It would be interesting to find citations for either of these, if you have seen them.
We do have guidance from FinCEN on registration fees, but haven't reviewed anything much from them on taxation (which would likely come from IRS instead).
Bitcoins are not transactable until converted to cash with regards to taxation.
That is an interpretation based on the guidelines set forth by the Canada Revenue Agency in April.
I assume a barter transaction is taxable but the conversion to fiat is where the tax is applied not in the bitcoin transaction itself.
Excellent, thank you for this and for the CRA citations. CRA and FinCEN don't cover the same ground, but they do have a border.
I've had some tax advice that runs counter to your barter interpretation, essentially that the unit of account in the transaction for purposes of taxation is going to be the taxed currency value (fiat value) of the bartered good. And also that you can run into some trouble with having a highly valued account offshore and not reporting it (even if that value is virtual and unrealized).
There are a lot of folks that will say "just don't pay taxes", but when you have a lot to lose and much of that is not highly portable, it is less of a choice. Paying exactly the right amount of tax and not any more than that is the other way to play, and finding methods along the way to minimize the tax burden by paying close attention to the things that the government wants me to do that I also agree with doing.
For example, buying massive solar power generation effectively reduced by tax burden to almost nothing more than once. The government likes this because they are spending too much on protecting access to foreign energy (militarily), and it increases the resiliency of the energy infrastructure so if more was made here they might be able to do less fighting overseas and feel safer at home.
Less military, less carbon, lower cost energy for me, AND lower taxes... that was a win for all of us. For any of you miners with high energy bills, the US Federal tax "encouragement" is available until 2016, but there is no cap on the credit and it can be carried forward.
http://www.gosolarcalifornia.ca.gov/consumers/taxcredits.phpThanks for the response it is very possible that the IRS and FINCEN, will interpret the rules differently than the CRA, as they are different beasts even with the shared border between them.
From my rough recollection of US laws, the closest application I can think of is taxation of worldwide income.
Canada has the same laws and did it differently, however it is a possibility that American regulators interpret their laws regarding tax havens as being the same as holding bitcoin. Bitcoin could be treated as a digital worldwide currency and may fit the purpose and scope of the rules.
Tax avoidance is a perfectly fair game and tax evasion is not, the question is how do you comply with the rules, when we have ambiguity on what lines to tax revenue under.
In Canada we have a TFSA (Tax Free Savings Account)
The money you put into the account up to $5000 dollars per year is not taxable, as you already paid the taxes from that money and any gains made in the TFSA are not included as taxable gains if you withdraw the money. ($5500 effective 2013 due to inflation)
http://www.tfsa.gc.ca/Investment income earned in a TFSA is tax-free.
Withdrawals from a TFSA are tax-free.
The opposite of a TFSA is an RRSP (Registered Retirement Savings Plan) which gives you a tax deduction for putting money in and a tax liability for taking money out which is why it is used to promote people saving money for retirement.
http://en.wikipedia.org/wiki/Registered_Retirement_Savings_PlanIf we treat bitcoin as an investment similar to the TFSA then it is effectively a tax shelter.
The problem with the fiat value of a product is that not all products have a universal price, some items have depreciation value like cars and computers.
With Bitcoin the exchange rate at which you buy the bitcoins and the present value of bitcoins are different things entirely. If I bought 100 bitcoins at 50 dollars and then bought 10,000 dollars worth of products using those bitcoins it would be a barter transaction, but if I sold them for cash it would be a capital gain according to Canadian law.
If we assume American law uses the fiat value at the time of purchase then we end up with the original problem that the burden of proof is on the user if you do not report it and would require meticulous efforts by the government to track everyone doing it.
With the example above if you bought $5000 dollars worth of goods and kept the rest as bitcoin, then you could effectively delay capital gains and barter costs until you convert them back to cash or goods for an indefinite duration.
Bitcoin in this case makes an effective tax haven until you withdraw it into fiat.
This would be a fair example of tax avoidance as you are deciding when to convert bitcoins into fiat.
In my opinion it is more likely that the US will customize new laws to specify rules regarding bitcoins like Canada, than treat it as worldwide income, but that is purely speculative on my part.
http://business.financialpost.com/2012/07/03/an-unnecessary-overreaching-of-u-s-tax-law-into-canada/Currently waiting on Havelocks announcement which is due next Thursday it may reveal the current legal status of Canadian Virtual exchanges based on the advice they receive from their lawyers.
Hopefully it will also clarify some of the rules regarding Canada and Bitcoin securities listed on their exchanges as well.
For now the US ambiguities will remain be the same, until burnsides posts the reasons for closing down BTCT.
Havelocks announcement in Canada and Burnsides future announcement should enable us to see the differences between Canadian and American laws rules and regulations in relation to virtual securities.
Hello everyone, just an update on Havleock Investments and the ongoing legal uncertainty in the bitcoin world.
We are still working with our legal team to get our affairs in order and have been told we will have information with which to move forward next week. We'll be letting everyone know on Thursday October 3rd.
To all the fund managers who have contacted us inquiring about listing, we thank you for your interest and will be able to give some definite answers next Thursday.
Thanks for your time.
Looking forward to an interesting week
