The government is indeed struggling to define it.
The same thing happened back in 1993. Is the Internet like a phone, or fax, or a tv, or radio, or mail? Yes, it has similarities to all of the above.
The IRS took the route of defining it as property, and the notice 2014-21 did a mediocre job of understanding it and applying the existing tax laws to it. In my humble, but well researched opinion, they made a mistake in requiring miners to report blocks as income. If someone builds 25 chairs using resources (wood, cloth, glue, nails, labor), those chairs can sit untaxed until they are sold, at which time the revenue is recognized and easily calculated in USD.
One of the reasons the chairs are not taxable at the time of creation is they don't have an established value. You could argue that Bitcoin has an established value, but even that varies from exchange to exchange and minute to minute. This does not take into consideration the other alternatives to Bitcoin of which many don't have a published value.
Even Mining Income from gold mining is considered taxable "At the point of sale, funds received are considered income to the miner."
Source:
http://www.irs.gov/pub/irs-mssp/placer.pdf (Chapter 2)
It isn't entirely their fault as Bitcoin is (to steal from an OLD SNL skit) both a dessert topping, and a floor wax. It is a totally new thing, and it is not easily classified.
This should not to be considered tax guidance. I'm just pointing out some inconsistencies that need to be sorted out.
Tron Black
CoinCPA.com
