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 Author Topic: Tax example for US miners using the new IRS ruling  (Read 602 times)
dentldir
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Merit: 250

 March 30, 2014, 05:16:24 AM

I'd like a few others to chime in on a hypothetical example which tries to apply the new IRS ruling for miners (or hashrate providers per se).

A miner buys a mining device for 5 BTC @ \$100/BTC (\$500 cost), the expected life of which is well under 1 year.

The mining device uses \$100 in electricity over the year (\$100 cost)

The device generates 2 BTC @ \$200/BTC and 2 BTC \$250/BTC over the year (\$900 income)

The miner spends the 4 BTC in 4 transactions:

1 BTC @ \$200/BTC
1 BTC @ \$300/BTC
1 BTC @ \$400/BTC
1 BTC @ \$500/BTC

The total gross income is \$900

The total cost of the income is \$600 (\$500 + \$100 Electricity)

So the net income is \$300.

For capital gains, the basis is:

2 BTC @ \$200
2 BTC @ \$250

and to consume those 4 BTC via FIFO:

1 BTC \$200 from 1 BTC @ \$200 => \$0 Gain
1 BTC \$300 from 1 BTC @ \$200 => \$100 Gain
1 BTC \$400 from 1 BTC @ \$250 => \$150 Gain
1 BTC \$500 from 1 BTC @ \$250 => \$250 Gain
------------------------------------------------------
4 BTC         from 4 BTC                 \$500 Gain.

So the owed taxes are calculated from:

\$300 taxed as income plus \$500 taxed as capital gains (short term in this example).

Sound right?

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