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Author Topic: Possibly dangerous tax situation when mining in US  (Read 2288 times)
Entropy-uc
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December 14, 2013, 07:01:55 PM
 #21

Actually, other threads in legal are reporting that the IRS is delivering opinions that bitcoin is not a capital good.

This means that you can't claim a capital gain on your bitcoins and have to recognize all income from the sale of bitcoin as earnings.

It also implies that you don't need to recognize the bitcoin as income when it is mined.  A farmer doesn't pay taxes on corn when it grows, he pays when he sells it for cash.

There are likely to be legal disputes every step of the way here.  You would be wise to get an accountant and a formal opinion letter from the IRS on how to handle things properly.
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lorix
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December 16, 2013, 06:29:21 AM
 #22

Correct.

Tax only comes into play when the BTC is exchanged into fiat and a capital gains event has occurred. And even then, only when the fiat is obtained in a form that can be directly tracked and tied to a specific individual like through a bank. If somebody from Localbitcoins meets you and hands you $10k for 10 BTC in cash without asking for a receipt then it's not like the IRS will know unless you deposit it somewhere.

Another example would be if you dug up a 10 pound gold nugget in your backyard - you wouldn't be instantly liable to pay the tax on it but if you sold it to a merchant then every cent of the registered transaction would be.

There is a reason gift cards are such popular purchases for BTC...  Wink

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December 16, 2013, 06:54:57 AM
 #23

If somebody from Localbitcoins meets you and hands you $10k for 10 BTC in cash without asking for a receipt then it's not like the IRS will know unless you deposit it somewhere.
You're still required to report it, even if it's in cash.  And, even if you meet someone offshore to make the exchange.  Sure, the chances of IRS finding out may be next to nothing, but if they do, it's jail time.  

If you want to dodge taxes, that's your business.  Let's just be clear on what's legal and what's not.

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Tax only comes into play when the BTC is exchanged into fiat and a capital gains event has occurred.
I honestly don't think there's another reasonable way to handle if if you're treating BTC as an investment.  If you're using it as an everyday currency that may be different.  But everyone's tax situation is unique, and you should make your own decision and be ready to defend it.
drewster
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December 17, 2013, 05:02:01 AM
 #24

- You mine a coin a day for the month of November. Bitcoin is at $1000, so you mine 30 coins worth $30,000.
You would owe income tax on those coins, on that $30,000.
Mined coins aren't taxable income until you sell them to someone else.  


I wish that were true, and to be honest the IRS hasn't said anything official about it. But any accountant will tell you that that based on how taxes work that isn't the case. BItcoins mined are revenue and will almost definitely be taxed as income based on their value at the time they were mined. This is really annoying actually, since it means that you need to keeps records of every fraction of a bitcoin you mine and the exchange rate at that time. It's unclear how granular this must be. I have records by day, but theorecticaly you probably need to record every time you get a payout from your mining pool.

I am not positive, but I think you can just use mark-to-market accounting, basically realizing gain or loss based on the value at year end.
 ?

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December 18, 2013, 05:09:07 PM
 #25

If tomorrow it is declared illegal, then you stop. Up until that point you were doing nothing illegal.
Really? FBI quote.
Quote
Article I, section 8, clause 5 of the United States Constitution delegates to Congress the power to coin money and to regulate the value thereof. This power was delegated to Congress in order to establish and preserve a uniform standard of value and to insure a singular monetary system for all purchases and debts in the United States, public and private. Along with the power to coin money, Congress has the concurrent power to restrain the circulation of money which is not issued under its own authority in order to protect and preserve the constitutional currency for the benefit of all citizens of the nation. It is a violation of federal law for individuals, such as von NotHaus, or organizations, such as NORFED, to create private coin or currency systems to compete with the official coinage and currency of the United States.
Quote
“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”

You can't even compare that to bitcoin

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was found guilty by a jury in Statesville, North Carolina, of making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money;

He was minting his own money, yes, but he was making coins that resembled us currency. You are an idiot to try and compare the two. Please tell me how bitcoin resembles any us currency available today?

They didn't resemble US currency in any meaningful way.
The jury was simply wrong and the resulting injustice will ultimately be rectified.
That case is not settled law anyway, it has yet to be concluded, and hasn't gone to appeal yet either.
The FBI didn't prove their case, there was never any intent to counterfeit (intent is a necessary element of the crime).
If you ever listened to von Nothaus, just about every statement he ever made about them was to distinguish them from US currency and say how they were different (and as he'd aver, better).

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