Bitcoin Tax question

[kostagr33k]

Sorry if this is in the wrong place or asked before. If so please move / point me to the right post!

So not sure if I understand completely, but are you only taxed on your Gains once you convert to USD or other fiat? I am located in the USA, so US dollar is my main concern here.

Lets say I have Bitcon and purchase a Visa Gift Card. Since I paid for the card in BTC, am I liable for any taxes? If theres an attorney in NY/NJ I would be willing to come to your office to discuss this as well as a few other questions I have about BTC and taxes / business advice I am looking for.


Thank you,

Kosta

[mgio]

Sorry if this is in the wrong place or asked before. If so please move / point me to the right post!

So not sure if I understand completely, but are you only taxed on your Gains once you convert to USD or other fiat? I am located in the USA, so US dollar is my main concern here.

Lets say I have Bitcon and purchase a Visa Gift Card. Since I paid for the card in BTC, am I liable for any taxes? If theres an attorney in NY/NJ I would be willing to come to your office to discuss this as well as a few other questions I have about BTC and taxes / business advice I am looking for.


Thank you,

Kosta

Nope, you need to pay tax on any appreciation of the coins when you spend them!

So in your example, of course you would owe taxes. Look up the laws regarding bartering if you don't believe me.


Otherwise everyone would just use bitcoins to buy gold and then sell the gold to avoid taxes. The answer is that you can't avoid taxes. You might get away with it but if you get caught, you'll be in serious trouble.

[kostagr33k]

Thanks, but I am still confused. I thought the law said, you only pay taxes if you exchange for USD. If you use BTC to buy something, there is NO tax implication?


Kosta

[Bob Derber]

Kosta - I have been a US tax adviser for years and mgio is correct - when you bought your Visa Gift Card with your bitcoins it was a taxable event.  Bitcoin transactions are not only taxed when you convert them to fiat.  You are taxed any time that you trade bitcoin for something else - a car, a boat, fiat, or a Visa Gift Card.

mgio's barter example is spot-on..... you will have gain or loss based upon what you paid for your bitcoin and the value of your Visa Gift Card on the date you exchanged your bitcoins for it.....

There are some that, in your specific example, might suggest that you have what is called a 1031 exchange (a tax area common to real property owners but a bit illusive in the personal property area).  My own conclusion has been that the exchange of bitcoin for a prepaid card will not qualify - but check the your own tax adviser and if they differ for some reason please let others on this list now as this will be useful information....  this area of US tax law is not entirely clear......

bob