Bitcoin Is Property Not Currency

[solex]

Won't this affect Bitcoin's fungibility ?

One Bitcoin won't be the same as another Bitcoin.. since there will be tax to pay on the capital gain.

If you bought a BTC at $10 and another at $100, and now you wanted to spend one to buy a $100 shirt, when the price is 100$/btc.

The 2 bitcoins have different value now..  

Is that what they are saying ?

No. It's an accounting problem.

If you bought 1 BTC at $10 and another at $100 and the bitcoin price is $100 when you buy a $200 shirt with 2 BTC then you have a capital gain of $90 which is now realized. If that $10 BTC was kept for less than a year before the shirt was bought the $90 profit would be taxed at an income tax rate, perhaps 40%, otherwise it would be more like 20%.

Reminds me of this:
 

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[porcupine87]

This regulation is no big deal. Question: Is there anything else considered as currency in the US, except of national currencies?

Won't this affect Bitcoin's fungibility ?

One Bitcoin won't be the same as another Bitcoin.. since there will be tax to pay on the capital gain.

If you bought a BTC at $10 and another at $100, and now you wanted to spend one to buy a $100 shirt, when the price is 100$/btc.

The 2 bitcoins have different value now.. 

Is that what they are saying ?

I think you have a first in first out. If you sell one btc or buy something with it, there will be no tax at the price of 100$.

[porcupine87]

No. It's an accounting problem.

If you bought 1 BTC at $10 and another at $100 and the bitcoin price is $100 when you buy a $200 shirt with 2 BTC then you have a capital gain of $90 which is now realized. If that $10 BTC was kept for a year before the shirt was bought the $90 profit would be taxed at an income tax rate, perhaps 40%, otherwise it would be more like 20%.

really? Holding longer means a higher tax rate? Normally it is the other way around. In Germany Bitcoin is a currency and you pay 25% as a capital gain in the first year and after one year you pay nothing (like with every currency. Under one year is considered as speculation, trading).
Now on assets we pay 25% flat on every gain, no matter how long you hold it. This is new since 2008. Before that it was 30% tax within the first year and nothing with more than one year - if you are a individual private saver.

[southerngentuk]

If you mined a coin at $1200 then you technically received property worth $1200 that is now worth $600.

When can you realize the loss?

This is hurting my head.

If your in a foreign country and using a US pool, are you liable for earning on property in the US?

Surely this is virtual property and a virtual problem.

If you use a off shore pool and exchange, then your property is outside US until you exchange that foreign currency for US dollars is it not ?

OK, you have overseas property gains by US terminology but in that country it may be a virtual property.

[bbeagle]

So who is going to have fun with the IRS by sending one satoshi back and forth between wallets millions of times and then reporting all those transactions on their taxes?

I don't think you understand how the IRS works.

All the IRS cares about is the final dollar amount. If you tell the IRS that you owe $0, and then attach thousands of pages of documentation (which you'll be paying to send to them), they'll just throw that in a binder and file it away and never look at it. YOU will be doing all the work for nothing.

[bbeagle]

Can you guys base those earnings on MtGox rates, $122 wasn't it when last traded.

Or do you have to base it on the price of an US Exchange  

Now what if there was only one US Exchange and it was like a fraction of the real price (no buy orders obviously).

Are those coins Earned oversea's ? or in the clouds ?

So much to go wrong here..

The IRS has dealt with issues like these for decades. This is nothing new, and doesn't require any new laws. I work with taxes and deal with these issues all the time.

You can calculate your earnings however you want, and whatever exchange you want, as long as the IRS deems it was a 'reasonable' choice. If most exchanges are buying coins for $550, and there is one that is buying them at $122, and you 'chose' the $122 to sell at, this will seem suspicious. The IRS will then modify your numbers to the $550 range and you will owe taxes and penalties based on the difference.

People have intentionally set up fake exchanges for other goods in the past (like to appraise jewelry incorrectly) to get by the IRS, and when the IRS finds out about it, usually those people serve jail time.

It doesn't matter WHERE you earned the btc - if you are US citizen, it's taxed.

It's not that hard to understand. And you can't 'trick' the IRS or use some funny way of calculating anything. The IRS is smart and has been battling these issues for decades. You can't fight them. If they say you did it wrong, you did it wrong and must pay the fines and penalties or you will go to jail. It's not like a court.

The IRS can't track every little thing you do with btc, but if you are audited, the IRS will look into your history and purchases, talk to your friends and associates, and look at anything suspicious. If you bought a new car, but didn't have any money to do so, this will look suspicious and they will claim you used btc to do it. The IRS will charge you the taxes and penalties on it and also may charge you with tax fraud along with a jail sentence. The IRS does not need proof - YOU need to prove how you bought the car.

[MP5KU]

It's a bit vague at the moment..

Might need someone who is actually familiar with bitcoin to help the IRS out.

[bbeagle]

If you buy a bitcoin for $100 and trade it for a bitcoin bought by someone else for $1000 then buy something with it for $550, what is your net gain/loss?

Buy a bitcoin for $100 - no tax implications for the buyer. There is no law on what you can buy something for. It's the seller who might have gains/losses that are taxable.

You trade your bitcoin with another person's bitcoin - no tax implications. Nobody gained or lost anything, just a trade on EQUAL VALUE assets. Both coins are worth whatever btc was trading that day. Nobody won or lost. Your newly traded btc still has a value of $100. The $1000 price tag stays with the original owner, not you.

You buy something for $550 - you realized a $450 gain ($550 - $100). You owe taxes on that $450 gain.

[chufchuf]

An address isn't an ID, much to Jamie Dimon's chagrin. In fact it's advisable to reuse new addresses constantly. The IRS surely wouldn't want to be responsible for making its users accounts insecure, not after all the KYC/AML leaks and identity thefts we already enjoy! And if it's going to tax something like bitcoin, it's taxing something where an address isn't a person, whether they like it or not.

[LostDutchman]

Are you people retarted? "I won't pay my taxes" Har har har... Good luck with that you stupid cunts.

Speaking of "retarted"; that should be "retarDed" and thank you for your kind input.

My $.02.

[southerngentuk]

Thanks bbeagle for your reply it is appreciated and probably correct. Am just throwing out thoughts.

Am not actually a US citizen but you can bet this will be exported to the rest of the Anglo-american empire real soon.

So just for fun.

Lets say others adopt this.

Am a UK citizen living in Australia.

I transferred money from a UK bank to MtGox Japan and purchased BTC.

I purchased Mining gear with the BTC in the US for delivery in AUS.

I used the gear to mine BTC on a US Pool and purchased more miners with that from China in BTC, Miners in Aus.

They mined coins on a US Pool, that I exchanged in Aus to my Aus bank Account.

My overall position is probably negative (loss) for the year.

Assuming each country adopts a similar policy, I have a bit of a headache.


 

[southerngentuk]

For extra fun, lets say

A block was mined from the US pool,
whilst I was visiting England,
and my pool was pointed to Mtgox in Japan,
but my miners where in Australia.

For tax purpose where did I receive my property, who do I pay the tax too ?

[solex]

really? Holding longer means a higher tax rate? Normally it is the other way around. In Germany Bitcoin is a currency and you pay 25% as a capital gain in the first year and after one year you pay nothing (like with every currency. Under one year is considered as speculation, trading).
..

Longer has lower tax rate. I corrected that but you grabbed the quote before I saved the edit. :-(

 

[LostDutchman]

For extra fun, lets say

A block was mined from the US pool,
whilst I was visiting England,
and my pool was pointed to Mtgox in Japan,
but my miners where in Australia.

For tax purpose where did I receive my property, who do I pay the tax too ?

Nexus will reside in the last place the coins landed.

My $.02.

[bbeagle]

For extra fun, lets say

A block was mined from the US pool,
whilst I was visiting England,
and my pool was pointed to Mtgox in Japan,
but my miners where in Australia.

For tax purpose where did I receive my property, who do I pay the tax too ?

None of the countries matter if you're a US citizen.

Example:
You're a Hollywood actor - you work for the BBC on a movie in Australia. Whatever money you earn is taxed by the US as if you were paid by an US company working in the US. You also might owe taxes to England and Australia.

[Misesian]

First they ignore you, then they laugh at you, then they fight you, then you win.

I think we're getting closer to winning

[southerngentuk]

For extra fun, lets say

A block was mined from the US pool,
whilst I was visiting England,
and my pool was pointed to Mtgox in Japan,
but my miners where in Australia.

For tax purpose where did I receive my property, who do I pay the tax too ?

Nexus will reside in the last place the coins landed.

My $.02.

A-8:
 
Yes, when a taxpayer successfully “mines” virtual currency, the fair market value
of the virtual currency as of the date of receipt is includible in gross income.

When and where was it received ? The pool is in the US but virtually its outside US Territory, I received no real property until it hits a bank.  

My tax form goes something like

Have you received property in (origin country),   - no
Have you received property overseas,  - no

There is not a question :-

Have you received property in a virtual location ?

Just out of curiosity, do you have a short cut for your

My $0.02.



or do you type it each time ?

I do appreciate your $0.02. most of the time thou.  

[amspir]

really? Holding longer means a higher tax rate? Normally it is the other way around. In Germany Bitcoin is a currency and you pay 25% as a capital gain in the first year and after one year you pay nothing (like with every currency. Under one year is considered as speculation, trading).
Now on assets we pay 25% flat on every gain, no matter how long you hold it. This is new since 2008. Before that it was 30% tax within the first year and nothing with more than one year - if you are a individual private saver.

Under that system, do you pay tax on the gains before the profit is realized?

[LostDutchman]

For extra fun, lets say

A block was mined from the US pool,
whilst I was visiting England,
and my pool was pointed to Mtgox in Japan,
but my miners where in Australia.

For tax purpose where did I receive my property, who do I pay the tax too ?

Nexus will reside in the last place the coins landed.

My $.02.

A-8:
 
Yes, when a taxpayer successfully “mines” virtual currency, the fair market value
of the virtual currency as of the date of receipt is includible in gross income.

When and where was it received ? The pool is in the US but virtually its outside US Territory, I received no real property until it hits a bank.  

My tax form goes something like

Have you received property in (origin country),   - no
Have you received property overseas,  - no

There is not a question :-

Have you received property in a virtual location ?

Just out of curiosity, do you have a short cut for your

My $0.02.



or do you type it each time ?

I do appreciate your $0.02. most of the time thou.  

Hmmmmmmmmmmm............good questions and it is problems like the ones you have suggested which are going to lead to all sorts of mischeif and headaches in the near future.  I don;'t have the answers but I'll bet the IRS doesn't either!

Oh, I generally type in the $'02.  Takes less time and gives me time to give final consideration to the content of the post.

Thanks for asking.

My $.02.

[rocks]

A US citizen (and in most cases residents) owes US taxes regardless of where the taxable event occurs.  It doesn't matter if you leave the US and NEVER come back.  The only way to avoid US taxation is to renounce your citizenship (which generally requires you to already have citizenship in another country).  Now if you are asking if you could "get away" with traveling to russia to do cash deals for rubbles and then laundering those funds though a bunch of offshore accounts?   Maybe but that is asking "will I get caught", not "is this legal".  Honestly if it is a small amount of money it probably isn't worth the trouble and if it is a huge amount of money speak to a good offshore lawyer and CPA.  Tax avoidance not tax evasion. 

Actually i was told that i can still keep my citizenship and only pay tax to the primary country if i only stay in US for less than xx days.

Many dual citizens do this.

I lived overseas for several years, and this is very clearly wrong.

If you are a US citizen (dual or otherwise) you owe taxes on all worldwide income, even if you do not enter the US for years.

There is a "foreign earned income exclusion" which you only qualify for if you are in the US for 30 days or less per calendar year. With the foreign exclusion you can receive a deduction of up to $97K (in 2013) on income earned outside of the US. This only applies to income earned outside the US.

Many US citizens who live outside the US earn less than the foreign exclusion and so believe they don't need to file US taxes or owe taxes, but this is incorrect. You still have to file a return each and every year to receive the foreign exclusion. If you do not the IRS can later stay you owe taxes and have lost the foreign exclusion deduction.

The dual citizens you know who earn less than $97K/year are correct that they don't owe US taxes, but they still have to file and pay taxes on amounts over that.