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Author Topic: Bitcoin is doomed. Thanks IRS!!! You Ass hats!  (Read 19166 times)
DeathAndTaxes
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March 27, 2014, 05:26:38 PM
 #61

Having bitcoin classified as property rather than currency is the best possible scenario.  The capital gains tax rate is 0% for most people.  0%... hard to beat that.

Only for long term capital gains.  Short term capital gains (asset held 364 or less days) is taxed at your regular income rate.
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March 27, 2014, 05:29:31 PM
 #62

Having bitcoin classified as property rather than currency is the best possible scenario.  The capital gains tax rate is 0% for most people.  0%... hard to beat that.

Only for long term capital gains.  Short term capital gains (asset held 364 or less days) is taxed at your regular income rate.

Which I suspect will lead to less "short term" speculation in Bitcoin...which is perhaps likely to tend towards being better for Bitcoin in the "long term"?
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March 27, 2014, 05:30:55 PM
 #63

Having bitcoin classified as property rather than currency is the best possible scenario.  The capital gains tax rate is 0% for most people.  0%... hard to beat that.

Only for long term capital gains.  Short term capital gains (asset held 364 or less days) is taxed at your regular income rate.

Which I suspect will lead to less "short term" speculation in Bitcoin...which is perhaps likely to tend towards being better for Bitcoin in the "long term"?

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March 27, 2014, 05:34:36 PM
 #64

As an aside, I feel that the U.S. has basically saved Bitcoin with this ruling.  I've long relied on the world's governments to 'save' Bitcoin by making it illegal, but this is even better.  Bitcoin would change to something quite different if it had to support the load of a large exchange economy.  If it remains a vehicle for speculation (which happens off-chain) and moving relatively large blocks of value around, it could remain similar to it's original implementation in terms of being peer-2-peer.

I had a strong feeling this is exactly what you would say (I've just been waiting for you to say it), and I tend to agree with you. I keep saying that Bitcoin isn't well suited for daily purchases, but fantastic for other things (primarily an asset/store of value that gives me total control).

the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.
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March 27, 2014, 05:35:25 PM
 #65

I love how people shit themselves when some dumb govt agency threatens them.

I love how internet tough guys who's net worth amounts to a beater Honda Civic spout off about how they plan to stick it to the man...and somehow feel that everyone else should do so as well if they were not 'cowardly' or 'stupid'.


ok, so lets all bow down like submissive pussies.
Then govt can squander everyones hard earned money on pointless shit and fuck the planet up even more.

A rather poor way to 'fight the man' would be to give him an opportunity to throw me in jail and confiscate all my property.  If anything that would make the problem with 'waste and abuse' (which IS a genuine problem BTW) even worse.  There are more effective ways, but they involve a chain of planning which consists of more than one link.


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Gerald Davis


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March 27, 2014, 05:37:42 PM
 #66

Dark wallet anyone?

Explain to me how that helps you when you engage in a transaction that is a taxable event with an entity which reports those transactions.

Well most entities don't report transactions at the transaction level to the IRS.  If that were the case then nobody would ever cheat on their taxes when it comes to cash transactions. Wink  It would also mean that 99.999999999999999999999% (yes I know that is too many nines) of people wouldn't pretend they have no use tax due in states which "require" it.

Generally speaking only when an entity pays YOU do they report that to the IRS (most commonly in the form of W-2, or 1099).  There are a few examples but they tend to be things which act as deductions for the reportee (student loan interest, property taxes paid, etc).  For example if you buy a TV at best buy, there is nothing best buy reports to the IRS.

The reality is almost nobody is 100% compliant with the tax code either through wilful non-compliance (use tax is pretty common), errors due to the complexity, or ommissions the accuracy rate is essentially 0%.  That being said I am not advocating people assume they can always cheat and not get caught but lets use some common sense.  If you buy for a $20 domain name on namecheap with bitcoins and fail to record that as a capital gain there isn't much chance you are going to get "caught" (caught implies IRS would even be looking for that and they won't).  By the letter of the tax law you should report it but if you don't it is very likely nothing will happen and if somehow you did get caught you could always argue good faith effort and simply pay the taxes due.  Now on the other hand if you buy a bunch of Bitcoins at $0.01 each and now they are worth $40M and you plan to buy a yacht to "avoid taxes" well you probably should consult a CPA and there is a very high chance you will get caught and when you do you will be hit with fines and penalties.

I think the property classification is dubious, currency isn't property for tax purposes, neither are bearer instruments, stored value (gift cards), or even casino chips. On the other hand the idea that the IRS is going to demand records on all transactions (even ones where there is no legal requirement to keep records) in order to catch all the $1.38 in missing taxes on capital gains from spending bitcoins for a video game is kinda silly.


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March 27, 2014, 05:41:46 PM
 #67

As an aside, I feel that the U.S. has basically saved Bitcoin with this ruling.  I've long relied on the world's governments to 'save' Bitcoin by making it illegal, but this is even better.  Bitcoin would change to something quite different if it had to support the load of a large exchange economy.  If it remains a vehicle for speculation (which happens off-chain) and moving relatively large blocks of value around, it could remain similar to it's original implementation in terms of being peer-2-peer.

I had a strong feeling this is exactly what you would say (I've just been waiting for you to say it), and I tend to agree with you. I keep saying that Bitcoin isn't well suited for daily purchases, but fantastic for other things (primarily an asset/store of value that gives me total control).

the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.

Well, you are simply flat out wrong in at the very least one case that I am intimately familiar with (namely my own.)

Using a globally distributed and persistent blockchain entry to by a pack of Skittles is about the most brain-dead use of resources that I've ever heard of.  This is the proverbial use of a sledgehammer to kill a fly.  And again, it would change the nature of the solution dramatically were it to become the norm (much to the delight of the Googles of the landscape.)


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March 27, 2014, 05:47:00 PM
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Well most entities don't report transactions at the transaction level to the IRS.  If that were the case then nobody would ever cheat on their taxes when it comes to cash transactions. Wink  It would also mean that 99.999999999999999999999% (yes I know that is too many nines) of people wouldn't pretend they have no use tax due in states which "require" it.

For someone who is dubious about not completely complying with the law, it's not going to be that big of a deal to run your wallet through a program that issues a statement of your short term and long term capital gains, which you can put along with the reports from your fiat interest-bearing accounts.
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March 27, 2014, 05:49:29 PM
 #69

I love how people shit themselves when some dumb govt agency threatens them.

I love how internet tough guys who's net worth amounts to a beater Honda Civic spout off about how they plan to stick it to the man...and somehow feel that everyone else should do so as well if they were not 'cowardly' or 'stupid'.


ok, so lets all bow down like submissive pussies.
Then govt can squander everyones hard earned money on pointless shit and fuck the planet up even more.

A rather poor way to 'fight the man' would be to give him an opportunity to throw me in jail and confiscate all my property.  If anything that would make the problem with 'waste and abuse' (which IS a genuine problem BTW) even worse.  There are more effective ways, but they involve a chain of planning which consists of more than one link.


I agree. If you dont allow them extort your money, the state can stick you in prison and screw up your life. So pay your tax, but be as vocal as possible to inform people how disgusting and degrading taxtation is.
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March 27, 2014, 05:50:36 PM
 #70

the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.

No way.  I can't use gold for daily purchases.  That doesn't stop it from being worth a rather huge amount per ounce.  Bitcoin, even if accepted by no merchants, can achieve a price in the tens of thousands of dollars per coin.

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March 27, 2014, 05:55:01 PM
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the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.
Using a globally distributed and persistent blockchain entry to by a pack of Skittles is about the most brain-dead use of resources that I've ever heard of.  This is the proverbial use of a sledgehammer to kill a fly. 

I agree with that to a point...however, it is worth using it to make a micropayment of say 2 cents to instantly read some content on the internet (something not currently possible with existing payment systems because of unreasonable high minimum fees).

Which means tracking capital gains or losses "could" be a stumbling point for this "best use" of the technology. But I still believe that a bit of code can solve this problem to provide the necessary tracking and documentation.
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March 27, 2014, 05:55:58 PM
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the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.

No way.  I can't use gold for daily purchases.  That doesn't stop it from being worth a rather huge amount per ounce.  Bitcoin, even if accepted by no merchants, can achieve a price in the tens of thousands of dollars per coin.

Gold is also used for jwellery and ornaments, very good conductor, heat insulator
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March 27, 2014, 05:57:10 PM
 #73

the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.

No way.  I can't use gold for daily purchases.  That doesn't stop it from being worth a rather huge amount per ounce.  Bitcoin, even if accepted by no merchants, can achieve a price in the tens of thousands of dollars per coin.

That's kind of silly, since there would be no value in using bitcoin.  It makes it a ponzi scheme, where the smart sell to the stupid and cash out before it collapses.  Speculators provide a service to bitcoin, by giving it value.  When it has value, it can be used as a means to trade for goods and services.

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March 27, 2014, 06:08:41 PM
 #74

the only reason bitcoin is a store of value is because people anticipate it will be useable for daily purchases.

No way.  I can't use gold for daily purchases.  That doesn't stop it from being worth a rather huge amount per ounce.  Bitcoin, even if accepted by no merchants, can achieve a price in the tens of thousands of dollars per coin.

That's kind of silly, since there would be no value in using bitcoin.  It makes it a ponzi scheme, where the smart sell to the stupid and cash out before it collapses.  Speculators provide a service to bitcoin, by giving it value.  When it has value, it can be used as a means to trade for goods and services.



Gold has industrial value, so its value will remain until viable alternatives compete with those industrial applications.  Fiat and part of BTC value is created by the perception of people like you and me. A piece of paper has no intrinsic value or utility, however BTC goes beyond this and actually does have a very valuable function which is the blockchain.

http://www.forbes.com/sites/kashmirhill/2014/03/26/warren-buffett-says-bitcoin-is-a-mirage-why-marc-andreessen-thinks-hes-wrong/

“A value of a BTC is not arbitrary, in fact it’s the opposite of arbitrary,” he says. “It equals the value of a single slot in a finite sized public cryptographic ledger through which value can move. The total Bitcoin ledger has value corresponding to the volume and velocity of transactions that will run through it in the future; by extension, each slot in the ledger has fractional value determined by the total number of slots (which, in Bitcoin’s case, are limited to 11 million today and 21 million ever).”


“So saying what Warren is saying is like saying ‘a car is great technology but it’ll never actually get anyone from point A to point B,” he continued. “Bitcoin is great technology BECAUSE it lets people get value from point A to point B through the public ledger; that functional use creates the value of the ledger, and a single BTC has a corresponding fractional value of the ledger.”
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March 27, 2014, 06:14:36 PM
 #75

Tvbcof and Holliday:  I agree that bitcoin presently has better use cases than day-to-day spending like you both point out.  If the block limit size is increased and blocks are communicated by tx-hash to reduce the orphan cost, do you believe bitcoin will remain less useful for day-to-day purchases?

On the IRS guidance: Am I wrong in understanding the IRS guidance as their interpretation of existing laws?  No laws were actually changed, correct?  To me it seems the guidance was fair: presently bitcoin is more like property than like currency; if you disagree I believe the courts would have the final say.  

But the bigger point I want to make is that as bitcoin grows, it may naturally evolve to become more like currency than like property, and at this point would not the IRS guidance less accurately reflect the existing law (no change in law required, just a change in the interpretation of what a bitcoin is to more accurately reflect…ahem…what it is at that point in time)?  

The same theme applies to the guidance on mining. From my discussions with various community members, I think the general feeling is that hashers are paid for the services they provide to a mining pool whereas miners create bitcoins based on their own initiatives and the acceptance of their efforts by their peers.  I think if the IRS had a deeper understanding of bitcoin, they would have used the word "hashers" rather than "miners" in their guidance.  Based on existing laws, I believe miners (but not hashers) are free to recognize gains on any coins they create when a gain is realized, and a court challenge would rule in their favour.  

This is just my opinion and should not be construed as legal advice.  IANAL.

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March 27, 2014, 07:03:07 PM
 #76

I hate to admit it, but this story makes a lot of sense.

I can't believe you think that. That article is utter nonsense made up by an idle-minded journalist looking to create a bit of bluster for the sake of it.

Monetary media don't draw their properties - "fungibility" - or otherwise from the whims of tax regulators. You might as well say that dollars are not fungible in the Euro economy because they attract capital gains tax.

The article is basically a scam. Read this http://en.wikipedia.org/wiki/Fungibility.

Specifically this part:

Quote
Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. For example, since one ounce of gold is equivalent to any other ounce of gold, gold is fungible.

Do you really think that the fact that one day gold is valued at $1200 and another day at $1500 destroys the fungibility of gold ? Thats what this idiot would have you believe.
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March 27, 2014, 07:16:36 PM
 #77

The IRS has issued its ruling. Now let it try to enforce it. Smiley

Seriously, as the cryptocurrency ecosystem continues to grow, there is no longer going to be a need to cash out BTC for fiat currency, in which case how are they ever going to know what kind of profits or holdings in bitcoin you have? Unless they go all police-state on us and make every bitcoin service under the sun obtain identity data on every account they have (such as when you buy a Gyft card), this is not going to do much to harm bitcoin.

Even if they did try to put such burdens on US businesses, they could just move overseas, and the overseas ones would fill the void. The internet knows no boundaries, so it's not like we'll care if Gyft shifts to the Barbados, for example, instead of wherever they are registered now. The IRS ruling will become a 99% ignored laughingstock because they won't be able to enforce it.

This is accurate. The anonymous/untraceable nature of any cryptocurrency makes it easy to hide. But not everyone wants to break the law and risk going to jail. Anyone doing business in the #s that will make this taxable would mean that you are doing 100s of thousands of $USD in bitcoin. Which means you probably have more to lose (such as your money). Tax isn't THAT bad people.

If you want to break the law to make money there are also other options.

I agree with the first, both posters actually. But do not forget that the basis of the domination system is the fact that the subjects are those who give the masters power and resources, that is from where they get their dominance. Since the tracking of all transactions for tax purposes is so weird, costly, impractical and intrusive, people should and probably will just say no. Certainly, that's what I will do. Report my bitcoin holdings every year? No. Report all transactions? No. Report the net fiat value of coins sold for fiat? Possibly, but not buy in value, where I got them from, how much I have left. No. Not enough people will say yes to this, so the law will go to sleep. The masters have no say in this. They think they have, but they have no say.


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March 27, 2014, 07:31:39 PM
 #78

It should be good for the price of Bitcoin because it encourages people to hold on to their coins.

Large BTC holders aka whales in the USA will think twice about selling large amounts of their coins. Spending them slowly over time is much smarter.

There is also the issue of being a money transmitter that goes away, which is also good.

Lets see how long it takes for this to sink in.

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March 27, 2014, 07:33:39 PM
 #79


I agree with the first, both posters actually. But do not forget that the basis of the domination system is the fact that the subjects are those who give the masters power and resources, that is from where they get their dominance. Since the tracking of all transactions for tax purposes is so weird, costly, impractical and intrusive, people should and probably will just say no. Certainly, that's what I will do. Report my bitcoin holdings every year? No. Report all transactions? No. Report the net fiat value of coins sold for fiat? Possibly, but not buy in value, where I got them from, how much I have left. No. Not enough people will say yes to this, so the law will go to sleep. The masters have no say in this. They think they have, but they have no say.


Thanks for the thoughtful post Erdogan.  Indeed, the power always rests with the people.  

I disagree with one point: you said "they think they have a say in this," but I believe the IRS simply issued guidance reflecting their interpretation of the current laws.  

Who are "they" anyways?  And how are they different than us?


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March 27, 2014, 07:44:49 PM
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I agree with the first, both posters actually. But do not forget that the basis of the domination system is the fact that the subjects are those who give the masters power and resources, that is from where they get their dominance. Since the tracking of all transactions for tax purposes is so weird, costly, impractical and intrusive, people should and probably will just say no. Certainly, that's what I will do. Report my bitcoin holdings every year? No. Report all transactions? No. Report the net fiat value of coins sold for fiat? Possibly, but not buy in value, where I got them from, how much I have left. No. Not enough people will say yes to this, so the law will go to sleep. The masters have no say in this. They think they have, but they have no say.


Thanks for the thoughtful post Erdogan.  Indeed, the power always rests with the people.  

I disagree with one point: you said "they think they have a say in this," but I believe the IRS simply issued guidance reflecting their interpretation of the current laws.  

Who are "they" anyways?  And how are they different than us?



I think by "they" he's referring the elite political class which continues to retain power in this country despite consistent corruption year and year after motherfucking year through political means, corruption, bribery, etc. At least, thats what I mean when I say "they".

How may groups get to give themselves a raise every year, laughing all the way to the bank as they threaten to shut the government down (again). The federal government has gotten WAY too large. And well know government is the most inefficient way to get things done.

So, why on EARTH do the same people who are running this country into the ground with miles of new legislation which expands the size of government, their reach and power, every year still run the country?
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