Since as a miner, you produce bitcoins, I am guessing that this would count as "inventory" in the Schedule C form for "Profit or Loss from Business", and particularly to my question, as a sole proprietorship. However, as a sole proprietorship, there is no distinction of business assets and personal assets, so what determines the "inventory" in this case? Are you supposed to declare all of your bitcoin holdings or do you just draw an imaginary line to what the business "inventory" is?
(I'm obviously not looking for official tax help, I will talk to an accountant eventually)
Imaginary line won't help and I suggest you not to play with IRS. Your mining equipment is your business asset and must be included in your business inventory. The cost of electricity can be shown as operating cost, but a CPA will know how to classify that properly. Your bitcoins is your business inventory and it is better if you declare it correctly. I would suggest you to take a professional help because they know how and where to place these properly.
