Bitcoin - Part Deux

On 25 March the Internal Revenue Service issued guidelines pertaining to the treatment of Bitcoin transactions by taxpaying US citizens.

F'rinstnce:
__The IRS does not consider Bitcoins to be a currency or "currency alternative".
__The sale of Bitcoins is subject to capital gains taxes, . . . short-term or long-term depending how long they were held.
__If one mines Bitcoins as a trade or business, the Bitcoin income from mining activity is not only subject to income tax, but also self-employment tax.
__If one trades one's Bitcoins for some other property that exceeds one's cost basis, one is are subject to tax.
e.g.: If one were one of the first Bitcoin adopters and bought 5,000 bitcoins at $0.05. And last year when Bitcoin was valued at roughly $1,000 in paper currency, one traded 250 of them for a brand new Lamborghini.
The IRS would now say that one had a cost basis of $12.50 for those 250 coins. But you traded them for other property with a fair market value of $250,000. This means you have a taxable gain of $249,987.50.

Hmm, this last is a significant ruling indeed, that affects all the "Bitcoin Millionaires" out there– early adopters who purchased Bitcoins at a dollar or less.

By the way, this is not a new Law, . . . just an IRS interpretation of current Law, so it's retroactive. That's how things are done nowadays.


Law ??? Law ??? We don' need no steenkin' law.

DonDiego supposes this is gonna tighten quite a few knickers as word gets out.

Ref: IRS

Dn't know if it's a death nail in the coffin for bitcoin or not, but it sure ain't good news for the bitcoin crowd.

J

This was all explained to me by my accountant before I ever took possession of Bitcoins, except. From what I understand, Bitcoins ARE treated just like a foreign currency.

I made a trade in a foreign market and was paid in Bitcoins. The transfer of "funds" was very quick and cheap. More than 18% savings in transfer fees. The bulk of the bitcoins were sold for U.S. dollars at the same rate as the stock was sold. I will have to pay taxes on the profit of the sale of foreign stock.

The balance of Bitcoins gained value in comparison to the U.S. dollar for a while but later have fallen to about 5% less than when I acquired them. When I "sell" them I will pay taxes accordingly, or not. It is not a large amount.

Anyone who has chosen to do business with Bitcoins most likely already knew about the IRS rules, regulations and the Law. If they didn't, well, that's just stupid.

Apparently, the company that went bankrupt because of stolen bitcoins has found 200,000 of them in some place they wouldn't normally look. I guess that should help the price of the stock.