin, so even if you do not convert your bitcoin to cash they can say there is some kind of virtual conversion going on and they create a taxable event.

[A.Delaney]

What doesn’t make sense to me in the article is that if you make a purchase with btc your selling it for cash and then purchasing with it since it is property. How are you selling it for cash? If I buy a cell phone from you and give you .002 btc for it. Where is the cash conversion? There was no conversion. It’s a property to property trade. Also since it’s property. If I sell you a 100 bucks worth of btc for 100 cash. Then it’s a property purchase like I sold you that cell phone for a 100 bucks. People sell stuff all the time on eBay and Facebook with no income taxes paid.

Maybe they are using the old gold excuse, in many countries you cannot use gold to buy for stuff so even if you had a bunch of gold you cannot buy anything with it, you need to convert it to dollars first and then you can use those dollars to buy whatever you want, I suppose they are trying to make it seem as if the reason the person from which you are buying a product is the value in dollars of bitcoin, so even if you do not convert your bitcoin to cash they can say there is some kind of virtual conversion going on and they create a taxable event.

This could be a huge problem for guys that bought 50k worth of miners and paid with crypto.

[jjacob]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

If you make a purchase with BTC, and you bought your bitcoins at a low rate, then it is obvious you will have capital gains. This would qualify as a barter transaction and would be equivalent to a sale of bitcoins. If there was no tax on such transactions, people would only indulge in barter transactions and never sell assets to realize capital gains.

[dothebeats]

If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

First, you don't incur taxes if you purchase BTC. You incur a tax liability when you sell it back for Dollars.

The tracking is the same as if you were to win big a casino or sell your car. It's limited how well the IRS can track the transactions, but the responsibility to pay taxes owed is on the tax payer.

If you walk into your bank with $10,000 or more you have to file a form explaining exactly where you got the money. So, yes, your Banker will ask you about it.

The questions are precisely made to verify that you don't own the cash illegal, i.e,. through selling drugs or money laundering or any other illegal transaction.

Well, OP did say purchasing with BTC and not purchasing BTC. In our country, whenever you make a purchase, you are also paying for a value-added tax, so there's that. It would be near-impossible for the IRS to keep track of your daily spendings, especially if you've mixed them first before sending them to purchase something you like. Taxing bitcoin is very vague when it comes to the tiniest of details; the government can't just tax you if you have bitcoins in your pocket, there needs to be some for of gain on your end that they know for them to get a tax cut, so how does that work in the long run if services like mixers exist?

And no, I don't promote money laundering.

[cindygirl]

The fact of it is, if you earn an income through bitcoin then you are legally bound to pay taxes on that income, just because you earn your money in a different way to someone else does not mean that you should not pay taxes the same as they do. We can argue all day and night about if taxation should exist and what's the correct level but there should not be any debate as to if earnings from crypto are taxable or not, they are entirely the same as earnings from anything else and the very fact that people are avoiding tax on them is why we are seeing stricter regulation being put in to place by governments across the world.

[exstasie]

The tracking is the same as if you were to win big a casino or sell your car. It's limited how well the IRS can track the transactions, but the responsibility to pay taxes owed is on the tax payer.

If you just buy, hold and occasionally take profit, it's simple. It's a lot more complicated for anyone who uses Bitcoin as a medium of exchange rather than just an investment. Same goes for altcoin traders, since all market liquidity is in BTC markets, not fiat markets. Tracking the USD cost basis and capital gain/loss of every transaction can be a nightmare. I'm hoping that bills like this one can at least give casual users a bit of breathing room:

The bipartisan legislation creates a structure for taxing purchases made with cryptocurrency.  Similar to foreign currency transactions, it allows consumers to make small purchases with cryptocurrency up to $600 without burdensome reporting requirements.

The fact of it is, if you earn an income through bitcoin then you are legally bound to pay taxes on that income, just because you earn your money in a different way to someone else does not mean that you should not pay taxes the same as they do.

I'm willing to pay taxes on my capital gains. But I'll tell you, my accountant hates me, and rightly so. It's annoying that the tax code was just overhauled and yet there is still no sensible regime for dealing with day-to-day transactions. If you use bitcoins just like a foreign currency, why shouldn't they be treated as such?

[LFC_Bitcoin]

I’ve never declared any of my bitcoin to fiat earnings. I am a HODLER though & haven’t sold a lot of bitcoin’s but at some pojnt in the future, maybe years away it’s going to be something I’ll have to employ an accountant for.

[A.Delaney]

What if you earn btc by mining? You are earning an income but if it just sits in your wallet how do you pay taxes on your earned income? What is the taxable value of btc? Are you suppose to keep track of the btc daily dollar value as you earn it to pay your income tax at the end of the year? If that’s the case I’m going to write off my equipment and my electric bill.  Then again if you sell your mining equipment that’s income and you have to pay taxes on that too. I’m merely trying to make sense of all this. Not avoid taxes.

[squatter]

Well, OP did say purchasing with BTC and not purchasing BTC. In our country, whenever you make a purchase, you are also paying for a value-added tax, so there's that. It would be near-impossible for the IRS to keep track of your daily spendings, especially if you've mixed them first before sending them to purchase something you like. Taxing bitcoin is very vague when it comes to the tiniest of details; the government can't just tax you if you have bitcoins in your pocket, there needs to be some for of gain on your end that they know for them to get a tax cut, so how does that work in the long run if services like mixers exist?

Even if you are using mixed coins, you have to account for the merchant or payment processor you are interfacing with. Do they know your physical address? Email address, IP address? These details can be used to identify you. They can also be "leaked" because of insecure third party trackers/cookies. Between precise timestamping, the immutable blockchain and leaked transaction data/personally identifiable information, clustering attacks and blockchain analysis of a mixer's wallets can (up to a certain probability) be used to identify your originating wallet. And if you use a lightweight client like Electrum, you're also leaking wallet information to Electrum servers that can help to corroborate that connection (and also link your wallet to an identifiable IP address range).

I don't think the IRS necessarily cares to do this over low-value cryptocurrency transactions. But I think it's important to be aware that the government (in tandem with blockchain analysis companies) knows much more than people tend to think about your transactions. We shouldn't assume they don't have any means to deanonymize us. And we should be weary of exposing our real personal information, IP address, etc. when interacting with merchants and third party payment processors:

There are actually treasure troves of deanonymization tools available to governments which have been developed by Chainalysis and their competitors for years. They've got databases full of metadata like bloom filters, leaked tracker information and PII data, IP address data. For all we know, companies like Bitpay or other merchants are honeypots to identify our wallets via address clustering.

They're watching us and the problem is only going to get worse. If you think Bitcoin is "private" by default, then read this: arxiv.org/pdf/1708.04748.pdf

[A.Delaney]

So the people that ordered 100k worth of miners from Bitmain. Will they need to report that if they paid in BCH and Bitmain is in China?

[codewench]

If I buy a cell phone from you and give you .002 btc for it. Where is the cash conversion? There was no conversion. It’s a property to property trade.

What was the value of the phone? What price did you pay for the bitcoin? Lets say the phone is worth $30. Lets say you bought the BTC when it was $1000 per coin. This means you paid $2 for the BTC some time in past and now received $30 in value for it. Thus you have $28 in taxable gain.

Also since it’s property. If I sell you a 100 bucks worth of btc for 100 cash. Then it’s a property purchase like I sold you that cell phone for a 100 bucks.

What did you pay for the BTC? If less than $100, then you have taxable gain. If more than $100 then you have a loss that can offset other gains.

People sell stuff all the time on eBay and Facebook with no income taxes paid.

If they gained value, then they should be paying income tax. If they are getting rid of their old unwanted stuff, at less than they paid, then they don't have a gain and thus don't have tax due.

[ShadowBits]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

This is the reason why we should really promote a decentralized bank of our own, where we can save our money without any questions from any of that banks.

[South Park]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

If you make a purchase with BTC, and you bought your bitcoins at a low rate, then it is obvious you will have capital gains. This would qualify as a barter transaction and would be equivalent to a sale of bitcoins. If there was no tax on such transactions, people would only indulge in barter transactions and never sell assets to realize capital gains.

The last time I checked barter was tax free in my country and in other several countries, if bitcoin is not recognized as a currency and instead is considered and asset then if you bought bitcoin for a dollar and then you use that bitcoin to buy a car years later then you just bartered one asset for the other, there is not a taxable event under this logic, so governments will have to change the law about barter or accept bitcoin is a currency.

[squatter]

If I buy a cell phone from you and give you .002 btc for it. Where is the cash conversion? There was no conversion. It’s a property to property trade.

What was the value of the phone? What price did you pay for the bitcoin? Lets say the phone is worth $30. Lets say you bought the BTC when it was $1000 per coin. This means you paid $2 for the BTC some time in past and now received $30 in value for it. Thus you have $28 in taxable gain.

This. It's pretty simple. The IRS expects you to treat every virtual currency transaction as taxable. They keep repeating it, but people keep saying "but there's no fiat involved!"

Every "position" you hold in cryptocurrency has a "basis": What price did you buy it? That's the basis. What price did you sell it at (whether for cash or in exchange for goods/services)? That's the adjusted basis.

This is from the IRS guidance on virtual currency published in 2014:

For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars.  Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt.

If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency.

[rjefferson]

I'm curious to see how these regulations play out because everything is still pretty foggy to me.

[A.Delaney]

This  makes it almost impossible to use crypto on a daily basis for living. If starbucks accepted crypto for coffee. You would have to keep track of every cup you bought all year since your crypto property was magically converted to cash and used to buy coffee. Imagine trying to live off crypto only. Not that it is really possible right now but could be someday. You would have to document every single purchase all year.

[A.Delaney]

If I buy a cell phone from you and give you .002 btc for it. Where is the cash conversion? There was no conversion. It’s a property to property trade.

What was the value of the phone? What price did you pay for the bitcoin? Lets say the phone is worth $30. Lets say you bought the BTC when it was $1000 per coin. This means you paid $2 for the BTC some time in past and now received $30 in value for it. Thus you have $28 in taxable gain.

Also since it’s property. If I sell you a 100 bucks worth of btc for 100 cash. Then it’s a property purchase like I sold you that cell phone for a 100 bucks.

What did you pay for the BTC? If less than $100, then you have taxable gain. If more than $100 then you have a loss that can offset other gains.

People sell stuff all the time on eBay and Facebook with no income taxes paid.

If they gained value, then they should be paying income tax. If they are getting rid of their old unwanted stuff, at less than they paid, then they don't have a gain and thus don't have tax due.

How can they determine the value of a used cell phone? Since crypto is property per the IRS. Every piece of property bartered in the US that was purchased with USD is subject to tax also. If I buy a pencil at Walmart with USD and trade you for a calculator then I owe capital gains tax. We dont know how much for sure because there is no way to value a used calculator. All we know is its worth more than a pencil is. So that pencil was converted to cash and used to make a purchase. Even though no cash was exchanged

[darkangel11]

This is the reason why we should really promote a decentralized bank of our own, where we can save our money without any questions from any of that banks.

A cryptocurrency bank? This idea isn't worth our time, really. A crypto bank won't serve any purpose in the world of decentralized coins and if they are to become centralized, what's the point of having a cryptocurrency in the first place? Just to have a fake feeling of being in control? No thank you.

I'm curious to see how these regulations play out because everything is still pretty foggy to me.

They will most likely destroy the experience for every cryptocurrency user and turn the whole thing into a maze of do's and don'ts that only government officials will be able to navigate.

[yoseph]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

I really don't understand why the mainstream media is so against Bitcoins at all and when it comes to the taxes, they should ask the retailers that accepts Bitcoins because the total price people pay includes the taxes as well. And no one has the right to question where you get your bitcoins because it is virtual.

[HitbtcSCAM]

Everyone should stop paying taxes, let the us government sell its bitcoins to get its money ,then they will be forced to raise the price and that is good

[darkangel11]

I really don't understand why the mainstream media is so against Bitcoins at all and when it comes to the taxes, they should ask the retailers that accepts Bitcoins because the total price people pay includes the taxes as well. And no one has the right to question where you get your bitcoins because it is virtual.

The answer is very simple. They are too greedy!
When buying an item you always cover the cost of the item + excise and VAT which are taxes hidden in the price. There are also other like the import tax which rises the cost of the product at a retailer. But that's not enough, they also want income tax because they know how much BTC has grown in the recent years and that most of us have profited.
Don't think the biggest thieves out there will let you do your thing. You may be giving them half of your salary in taxes, it doesn't matter. Making some money from virtual tokens is a big no-no

[alyssa85]

What if you earn btc by mining? You are earning an income but if it just sits in your wallet how do you pay taxes on your earned income? What is the taxable value of btc? Are you suppose to keep track of the btc daily dollar value as you earn it to pay your income tax at the end of the year? If that’s the case I’m going to write off my equipment and my electric bill.  Then again if you sell your mining equipment that’s income and you have to pay taxes on that too. I’m merely trying to make sense of all this. Not avoid taxes.

If you are a miner, surely that's a business - so the calculation will be revenue (the coins you mine and sell) less expenses (the cost of buying the miner + electricity).

If you are a serious miner then it might be worth doing it as part of a limited company (i.e. incorporate) rather than as an individual.

[TooDumbForBitcoin]

another one article on regulations from wall street journal. Author is the SEC chairmen
https://www.wsj.com/articles/regulators-are-looking-at-cryptocurrency-1516836363

[eaLiTy]

If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

If you are aware of that,if you get to a bank with loads of money you have to provide your source ,this is nothing new,if you have acquired your money by legit ways then what is wrong in producing the source of that money,no one can tax us for the coins we are holding and hopefully no country will come up with those stupid laws but expect some regulation coming up this year and hopefully everything will be fair.

[btcrich]

Everyone should stop paying taxes, let the us government sell its bitcoins to get its money ,then they will be forced to raise the price and that is good

How do you propose that,if you stop paying your tax then you will be facing some consequences because of that,either you have to pay a huge fine to sort that out,all the countries are planning to come up with regulations and even now we are paying taxes for the amount of coins we are selling,i am personally filling my taxes for the profits i get through trading because i do not want any trouble .

[A.Delaney]

What if you earn btc by mining? You are earning an income but if it just sits in your wallet how do you pay taxes on your earned income? What is the taxable value of btc? Are you suppose to keep track of the btc daily dollar value as you earn it to pay your income tax at the end of the year? If that’s the case I’m going to write off my equipment and my electric bill.  Then again if you sell your mining equipment that’s income and you have to pay taxes on that too. I’m merely trying to make sense of all this. Not avoid taxes.

If you are a miner, surely that's a business - so the calculation will be revenue (the coins you mine and sell) less expenses (the cost of buying the miner + electricity).

If you are a serious miner then it might be worth doing it as part of a limited company (i.e. incorporate) rather than as an individual.

If I mine btc and sell it on an exchange then I would most certainly expect to pay taxes on my earnings. I would never try to dodge that. However if you never sell your btc and save them for a few years. How do you pay taxes on them if you didn't sell them? What is the value of them if you didn't buy them?
I could say ok I earned .03 btc today mining. Today its worth $330 USD so I made $330 today. However you don't pay taxes by the day. So if the price is down at the end of the year did you lose money since its worth less than the day you earned it or did you make money since you did receive payment for your work?

[A.Delaney]

If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

If you are aware of that,if you get to a bank with loads of money you have to provide your source ,this is nothing new,if you have acquired your money by legit ways then what is wrong in producing the source of that money,no one can tax us for the coins we are holding and hopefully no country will come up with those stupid laws but expect some regulation coming up this year and hopefully everything will be fair.

Filling out paperwork explaining where you got the cash from is merely a formality. Who is going to say they sold illegal drugs or laundered it? The simplest answer is I saved it. The point is the US is suppose to be a "free" country. Ya its free as long as your are politically correct and every move you make is accounted for and documented.

[squatter]

How can they determine the value of a used cell phone?

The price of the phone (in BTC) can be used to determine the fair market value. Let's say you bought some BTC and later traded some of it for the used cell phone. If the phone cost 0.02 BTC, then the market value of BTC at the time of the transaction determines the fair market value. Let's say the price of BTC was $1000 when you bought the phone:

0.02 BTC x $1000 = $20. That's the fair market value of the phone.

Now let's consider the basis of your BTC. Let's say you bought BTC at $500; that's your basis. That means that the 0.02 BTC that you traded for the phone has this basis: 0.02 BTC x $500 = $10.

That means you realized a $10 gain when you bought the phone.

If I buy a pencil at Walmart with USD and trade you for a calculator then I owe capital gains tax. We dont know how much for sure because there is no way to value a used calculator.

It's harder to make this argument with Bitcoin because it is widely traded. You can't argue "we dont know how much" because we have widely accepted tickers. There is no market for used calculators, but it's quite easy to tell you what 1 BTC is worth at this moment. (Next question: What exchange price should you use? Answer: It doesn't particularly matter as long as you are consistent and the exchange you cite isn't divergent from the market)

[A.Delaney]

How can they determine the value of a used cell phone?

The price of the phone (in BTC) can be used to determine the fair market value. Let's say you bought some BTC and later traded some of it for the used cell phone. If the phone cost 0.02 BTC, then the market value of BTC at the time of the transaction determines the fair market value. Let's say the price of BTC was $1000 when you bought the phone:

0.02 BTC x $1000 = $20. That's the fair market value of the phone.

Now let's consider the basis of your BTC. Let's say you bought BTC at $500; that's your basis. That means that the 0.02 BTC that you traded for the phone has this basis: 0.02 BTC x $500 = $10.

That means you realized a $10 gain when you bought the phone.

If I buy a pencil at Walmart with USD and trade you for a calculator then I owe capital gains tax. We dont know how much for sure because there is no way to value a used calculator.

It's harder to make this argument with Bitcoin because it is widely traded. You can't argue "we dont know how much" because we have widely accepted tickers. There is no market for used calculators, but it's quite easy to tell you what 1 BTC is worth at this moment. (Next question: What exchange price should you use? Answer: It doesn't particularly matter as long as you are consistent and the exchange you cite isn't divergent from the market)

Ok so what about If your buying something that cost $200 but paying with BTC and don’t have it?  So you go buy $200 worth of BTC and then immediately send the BTC to the seller. There’s no gain in value so is there a tax? $200 for $200 in BTC to buy something that cost $200.

[South Park]

This  makes it almost impossible to use crypto on a daily basis for living. If starbucks accepted crypto for coffee. You would have to keep track of every cup you bought all year since your crypto property was magically converted to cash and used to buy coffee. Imagine trying to live off crypto only. Not that it is really possible right now but could be someday. You would have to document every single purchase all year.

But that is exactly their intention, they know they cannot ban bitcoin directly since a ban is going to fail, they cannot seize bitcoin either so what are they doing? They are trying to kill bitcoin with overregualtion, they will try to make bitcoin so difficult to use that most people will not want to bother to use bitcoin in their everyday lives, their logic does not make sense, but they are going to use it to protect their fiat at all costs.

[Drunkenhorse]

Funny thing is how to explain if you made bitcoins from 0, did not invest a cent, I guess their logic will be broken.

[squatter]

Ok so what about If your buying something that cost $200 but paying with BTC and don’t have it?  So you go buy $200 worth of BTC and then immediately send the BTC to the seller. There’s no gain in value so is there a tax? $200 for $200 in BTC to buy something that cost $200.

If there's no gain, there's no tax. They're just trying to capture the capital gains, not tax you for using BTC.

On the flip side, if you lose money by holding BTC and then spending it, that's a loss that can offset other taxable gains. It's a real bitch to keep track of, though.

Funny thing is how to explain if you made bitcoins from 0, did not invest a cent, I guess their logic will be broken.

That works for CPU mining with your PC in the early days, but that's about it. The IRS has a taxation scheme for just about everything. Mining and regular work paid in BTC is ordinary income. So even if you don't invest USD directly into BTC, they'll argue any bitcoins you "made" without investment were income.

[Kotone]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

With how countries are starting to get more noticing bitcoin and cryptocurrency as a whole. Some tax agencies have been starting to whiff to get or to tax these so that they might use it for their gain. However some of these are just baits and not even authorized by the government itself and just an autonomous move by them as the country or governments worldwide still do not have regulations for this.

[LeonardoDiCrypto]

So the people that ordered 100k worth of miners from Bitmain. Will they need to report that if they paid in BCH and Bitmain is in China?

This is an interesting question, which opens up the debate if you have to declare each currency that you eventually sell for cash.

[South Park]

My wife just emailed me this article. The IRS is really trying to scare you into reporting your transactions.   

https://www.msn.com/en-us/money/markets/if-you-own-bitcoin-heres-how-much-you-owe-in-taxes/ar-AAv9Evn?li=BBnbfcL


If you make a purchase with BTC. Just how do they think they can charge taxes on that purchase? What a load of crap. Here is another thing that pisses me off. Have you ever walked into your bank with a large amount of cash and been questioned about how you got it by the banker?  Its cash. Its not illegal to own it and you don't have to explain how you got it. You saved it. I can bet though if I sold a bunch of BTC person to person and walked into the bank with cash there would be questions.

I really don't understand why the mainstream media is so against Bitcoins at all and when it comes to the taxes, they should ask the retailers that accepts Bitcoins because the total price people pay includes the taxes as well. And no one has the right to question where you get your bitcoins because it is virtual.

They are so against bitcoin because those are the orders they received, most news papers, magazines and websites that have anything to do with serious news, are dependent on the money that comes from the governments so they cannot speak against them, the media is not effective anymore because of that and since bitcoin affects the interest of governments, banks and big business then the media is used by all of them to spread lies about bitcoin.

[penig]

This is straight forward, there is nothing against bitcoin and crypto here, they are applying the same rules that already exist for other trading.  What, you thought you could trade with non-cash goods and that wouldnt have been exploited for decades?  Have shares and trade for gold, or vice versa, no taxes to pay?     Of course not.  Your country wants you to declare your earnings, income, profits, and pay tax on them regardless how you made them.

[jeffer8035]

always in the banks to look for the cash when the bitcoin is implemented as it is really going to end all that

[South Park]

This is straight forward, there is nothing against bitcoin and crypto here, they are applying the same rules that already exist for other trading.  What, you thought you could trade with non-cash goods and that wouldnt have been exploited for decades?  Have shares and trade for gold, or vice versa, no taxes to pay?    Of course not.  Your country wants you to declare your earnings, income, profits, and pay tax on them regardless how you made them.

But that is now, do you think they are going to be so open with bitcoin when  in the future bitcoin begins to be used by a huge number of people in their countries, they will realize at that point that things are getting out of hand this is why we see the media bashing bitcoin as well, that way if politicians need to ban bitcoin in the future they will have created a lot of ill feelings against bitcoin already.

[yana0901]

In general, I would like this currency to become legal. After all, it is very comfortable. And make money on it is possible. Although there are risks, but there are not so many

[AlexsanderGusev15]

in general on bitcoin very large commissions. but if you think about it, the currency is not small.