Sure used personal words.
Perhaps it just stung because you're having a harder time maintaining the fantasy in the face of meaningful criticism? I don't know anyone involved here (at least not by the names they're using) well enough to have personal ideas about them.
First, 'bitcoins' are not an alternative currency but instead
air guitars. One interesting twist with BTC is whether, if with anyone, or how title vests to 'unspent outputs'. Keep in mind that there are no 'bitcoins', which are just an abstraction, but instead just unspent outputs recorded in a free open-source software program on hundreds of thousands of computer that is governed by the following license.
[license elided for brevity]
Ok, cool. Bitcoins are 'air guitars' or 'unspent outputs' a/k/a Fairy Money. If you believe BTC's have no value, please put your
moneyair guitars where your mouth is and send 100 BTC to this address:
1NjgvNBhqJyDGkTF7BeNPGW16XVHdHm8j2
We'll all be able to watch that on the blockchain and see if you actually believe that these are "unspent outputs" with no actual value and title that's speculative at best.
You also might want to go post on the threads about the various Bitcoinica losses and point out that the people who think they have lost something because they have lost their BTC's have actually lost nothing, because BTC's have no value, and they didn't have good title to the BTC's. This will save people a lot of trouble and heartache - a lot of people are pretty worked up because they think that hundreds of thousands of USD worth of value have been misappropriated. What they didn't realize is that they voluntarily exchanged something of value (effort/goods or actual funds) for air guitars, and all of the real value was gone at that moment, and the fact that they don't have quite as many air guitars or "unspent outputs" as they used to is meaningless. They never really had good title, anyway, and they were morons for exchanging something of known value for imaginary computer doodads that nobody really owns, anyway.
Right?
On the other hand, I suspect that you (as well as any tax authority or judge who bothered to look at the issue) will believe that BTC's do have value, because they are readily and easily exchanged for value globally, and there are even several exchanges which helpfully maintain up-to-the-second realtime exchange rate tables between this valueless Fairy Money and various national currencies.
I really don't believe you could make the "BTCs have no value" argument with a straight face. But if you can, please send me all of yours, because I
do think they have value.
"When I use a word,' Humpty Dumpty said in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master— that's all."
Or, maybe you think it's going to work to say that they have value sometimes and not at other times - so that when you're talking to the IRS, they are "air guitars", but when you're talking to a trade counterparty, they suddenly have a value relative to other things like work and currency.
Good luck with that in court.
For example, tax professionals would agree that if you paid USD via a credit card to either download or access via a SaaS Turbotax then Intuit would have income and the user could claim a deduction as an ordinary and necessary business expense.
No, a tax professional would tell you that whether or not the purchase is deductible depends on how it's used. It might be an ordinary and necessary business expense, it might not. (Hint: Where would that expense go on a 1040? Would different taxpayers put it on different schedules? Are there some taxpayers who wouldn't have a schedule to put it on?)
But if you download a free copy of WordPress then you would not have 'income' even if it were in trade for a service due to the illusory nature of the contract because it lacks consideration.
Well, I'll grant you that's an interesting hypothetical. If some guy really did agree to do meaningful work in exchange for a free download of WordPress (which is available to everyone, globally, for no consideration) then you're probably right, there's no income and no expense for anyone. The performance of the service would probably best be characterized as a nontaxable gift.
But that hypothetical is of limited utility to us in this conversation because nobody does that in the real world. People who do work want to get something of value in return - like, say, money or goods or services. If someone does some work and they get BTC in return, I don't think there's any real similarity to your WordPress example because there is no source of BTC's that distributes them freely without limitation. If the BTC faucet somehow broke and gave people any number of BTC's they wanted at any time, then I agree that someone who was working for BTC would best be considered a volunteer (or the grantor of a gift); but if someone figures out how to generate an unlimited number of BTC's and they start handing them out to anyone who wants them, we're done here anyway.
Second, there is plausible deniability created by anyone with the private key being able to exercise control over 'unspent outputs' which complicates the issue. Were the unspent outputs associated to the public key that Bitcoinica regularly exercised dominion and control over moved to a different public key by a Bitcoinica agent or by some other actor? So likewise one could claim they did not sell a good or perform a service in exchange for any 'unspent outputs' which can be sent and received without the consent of anyone except for whoever has the private key which could be obtained through brute force techniques.
See, here's where my bullshit meter goes right off the scale - if the previous argument (BTC's have no value, or BTC's have no value until they're turned into something else) holds water, why would anyone need to deny anything? Legitimate planning is designed so that it can be disclosed, completely and fully, to the relevant authorities and there's no "you can't prove it's really me" crap going on.
This reminds me a lot of the idea that was popular about 15 years ago that nobody would ever be convicted for anything involving the Internet because it would be too hard to prove which human being was actually responsible - it's all just bits on the wire, and who the fuck knows who's at the other end, right?
And then 10 years ago people thought that you could do pretty much anything you wanted on Ebay without thinking about tax, because Ebay is like a giant garage sale, and everyone knows that even if you get some cash for your stuff at a garage sale, there's no income because everyone takes a loss at everything at a garage sale, and besides, Ebay names are things like "PonziMaster6969" and who the fuck is that, and it's gonna be a lot of work for IRS to subpoena Ebay and Paypal and they probably won't bother because the IRS is lazy, and besides, maybe it was the dog who sold that stuff on Ebay (can dogs even
have income?), or the neighbor, or some creepy guy using your open WiFi hotspot, so we don't
really know what happened, so it can't be taxable, right?
That hasn't really worked out very well.
So even if 'ownership' of 'bitcoins' were established or conceded then there are still plenty of issues with regards to always using a different public key address to receive 'change',
Yeah; and if I put all my money from my job in my left pocket, but then sometimes I put some money from my secret job in my right pocket, I don't have to put that secret job money on my tax return BECAUSE IT'S A TOTALLY DIFFERENT POCKET, DUH! If the IRS asks "how much have you got in your pocket", I'm only gonna tell them about the left pocket. What are the chances that the IRS agent is gonna know about pockets, and that my pants might have a bunch of them. Even if they know about four-pocket pants, or five-pocket pants, I have a pair of pants with SIX pockets. SIX! There's no way IRS is gonna know about my six pockets, I'm home free!
Do you really believe this stuff?
tax arbitrage opportunities from jurisdiction or person/entity such as with deferral for overseas earnings or shifting tax brackets, transfer pricing, 2503(b) gifts, etc. For application of the relevant law reasonable minds will differ even among credentialed professionals.
That's a nice collection of tax buzzwords, but what does any of that have to do with BTC? People have been doing those things for years and years with our old-fashioned banking system.
I will agree that BTC might make some of the cross-border or inter-company transfer issues easier for smaller entities, because the cost and time of international transfers can cause a lot of friction making it impractical to use some strategies unless the actual amounts involved are big.
But BTC isn't changing the nature of the transactions, just the economic level at which it's cost-effective to implement them.
Third, establishing a case with evidence has not even been talked about. Doing so could be an absolute nightmare. [...]
With the Bitcoin protocol being both the blood (USD, EUR, etc.) and the veins (credit cards, bank accounts, wire transfers, etc.) it eliminates the need for third parties that facilitate value transfer which could provide helpful records when served with a subpoena. Thus, the IRS will either need to be a party to the transaction, which would be infeasible, or be involved with an informant.
So, I agree that would be true in what I believe is the incredibly unrealistic scenario where some anonymous programmer or web designer works only for BTC, manages that BTC directly with a live "fat client" wallet, and never spends any of it; and as long as the paying entity doesn't have reporting obligations or other workers who become disgruntled and turn into informants, or the worker gets paid small amounts by lots of individuals.
The problem is that's not a very exciting business plan, or life - because as soon as that person wants to spend some of their BTC, they've got to participate in the other financial system, and that other financial system is full of cross-links with the tax authorities.
I suppose that person could exchange BTC locally for cash in an anonymous transaction, if they live/work in an area with others who are interested, and then they could spend that cash on low-profile things they enjoy that won't attract attention or show up on lists of expensive purchases.
And, to be clear, what we're talking about now is tax evasion at an activity level that's low enough to avoid notice, not earning income tax-free.
Even that isn't a giant change in the nature of our economy or taxation - it's making off-the-books employment a little easier for knowledge workers, so they're on a par with restaurant and construction/landscaping workers, but that's also happening because of the growth of the Internet generally.
But all of that is predicated on an actual use of BTC that seems at odds with what's happening in the real world - perhaps this forum presents an unrealistic view of reality, but I get the impression that a lot of people aren't handling their BTC with traditional fat clients on their own PC's, they're transferring funds back & forth between bank accounts and online exchanges and other currencies and trying to find ways to make money move as quickly and as easily as possible between an online exchange and a traditional bank account, which are two different entities who are absolutely going to comply with an IRS subpoena and will cheerfully hand over everything that's asked for and probably more. If you look at the level of detail that's disclosed in the various Bitcoinica postmortem threads, it's pretty clear (if it wasn't already) that the exchanges have perfectly good records showing what happened, and when, tied to E-mail accounts, IP addresses, and bank accounts.
So you can say that in a hypothetical world BTC has eliminated the need for intermediaries who are subject to subpoena and that a transaction is private between the two parties involved - but that's only true if both parties are careful and conservative, and those are not words I would use to describe a lot of the people operating in the BTC environment. In the real world, I see intermediaries all over the place - the only question in my mind, if the tax authorities or law enforcement get interested, is whether they're going to get those records by seizing the US-located servers, or by issuing a subpoena to the operators.
