I am not a tax lawyer/CPA/etc, so don't take any of this as advice. But here is my opinion:
I plan to talk to a tax accountant, but I believe I will be able to treat my bitcoins as if they were any other collectable coin. That is, if I make money selling them someday, I'll be treated as if I sold any other appreciating asset. Same thing as if I had bought some confederate dollars at a flea market that appreciated wildly for some reason.
You definitely don't want Bitcoin to be classified as a collectible. The taxes on collectibles (beanie babies, etc) are much higher than standard assets (stocks, bonds, etc). This has screwed many a gold coin collector. Luckily I don't think this will happen. A collectible is defined, in part, by being a physical object.
What I'ld like to know is if holdings of Bitcoin count as a "foreign account" and thus when "aggregate value of these [foreign] accounts exceeds $10,000 at any time during the calendar year" then filing the FBAR report is required:
Bitcoin is not associated with any foreign country, so I don't believe FBAR regulations will apply. Until the government recognizes the Internet as a foreign entity, I think we will be safe.
Bitcoin is most analogous to gaming digital currencies, so I believe the same rules should apply as for Linden Dollars. From what I have read, these are classified as a "store of wealth" and taxed as an asset (like a stock). Of course, the IRS can choose to change their mind at any point. For whatever you do, you will just have to cross your fingers and hope they decide you are right. That is the risk of being an early adopter. There are mechanisms to request an official ruling from the IRS, but from what I understand, these are not all that binding. To be truly safe, you simply need to wait for enough case law to give you cover. Let someone else be the guinea pig.
I belive, if you sell something for Bitcoins, this will be treated as a barter. We may consider Bitcoin a currency, but I don't think the IRS will. If you have enough income to make it worth it, there are probably a lot of games you can play with how exactly you do calculate the value of the exchange. You will need to speak to an attorney about how to do that. Due to the massive appreciation we are seeing in Bitcoin, I expect it will be most advantageous to convert the value to Dollars at the time of sale.
If you are simply trading between Dollars and Bitcoins, you should be able to treat it as any other asset. Make sure you keep good records of when you bought and sold so you can calculate basis and long term status.
