Peter R
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March 29, 2014, 05:39:43 PM |
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i mine not for income but as an investment.
i trade my USD for equipment hoping to get BTC in return which i then hold longterm. b/c there are some who sell BTC immediately for USD, unlike me, i think a rule that treats the subsequent event of selling or spending of mined BTC as a capital gain is more uniform and appropriate.
I agree and that is what I am saying cypherdoc, assuming one is a miner and not a "hasher." yes you did. but the other point i'm trying to make is that ppl who accept pay in btc should not be taxed ordinary income if they decide to hold it for over one year thus qualifying it as capital gains. accepting pay can also be an investment or property as the IRS has defined it. stock options as pay are structured in this way. remember that i'm using the IRS's recent decision to not classify Bitcoin as money but instead as property to make this argument. Doesn't that rule only apply if you are paid in stock options? If you were paid directly in stock, I think the tax treatment would be the same as what they are proposing for bitcoin. The stock option trick has never really made sense to me, so perhaps I am missing something. EDIT: All this discussion on tax over the last few days really shows how complex and burdensome the existing system is!! Our combined efforts discussing and studying these issues has probably already consumed millions of dollars of our time.
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cypherdoc (OP)
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March 29, 2014, 05:54:00 PM |
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i mine not for income but as an investment.
i trade my USD for equipment hoping to get BTC in return which i then hold longterm. b/c there are some who sell BTC immediately for USD, unlike me, i think a rule that treats the subsequent event of selling or spending of mined BTC as a capital gain is more uniform and appropriate.
I agree and that is what I am saying cypherdoc, assuming one is a miner and not a "hasher." yes you did. but the other point i'm trying to make is that ppl who accept pay in btc should not be taxed ordinary income if they decide to hold it for over one year thus qualifying it as capital gains. accepting pay can also be an investment or property as the IRS has defined it. stock options as pay are structured in this way. remember that i'm using the IRS's recent decision to not classify Bitcoin as money but instead as property to make this argument. Doesn't that rule only apply if you are paid in stock options? If you were paid directly in stock, I think the tax treatment would be the same as what they are proposing for bitcoin. The stock option trick has never really made sense to me, so perhaps I am missing something. EDIT: All this discussion on tax over the last few days really shows how complex and burdensome the existing system is!! Our combined efforts discussing and studying these issues has probably already consumed millions of dollars of our time. with all the trolling going on, those guys must be worth millions.
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CurbsideProphet
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March 29, 2014, 05:59:07 PM |
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Because Bitcoin is so young, it could still go to zero. Many mainstream economists argue just this. And many opponents are trying to make this a reality. It is still a speculative investment. If this is true then the following shouldn't be subject to capital gains taxes until they are either spent or sold: 1. Pay in Bitcoin 2. Mining rewards Edit: The premise of this post is actually incorrect. Risk alone isn't necessarily reason to avoid ordinary income tax. A better way to make this argument is that payment in stock options (also property) can be structured to avoid ordinary income tax while Bitcoin pay and mining cannot The IRS seems too want to have it both ways here. Tax it as money when paid (unlike other property like stocks options as I've demonstrated) AND tax it as capital gains when spent or sold http://finance.yahoo.com/news/taxing-stock-options-other-equity-070055008.htmlHey Cypher, good to see you're still around. I agree with you that taxes shouldn't be incurred until gains are realized. It's pretty common for businesses to keep account of unrealized gains/losses so it really should be no different with Bitcoin.
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cypherdoc (OP)
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March 29, 2014, 06:01:02 PM |
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Because Bitcoin is so young, it could still go to zero. Many mainstream economists argue just this. And many opponents are trying to make this a reality. It is still a speculative investment. If this is true then the following shouldn't be subject to capital gains taxes until they are either spent or sold: 1. Pay in Bitcoin 2. Mining rewards Edit: The premise of this post is actually incorrect. Risk alone isn't necessarily reason to avoid ordinary income tax. A better way to make this argument is that payment in stock options (also property) can be structured to avoid ordinary income tax while Bitcoin pay and mining cannot The IRS seems too want to have it both ways here. Tax it as money when paid (unlike other property like stocks options as I've demonstrated) AND tax it as capital gains when spent or sold http://finance.yahoo.com/news/taxing-stock-options-other-equity-070055008.htmlHey Cypher, good to see you're still around. I agree with you that taxes shouldn't be incurred until gains are realized. It's pretty common for businesses to keep account of unrealized gains/losses so it really should be no different with Bitcoin. thanks for dropping in once a year to say hi. yep, Bitcoin isn't going anywhere so neither am i. ![Wink](https://bitcointalk.org/Smileys/default/wink.gif)
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cypherdoc (OP)
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March 29, 2014, 06:06:59 PM |
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the problem is the result of what they've done.
the IRS may be technically correct by jamming round Bitcoin into the square hole of their regulatory structure. but the result will be pushing the real Bitcoin economy overseas while encouraging speculation here domestically. do we really want to encourage that trend which we've been on for the last 3 decades anyways?
but maybe that's what they want. i for one think it will backfire on them.
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Peter R
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March 29, 2014, 06:24:57 PM |
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Just thinking out loud: it may be convenient if a willing 14-year old turned up who's been mining on P2P pool for years, technically has a decent-sized tax liability (due to the erroneous guidance regarding miners), and is unable to sell bitcoins for dollars because he cannot legally register for an account on an exchange.
If the 14-year old reported his tax liability and was unable to pay it, what would happen?
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cypherdoc (OP)
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March 29, 2014, 06:41:35 PM |
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Just thinking out loud: it may be convenient if a willing 14-year old turned up who's been mining on P2P pool for years, technically has a decent-sized tax liability (due to the erroneous guidance regarding miners), and is unable to sell bitcoins for dollars because he cannot legally register for an account on an exchange.
If the 14-year old reported his tax liability and was unable to pay it, what would happen?
Good point. They should allow payment in Bitcoin. But that doesn't address my more fundamental question.
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amspir
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March 29, 2014, 08:09:43 PM |
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The IRS seems too want to have it both ways here. Tax it as money when paid (unlike other property like stocks options as I've demonstrated) AND tax it as capital gains when spent or sold
You make it sound like it's double taxation, when it is not. I do some work for somebody, and they give me a collectible baseball card in compensation. I am obligated to pay tax on the income, based on the value of the card when it was given to me. If I choose to hold onto the card, and realize a capital gain when it sold later at a higher price, then I am obligated to pay taxes on that gain.
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marcus_of_augustus
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March 29, 2014, 08:30:42 PM |
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It appears so .... Federal Judge Rules Bitcoin is a currency ... suck on that fat one IRS!! http://techcrunch.com/2013/08/07/bitcoin-clampdown-continues-as-federal-judge-says-its-a-currency/A federal judge in Texas has declared that Bitcoin is a currency and should therefore be regulated just like U.S. dollars The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money. This a Federal court ruling. It couldn't get any clearer, the IRS has made a huge mistake!
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principalg1
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March 29, 2014, 08:35:44 PM Last edit: April 09, 2014, 11:54:47 AM by principalg1 |
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Best I can tell (law not being my vocation) the IRS formalized things such that not only are winnings taxed as capital gains, but losses are also a factor.
This is key because it allows people with real money to put some of it on the table and enjoy at least some tax advantage if Bitcoin experiences some sort of a failure or collapse. I would expect more speculation from those with deep pockets for that reason.
This isn't the only reason why the formal guidance from the IRS as it came down delights me, but it is one of them.
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mysidia
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March 29, 2014, 08:36:21 PM |
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When you buy bitcoins from an exchange or broker, you don't actually take possession until they are sent to your wallet.
The broker is your agent. From the moment you buy the BTC, the broker "owes" you Bitcoins. So the cost basis is fixed at that point in time; it is not necessary to take delivery, before the basis is set. You usually don't take immediate possession of stock you purchase either. Most people keep all their stocks in street name the whole time, so they can sell easily.
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BTC: 1FbuJxZCeJUqrP7EpUkgMKWAmAA1M8gUBd LTC: LbvomgbwKnqk47mWzALCDEoV8ydjxYYYpF
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amspir
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March 29, 2014, 08:38:53 PM |
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You do know that the IRS ruling and the federal judge's ruling are two different things, applied to narrow scopes in the law. The case you cited applies to AML/Money Transfer laws, while the IRS ruling allows bitcoin holders with long term capital gains to be taxed at a lower capital gains rate.
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cypherdoc (OP)
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March 29, 2014, 08:41:43 PM |
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The IRS seems too want to have it both ways here. Tax it as money when paid (unlike other property like stocks options as I've demonstrated) AND tax it as capital gains when spent or sold
You make it sound like it's double taxation, when it is not. I do some work for somebody, and they give me a collectible baseball card in compensation. I am obligated to pay tax on the income, based on the value of the card when it was given to me. If I choose to hold onto the card, and realize a capital gain when it sold later at a higher price, then I am obligated to pay taxes on that gain. no, that wasn't my point. it's the stepped up tax rate of ordinary income at time of pay or mining that i'm not happy about. b/c the IRS defines it as "property" i'm arguing that if i'm paid for services in bitcoin i should be able to make the choice of deferring taxes out one year and making them capital gains just like one might do with stock options. anyways, it's not a huge deal. i'll pay the tax for now and hope they reverse the decision later.
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marcus_of_augustus
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March 29, 2014, 08:43:18 PM |
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You do know that the IRS ruling and the federal judge's ruling are two different things, applied to narrow scopes in the law. The case you cited applies to AML/Money Transfer laws, while the IRS ruling allows bitcoin holders with long term capital gains to be taxed at a lower capital gains rate. No. How about you describe in detail to us idiots how screwed up and schizophrenic the Federal government really is? It's quite clear the Federal Judge is saying it is legally to be treated as money. Are you saying the IRS is basically a criminal organisation that can use its very own legal definitions to extort wealth from the USA citizenry? How does that work?
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amspir
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March 29, 2014, 08:48:59 PM Last edit: March 29, 2014, 09:03:20 PM by amspir |
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No. How about you describe in detail to us idiots how screwed up and schizophrenic the Federal government really is? It's quite clear the Federal Judge is saying it is legally to be treated as money. Are you saying the IRS is basically a criminal organisation that can use its very own legal definitions to extort wealth from the USA citizenry? How does that work?
Umm, ya. They even have their own court in which to sue you for your unpaid taxes. I never advocated or endorsed the system, I just want to stay out of jail and be able to live a public life without having to go underground as a criminal. The federal judge ruling is a framework that applies to a different area of the law, for money laundering, not taxes. [edit] You seem to be arguing base issues to which the rulings apply: 1) The government demands a tax on your income 2) The government demands that you don't transfer money without their supervision The invention of bitcoin never invalidated these laws. It's just the government clarifying how bitcoin applies to these laws.
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tvbcof
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March 29, 2014, 09:02:52 PM |
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Best I can tell (law not being my vocation) the IRS formalized things such that not only are winnings taxed as capital gains, but losses are also a factor.
This is key because it allows people with real money to put some of it on the table and enjoy at least some tax advantage if Bitcoin experiences some sort of a failure or collapse. I would expect more speculation from those with deep pockets for that reason.
This isn't the only reason why the formal guidance from the IRS as it came down delights me, but it is one of them.
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sig spam anywhere and self-moderated threads on the pol&soc board are for losers.
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marcus_of_augustus
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March 29, 2014, 09:11:28 PM |
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No. How about you describe in detail to us idiots how screwed up and schizophrenic the Federal government really is? It's quite clear the Federal Judge is saying it is legally to be treated as money. Are you saying the IRS is basically a criminal organisation that can use its very own legal definitions to extort wealth from the USA citizenry? How does that work?
Umm, ya. They even have their own court in which to sue you for your unpaid taxes. I never advocated or endorsed the system, I just want to stay out of jail and be able to live a public life without having to go underground as a criminal. Coward. You disagree with a corrupt system but state you'll do nothing to change or stand up to it.
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CurbsideProphet
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March 29, 2014, 09:19:05 PM |
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No. How about you describe in detail to us idiots how screwed up and schizophrenic the Federal government really is? It's quite clear the Federal Judge is saying it is legally to be treated as money. Are you saying the IRS is basically a criminal organisation that can use its very own legal definitions to extort wealth from the USA citizenry? How does that work?
Umm, ya. They even have their own court in which to sue you for your unpaid taxes. I never advocated or endorsed the system, I just want to stay out of jail and be able to live a public life without having to go underground as a criminal. Coward. You disagree with a corrupt system but state you'll do nothing to change or stand up to it. ![Roll Eyes](https://bitcointalk.org/Smileys/default/rolleyes.gif) The guy said he doesn't want to go to jail and I don't blame him. There are other ways to show your protest that doesn't involve getting locked up. Besides he's right, the judge ruling has nothing to do with the IRS, they are two separate issues, which you fail to comprehend.
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1ProphetnvP8ju2SxxRvVvyzCtTXDgLPJV
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amspir
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March 29, 2014, 09:19:45 PM |
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Coward. You disagree with a corrupt system but state you'll do nothing to change or stand up to it.
Proud to remain a coward. Smart criminals don't get caught. Dumb criminals get caught. Really dumb criminals don't require a confidential informant to inform the government of their activities.
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tvbcof
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March 29, 2014, 09:21:07 PM |
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No. How about you describe in detail to us idiots how screwed up and schizophrenic the Federal government really is? It's quite clear the Federal Judge is saying it is legally to be treated as money. Are you saying the IRS is basically a criminal organisation that can use its very own legal definitions to extort wealth from the USA citizenry? How does that work?
Umm, ya. They even have their own court in which to sue you for your unpaid taxes. I never advocated or endorsed the system, I just want to stay out of jail and be able to live a public life without having to go underground as a criminal. Coward. You disagree with a corrupt system but state you'll do nothing to change or stand up to it. The most effective way to change things is to remain free and with enough resources to apply toward efforts which have some chance of making things change. Having one's property confiscated and getting thrown in jail may impress a handful of fringe observers (and relatively inconsequential ones at that) but ultimately it is going to be a relatively ineffective way to address the very real issues of dis-empowerment of ordinary citizens through a variety of rather ugly means. I'd go so far as to say that we are probably close enough to an event of significance that it makes sense to 'keep one's powder dry', but only time will tell on that one.
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sig spam anywhere and self-moderated threads on the pol&soc board are for losers.
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