If I mine an alt coin then send it to an exchange and sell it first for bitcoin and then sell bitcoin for litecoin then how should i consider this for my "income tax" for mining it ??
I wouldn't.
Anything you mine is not taxable until it is converted for dollars (and usually not even then). (IANAL and especially IANYL).
And this is why it is a very bad idea to try to get advice from random participants in an internet forum. Most of them just make up answers that they like the sound of rather than informing you of the facts. That's a great way to get yourself into trouble. Somehow, I doubt the IRS will accept "But BitchicksHusband said it was ok?" as an explanation of why you didn't pay the required taxes.
Specifically in IRS Notice 2014-21:
http://www.irs.gov/pub/irs-drop/n-14-21.pdf?utm_source=3.31.2014+Tax+Alert&utm_campaign=3.31.14+Tax+Alert&utm_medium=emailSection 4. FREQUENTLY ASKED QUESTIONS
Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
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. See Publication 525, Taxable and Nontaxable Income , for more information on taxable income.
Re:bad advice, sort of true, but then again, when misinformation is posted, there are usually several posters ready willing and able to jump in to save the day as you just did. (I was about to say something similar,
Although you did it better than I would have with the link and everything.) ,...my point is, a forum CAN be a good place to learn if one uses the tool properly.
