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IRS Rules Bitcoin Is Property (Not Currency)

Tyler Durden's picture




 

After less than three months consideration, the IRS has issued its statement clarifying th etax treatment of Bitcoins (and other virtual currencies) before the April 15th Deadline. The finding, summarized, is that Vitual currencies will be treated as property (not as a currency) which, as WSJ notes, means an investor who buys bitcoin would typically have a capital gain or loss when it’s sold. The price of Bitcoin is rising modestly on this news...

 

As Bloomberg explains:

Today’s IRS guidance will provide certainty for investors, along with potential income-tax liability. Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop.

 

...

 

Under the IRS ruling, Bitcoin investors would be treated like stock investors. Bitcoins held for more than a year and then sold would pay the lower tax rates applicable to capital gains -- a maximum of 23.8 percent compared with the 43.4 percent top rate on property sold within a year of purchase.

 

...

 

For investors with losses, U.S. tax law allows taxpayers to subtract capital losses from any capital gains. They can also subtract up to $3,000 of capital losses a year from ordinary income.

As with stocks, Bitcoin dealers would be subject to different rules that wouldn’t allow for capital gains treatment.

Bitcoin miners would have to report their earnings as taxable income with a value equal to the worth on the day it was mined. If they mine as part of a business, they would have to pay payroll taxes as well.

And here is WSJ's Q&A:

How is virtual currency treated for federal tax purposes? 

Bitcoin and other virtual currencies are treated as property, not as a currency. Therefore, an investor who buys bitcoin would typically have a capital gain or loss when it’s sold but wouldn’t have foreign-currency gains and losses.

If a taxpayer receives a payment in virtual currency, is it considered income?

Yes, the fair-market value of the currency (in U.S. dollars) on the date the payment was received is considered to be income. For more information on exchange rates, see the notice.

Does a person who makes a payment using bitcoin have a gain or loss on the transaction?

Yes, typically. For example, say a person buys $5,000 of bitcoin, which then doubles in value. If she then uses the bitcoin to pay a $10,000 tuition bill, she could have a $5,000 taxable capital gain on the transaction.

This clarification means that people who use bitcoin in small amounts, such as to buy a meal, could face onerous record-keeping issues.

Is a person who “mines” a virtual currency considered to have received income?  

Yes, and if the taxpayer engages in mining as a trade or business, self-employment tax is often due.

Does virtual currency that’s paid by an employer in return for services meet the definition of wages for payroll-tax purposes?

Yes, and it’s also subject to income-tax withholding.

Must payments made in bitcoin be reported to the IRS? 

Yes, if they meet the requirements for information reporting on payments made in property. Typically, the threshold is payments of $600 or more.

Will taxpayers be penalized for having treated bitcoin transactions in a different manner before today’s notice?

They could be, especially if they underpayed tax or didn’t report income, or both. But the IRS noted that penalty relief “may be available” to persons who were required to file information reports but didn’t, if there’s a reasonable cause for the nonfiling.

 

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Tue, 03/25/2014 - 14:20 | 4591010 fonestar
fonestar's picture

MOAR BITCOIN!!!

 

Bitcoin will outlive your "IRS" and government!!

Tue, 03/25/2014 - 14:22 | 4591022 Hippocratic Oaf
Hippocratic Oaf's picture

Hard to swallow MOAR bad news, huh?

Tue, 03/25/2014 - 14:23 | 4591030 fonestar
fonestar's picture

Do you know why this "decision" hasn't effected Bitcoin price?

It's because America doesn't matter.

Tue, 03/25/2014 - 14:36 | 4591087 Pladizow
Pladizow's picture

Good luck to both sides on keeping track of these taxes!

Tue, 03/25/2014 - 14:37 | 4591098 DoChenRollingBearing
DoChenRollingBearing's picture

Yep, run yr BTC through a mixing service and see if someone will sell you gold for BTC!

Tue, 03/25/2014 - 14:55 | 4591191 StacksOnStacks
StacksOnStacks's picture

GET YOUR CBA NOW (CERTIFIED BITCOIN ACCOUNTANT)

Tue, 03/25/2014 - 14:57 | 4591197 Stackers
Stackers's picture

Would you claim capital gains or as a "collectible" like gold and silver ?

Tue, 03/25/2014 - 15:03 | 4591216 flacon
flacon's picture

Who the fucking hell is the "Eye Are Ess" to make any determinations over BitCoin! Fuck you tax men! 

(I don't own BitCoin, but I detest this sort of "tax" (THEFT)) Did any one at the IRS put their own money at risk for this "tax"? If you win you lose and if you lose you lose. Goddamned shit system we live in these days! 

Tue, 03/25/2014 - 15:32 | 4591348 linniepar
linniepar's picture

Only three truths in this world: death, taxes, and Barry Sotero's homosexuality.

Tue, 03/25/2014 - 17:19 | 4591773 Dead Man Walking
Dead Man Walking's picture

you forgot the fourth. His wife is a man.

Tue, 03/25/2014 - 18:46 | 4592046 smlbizman
smlbizman's picture

they will tax invisible non existence property

Tue, 03/25/2014 - 15:47 | 4591420 Unknown User
Unknown User's picture

This ruling looks unenforceable since BTC transactions are anonymous.

Tue, 03/25/2014 - 16:32 | 4591601 outamyeffinway
outamyeffinway's picture

The IRS may regret this when their data entry clerks protest at the thousands upon thousands of micro transactions they have to enter off of the Schedule C's. Well they should have some personnel they can pull from the ACA side of things considering how many people are signing up.

Wed, 03/26/2014 - 07:51 | 4593145 N2OJoe
N2OJoe's picture

Which is just another excuse to expand the beauracracy, Outa.

 

"The beauracracy is expanding to meet the needs of the expanding beauracracy."

Tue, 03/25/2014 - 16:34 | 4591605 fonestar
fonestar's picture

Well anonymity really just pertains to the users.  It's the ability to tie addresses to real people which is where any Bitcoin taxation attempt would become impossible.

Tue, 03/25/2014 - 14:57 | 4591198 fonestar
fonestar's picture

A fonestar is standing by!

ORDER NOW!!!!

Tue, 03/25/2014 - 15:21 | 4591297 eclectic syncretist
eclectic syncretist's picture

C'mon, you brown nosing fag.

Tue, 03/25/2014 - 16:27 | 4591579 fonestar
fonestar's picture

best you got?

Tue, 03/25/2014 - 15:11 | 4591261 August
August's picture

Just file a request with the NSA for your annual BTC transaction summary.

Tue, 03/25/2014 - 15:15 | 4591274 slightlyskeptical
slightlyskeptical's picture

But i thought all my transactions were confidential?

/s

Tue, 03/25/2014 - 17:12 | 4591744 fonestar
fonestar's picture

And how would they go about that moron?  Easy to talk shit with no facts to back it up isn't it?

Tue, 03/25/2014 - 14:38 | 4591103 fonestar
fonestar's picture

There's just no way any auditor can deal with the complexity involved in the Bitcoin network, the multiple addresses and address-to-person fiasco.  There's just no way anyone on Earth can deal with it.

Tue, 03/25/2014 - 14:44 | 4591135 Mr Pink
Mr Pink's picture

The IRS is kidding themselves if they think they can prove ownership of BTC. 

Tue, 03/25/2014 - 14:51 | 4591168 pods
pods's picture

The problem is that you cannot disprove ownership.

In Amerika, you are guilty until you prove innocence or they get bored assraping you, whichever comes last.

pods

Tue, 03/25/2014 - 14:54 | 4591188 fonestar
fonestar's picture

Disprove ownership?  Uh what?  Why would you even need to store your c0inz on your EDC laptop?  Pretty evident you're out of your depth discussing Bitcoin.  Leave it to the real virtual men here.

Tue, 03/25/2014 - 15:22 | 4591307 eclectic syncretist
eclectic syncretist's picture

Leave it to the NSA, or the hackers who got all of the GOX bitcoins.  What did the real men who had bitcoins in Mt. GOX get dumbass.  They got robbed!

Tue, 03/25/2014 - 16:41 | 4591624 fonestar
fonestar's picture

Who fucking cares?  Someone got robbed and someone else got rich as shit!  Why the fuck should fonestar care?

Tue, 03/25/2014 - 15:39 | 4591375 Mr Pink
Mr Pink's picture

So if you sell an oz of gold to a local coin dealer for $2000 you bought from a coin dealer for $800 are you going to report it?

Can you prove you didn't own it?

A lot of boating accident talk around here but when it comes to bitcoin then the almighty IRS is gonna git chu!

Tue, 03/25/2014 - 14:51 | 4591170 Theta_Burn
Theta_Burn's picture

When you spend it with a legitimate buiness, who will now need to comply via the IRS requiring a bitcoin user sign-up sheet.

To you guys it is intrinsic value, to the IRS its intrinsic property.

Tue, 03/25/2014 - 14:55 | 4591194 fonestar
fonestar's picture

Hey, those straws you were grasping?  Yeah, they're pressing sexual assault charges....

Tue, 03/25/2014 - 16:01 | 4591471 NidStyles
NidStyles's picture

You really do not get it, do you? Who do you think made the USD the defacto currency? It wasn't the government that forced people to adopt it. It was the IRS and taxation. 

This move by the IRS negates any real benefit of doing business with Bitcoins for all legitimate businesses. That means your economic fantasy has been and no further more is still dead on arrival. Bitcoin never had a chance because it's based on the very system that is flawed in the first place.

Tue, 03/25/2014 - 16:24 | 4591569 fonestar
fonestar's picture

Oh look, the fake anarchist!

Tue, 03/25/2014 - 17:01 | 4591700 NidStyles
NidStyles's picture

Hey anytime you want to chat about some Rothbard, Spooner, Marx, or anyone that wrote in the Libertaire, let me know. We can speak openly here all day long sir. 

Tue, 03/25/2014 - 21:37 | 4592542 BellyBrain
BellyBrain's picture

Anarcho-Capitalism is NOT anarchism: https://www.youtube.com/watch?v=ObTwbE9Dwm4

Tue, 03/25/2014 - 16:28 | 4591587 Matt
Matt's picture

All this does is create incentive for a software developer to create a tool for record keeping, for merging the blockchain records with a spreadsheet and annotating the transactions.

The benefits to the business are still:

1) irreversible (unless the business chooses to)

2) lower transaction fees than credit cards, etc.

3) built in record of all transactions, at least on a incoming/outgoing level, with redundant records stored worldwide

Tue, 03/25/2014 - 17:09 | 4591726 NidStyles
NidStyles's picture

Which is the exact opposite that the bitcoin fanatics claim bitcoin is. 

 

I've been around long enough to know a pump-and-dump mechanism when I see one, and it's based upon the value of the currency that you are exchanging into except priced in dollars. So no matter what, you are still buying into the dollar. Whether it be with real world goods or virtual goods, you are still exchanging your bitcoin for it's value measured in dollars. 

 

That is the intrinsic flaw with bitcoin. If you also factor in the IRS going jacked boot and making it impossible for you to trade cash for bitcoin tax free like you can with gold and silver, Bitcoin is fucked.

 

Educations are wonderful things. Fonestar either needs one, or he's a mole of sorts.  

Tue, 03/25/2014 - 19:02 | 4592105 FinalEvent
FinalEvent's picture

I'm into bitcoin and don't give a FUCK about the fiat value.

It all depends on if you die with cryptocurrencies or with fiat in the end.

1 ounce is 1 ounce, 1 BTC is 1 BTC (if both kept in private storage)

Tue, 03/25/2014 - 14:53 | 4591184 eclectic syncretist
eclectic syncretist's picture

Bitcoin is a scam against libertarians, and you are the the scammer in chief who should be dragged out into the street and beaten by everyone who has been or will be scammed by the bitcoin pealess shell game.

Tue, 03/25/2014 - 14:56 | 4591196 fonestar
fonestar's picture

Your mind is a scam perpetrated against empty spaces.

Tue, 03/25/2014 - 15:28 | 4591333 eclectic syncretist
eclectic syncretist's picture

Oh yeah!.....Well, that's just like....your opinion man.

http://www.youtube.com/watch?v=pWdd6_ZxX8c

Tue, 03/25/2014 - 15:20 | 4591295 Matt
Matt's picture

So, as a "Libertarian", you do not believe that people should be free to negotiate whatever currency they want for a transaction between two consenting parties?

Tue, 03/25/2014 - 15:25 | 4591317 eclectic syncretist
eclectic syncretist's picture

You can do whatever you like, you can throw all you fiat away or take a dump all over it for all I care.  What I don't like is hucksters scamming the good people of zero hedge, as phoneystar is attempting to do.

Tue, 03/25/2014 - 15:04 | 4591230 Jonas Parker
Jonas Parker's picture

Gee Mr. IRSman, there's just no way any auditor can deal with the complexity involved in the Bitcoin network, the multiple addresses and address-to-person fiasco.  There's just no way anyone on Earth can deal with it. Fonestar said so!

Uh, so does that let me off the hook?

Tue, 03/25/2014 - 17:13 | 4591745 Drifter
Drifter's picture

I don't think that aspect is addresed in the article, the ruling merely says how IRS views bitcoin, along with the usual "it's your obligation to report gains and losses". 

No, I don't see any way they can tie bitcoin transactions to a person just on wallet ID.

Not yet anyway.

Tue, 03/25/2014 - 14:26 | 4591042 BLOTTO
BLOTTO's picture

Warren Buffett on bitcoins:

.

Stay away from it. It's a mirage, basically. It's a method of transmitting money—a very effective way of transmitting money. You can do it anonymously and all that. A cheque is a way of transmitting money, too. Are cheques worth a whole lot of money?

I hope bitcoin becomes a better way of doing it. But you can replicate it a bunch of different ways, and it will be. The idea that it has some huge instrinsic value is just a joke in my view. There's dollars on both ends.

Tue, 03/25/2014 - 14:29 | 4591061 fonestar
fonestar's picture

Warren Buffett, "Stay away from Bitcoin, my buddies don't get their skim!"

Tue, 03/25/2014 - 14:33 | 4591073 DoChenRollingBearing
DoChenRollingBearing's picture

That means if I (quickly) buy some gold with some of my BTC I can take even further losses on my 1040!!

Too bad IRS!

Tue, 03/25/2014 - 15:00 | 4591211 fonestar
fonestar's picture

fonestar always smirk when people in the office talk about Buffett with reverence.  He's a has been, trillionaire's boy toy... chose a ukulele instead of a pipe to lead the sheep astray.

Tue, 03/25/2014 - 17:13 | 4591746 NidStyles
NidStyles's picture

Yet he's been wealthy for a long time, and you still aren't even wealthy yet. Sooo, that sort of tells me that you might be a bit angry and jealous of him..

Tue, 03/25/2014 - 19:04 | 4592122 Quus Ant
Quus Ant's picture

did you choose the pipe?

Tue, 03/25/2014 - 15:22 | 4591308 lordylord
lordylord's picture

As of now, Bitcoin is only a service Foney.  No way in the world that it becomes or allowed to become a currency to compete with the dollar.

Tue, 03/25/2014 - 14:35 | 4591069 One And Only
One And Only's picture

Warren Buffet says no one can value an internet company and if you try he'd flunk you - 1990

http://www.youtube.com/watch?v=nrSB1sLgWLE

Soooooo. Warren Buffet can't value Apple or Google but he can value bitcoin?

At one point Buffet also owned 130 ounces of silver....but it has no intrinsic value because you dig up from the Earth to bury it in the Earth somewhere else. Why did he own 130 million ounces?

Be careful of man who speaks with fork tongue.

 

Tue, 03/25/2014 - 14:39 | 4591105 McMolotov
McMolotov's picture

"By 2005 or so, it will become clear that the internet's impact on the economy has been no greater than the fax machine's." —Paul Krugman, 1998

Tue, 03/25/2014 - 15:25 | 4591304 The_Dude
The_Dude's picture

I may have to side with Paul on this one (though he remains an idiot in my book).

 

If we summed the new productive capacity with the loss (internet addicted generation, lower IQ's, zero attention span, divisive cultural artifacts, etc...etc)  I would say we might be net even to trending negative....Hate to say it but we need to figure out how to handle this thing before it tears us apart. Maybe it is just one more facet of the general cultural degradation but it sure seems to be helping to speed it along.

 

Now...back to my Bieber stream!!

Tue, 03/25/2014 - 15:27 | 4591325 lordylord
lordylord's picture

Intersting thought.  Does the internet do more harm than good?  It probably widens the Gaussian distribution with a huge negative skew.

Tue, 03/25/2014 - 17:47 | 4591877 machineh
machineh's picture

"By 2015 or so, it will become clear that Kurgman's impact on the economy has been no greater than a random gerbil's." — MH, 2014

Tue, 03/25/2014 - 14:39 | 4591106 BLOTTO
BLOTTO's picture

Agreed One.

.

Just interesting to read what the OofO has to say about bitcoins and try to disect his message.

Tue, 03/25/2014 - 14:52 | 4591177 LibertyBear
LibertyBear's picture

I don't think quoting Warren Buffet increases credibility.

Tue, 03/25/2014 - 15:37 | 4591365 Bunga Bunga
Bunga Bunga's picture

Buffet, he said it himself, invests only in businesses which an idiot can run. So it's very clear, that he can't invest into something which is a little bit more sophisticated and not to talk about a simple hashing algorithm. He will stay with his candy businesses until he dies.

Tue, 03/25/2014 - 14:39 | 4591104 Stoploss
Stoploss's picture

My guess would be if one declared a bitcoin ownerage, god forbid a profit, one could bet whats left of one's ass the IRS will be crawling straight up there with an electron microauditingoscope..

Tue, 03/25/2014 - 14:22 | 4591024 Cthonic
Cthonic's picture

in the meantime, get out yer TIN's and 1099's

Tue, 03/25/2014 - 14:36 | 4591085 Theta_Burn
Theta_Burn's picture

Not currency, but property, taxable, open to siezure, fines and late fees, in perpetuity.

Caught with your bit pecker in a vise because of the above? declare virtual bankrupcy.

Fooking rubes...

Tue, 03/25/2014 - 16:17 | 4591534 Philalethian
Philalethian's picture

"declare virtual bankrupcy."

Lol...way to funny!

Foneystar: "Hello spirit, I am spiritually dead."

Tue, 03/25/2014 - 14:59 | 4591207 Jumbotron
Jumbotron's picture

Cool...now each state can levy property tax on it.

Tue, 03/25/2014 - 16:15 | 4591524 DontGive
DontGive's picture

You are in every BTC thread with your links (shill alert?), which are written by people who can't wrap their mind around it. They are just writers banging out articles, in order to get paid in fiat.

Tue, 03/25/2014 - 16:21 | 4591555 LongBalls
LongBalls's picture

What did you expect. It's NOT PRIVATE!

Tue, 03/25/2014 - 16:36 | 4591606 Pickleton
Pickleton's picture

http://venturebeat.com/2014/03/23/yet-another-bitcoin-exchange-implodes-vircurex-will-freeze-accounts-tomorrow/

 

Another one bites the dust.  Another one bites the dust.  OW! and another one gone and another one gone and another one bites the dust.  HEY!

 

And here I thought Vircurex was a treatment for herpes.

Tue, 03/25/2014 - 14:22 | 4591018 Kaiser Sousa
Kaiser Sousa's picture

keep hope alive!

Tue, 03/25/2014 - 14:22 | 4591025 fonestar
fonestar's picture

When you have coinz you are the hope, the future, the light!

Tue, 03/25/2014 - 15:02 | 4591224 eclectic syncretist
eclectic syncretist's picture

Close your shit-hole, you turd molester.

Tue, 03/25/2014 - 14:24 | 4591032 digitlman
digitlman's picture

Like anybody would report their BTC to the IRS.

Tue, 03/25/2014 - 14:25 | 4591037 fonestar
fonestar's picture

Exactly.  What are they going to do?  Mandate who can download the Bitcoin client software?

Tue, 03/25/2014 - 15:04 | 4591232 eclectic syncretist
eclectic syncretist's picture

Like the NSA doesn't know every transaction you've ever made LOL.  And all the bitchcon transactions too, and they'll laugh their asses off when you get cleaned out or exposed for fraud.

Tue, 03/25/2014 - 16:39 | 4591615 TheFutureReset
TheFutureReset's picture

They simply don't have the resources to audit more than the most visible law benders. Dollars are much easier to track/trace and 99% of dollar misdeeds go unpunished/unaudited. Plus, the feds are incompetent. The market will soon find a way around the IRS. 

Keep transactions simple and small, and wait for the collapse. 

Tue, 03/25/2014 - 17:04 | 4591717 frenzic
frenzic's picture

They have unlimited resources as long as the petrodollar system survives. Sure there will be a problem of budgeting for the department but that never stopped the US government before now did it. Incompetent, you mean a bunch of knowitall children in a 6 billion dollar "market" or the guys that routinely fleece each and every adult (and getting away with it as well) in the entire country and abroad if need be?

Tue, 03/25/2014 - 19:23 | 4592173 TheFutureReset
TheFutureReset's picture

Of course the latter, homey. The know-it-all kids don't have the guns to your head. Which side are you on? 

I do like your qualification, "as long as the petrodollar system survives." And you are of the opinion that that will last forever? It's days are few due to that "market" you disdain, among other things. 

Tue, 03/25/2014 - 14:34 | 4591078 SilverRhino
SilverRhino's picture

Seriously ... fuck the IRS.    

I keep wondering why no hackers have distributed IRS agents' information.     

Tue, 03/25/2014 - 15:05 | 4591122 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

That is exactly what we need!  

A brave organization (like a big sispesystreetirregulars) to name names and give addresses out to us of ALL IRS agents, Congresscritters, cops, prosecutors, judges, etc.

EDIT: Add banksters...

They know all about us, we should know something about THEM.

Wed, 03/26/2014 - 02:01 | 4592959 JustUsChickensHere
JustUsChickensHere's picture

And published via Tor, BitTorrent and on Freenet so that the information can not be removed or censored.

Tue, 03/25/2014 - 14:51 | 4591167 Mr Pink
Mr Pink's picture

Not that I would ever even consider hiding capital gains from the IRS, what if a person, if they were so inclined, transferred their bitcoins to an exchange to an account registered under a fake name using a public wifi and traded them several times for several different altcoins and then sent them back to several new wallets?

Tue, 03/25/2014 - 15:24 | 4591315 Matt
Matt's picture

No worries, I'll just add a print out of the entire blockchain records to my tax filing, and claim a net capital loss of $100,000 each year. 

Tue, 03/25/2014 - 16:31 | 4591599 TheFutureReset
TheFutureReset's picture

Just wait, there will soon be an app for that. 

Tue, 03/25/2014 - 15:05 | 4591237 sessinpo
sessinpo's picture

 digitlman    Like anybody would report their BTC to the IRS.

--

Well, that can be said of any non digital transaction. Yet somehow people are smart eough to compare a companies inventories to revenues and see something isn't adding up.

Are  you digitlman or duhman?

Tue, 03/25/2014 - 20:49 | 4591985 deflator
deflator's picture

The IRS catches the easiest targets first, the ones with millions in assets and never claimed more than 35k in income in any year of their life.

 As far as the government being incompetent, many of their employees are but their machines are not. They have the best technology and when they are finished with it everybody else can have it.

 "The government is incompetent" meme is probably promulgated by the government.

Tue, 03/25/2014 - 14:25 | 4591041 1stepcloser
1stepcloser's picture

I rule the FRN toilet paper and not currency

Tue, 03/25/2014 - 14:25 | 4591044 Kaiser Sousa
Kaiser Sousa's picture

instead of ya'll out there tryin to reinvent the wheel, why dont u stop fighting 5000 years of history and the only 2 forms of REAL MONEY that gives u a chance or re-establishing true liberty, exiting the debt and death based currency paradigm and the graps of the MoneyChangers....

repent and go back to phyical Gold and Silver...

we'll pray 4 u....

dislclaimer:not really religous, used the religous context for effect...

Tue, 03/25/2014 - 14:27 | 4591056 fonestar
fonestar's picture

fonestar owns Bitcoin because it has the most gold-like properties of any currency ever conceived.  Why do gold bugs never speak about the systemic properties of gold as a currency?  fonestar owns gold because of its systemic properties, not because of "intrinsic value".

Tue, 03/25/2014 - 15:05 | 4591236 eclectic syncretist
eclectic syncretist's picture

Quit scamming people with libertarian values asshole.  Bitcoin is fiat imaginary value plain and simple.

Tue, 03/25/2014 - 15:19 | 4591294 Alethian
Alethian's picture

So are video games.

 

How's the video game industry doing again?

Tue, 03/25/2014 - 15:28 | 4591330 Matt
Matt's picture

So libertarians believe in freedom, as long as you only use gold for all transactions? No freedom to settle in anything both parties agree upon?

Tue, 03/25/2014 - 14:26 | 4591047 jubber
jubber's picture

They have now given it status.

Tue, 03/25/2014 - 14:27 | 4591051 ebworthen
ebworthen's picture

What, does the I.R.S. think I'm going to tell them I have Bitcoin anymore than Gold or Silver?  ROFLMAO!!!

"Tragic hard drvie/flash drive accident" added to "Tragic boating accident".

Fuck the I.R.S. and all of .gov.

Tue, 03/25/2014 - 14:36 | 4591089 DoChenRollingBearing
DoChenRollingBearing's picture

Hey, take the loss (sorry to hear about that, man) and write it off on yr taxes.

Tue, 03/25/2014 - 14:38 | 4591102 Cannon Fodder
Cannon Fodder's picture

No your hard drive was on the boat that sank during the accident...

There fixed it for ya... :)

Tue, 03/25/2014 - 15:34 | 4591357 ebworthen
ebworthen's picture

Thanks, good suggestion.  "We're gonna' need a bigger houseboat."

Tue, 03/25/2014 - 14:27 | 4591054 Meat Hammer
Meat Hammer's picture

Then the Feds will use the tax money to pay their bankster buddies back for the millions in transaction fees they lost from consumers using BTC instead of atm cards or credit cards. Perpetual circle jerk.

Here, Mr. and Mrs. US Citizen, let me shove my red, white, and blue fist up your rectum just a biiiiiiiiiit farther.  

Tue, 03/25/2014 - 14:31 | 4591058 Mercury
Mercury's picture

Nonetheless, it will be hard to track things bought with bitcoin that are priced only in bitcoin.

Tue, 03/25/2014 - 14:31 | 4591066 fonestar
fonestar's picture

Right now we still live in a dollar based world.  No arguing that reality.  The dollar needs to collapse first before we know how things are priced in physical gold, silver, Bitcoin, etc.

Tue, 03/25/2014 - 14:36 | 4591088 RabbitChow
RabbitChow's picture

IRS is blowing smoke.  No one will report transactions, especially for small amounts like a cup of coffee or a meal.  There are no 1099s issued for gains on redeeming bitcoin, especially on the foreign exchanges.  An exchange in Japan isn't going to follow some draconian task of sending out statements at the end of the year.  And what if the default currency is Euros, or Rupees, or Yen, or Yuan? 

Tue, 03/25/2014 - 14:45 | 4591142 Urban Redneck
Urban Redneck's picture

If they want to audit you- they aren't blowing smoke.  Since the burden of proof is on the taxpayer, and they can impose levies and sieze property to their heart's content.  Treating Bitcoin as property as opposed to currency simply the methods at their disposal to make you a BITCH of the IRS...

Tue, 03/25/2014 - 15:03 | 4591225 Theta_Burn
Theta_Burn's picture

What I posted up-thread..

And if you think it hurts when Glen the IRS man crawls up your ass, wait till you have to dig him out.

Property...not currency

 

Tue, 03/25/2014 - 15:06 | 4591238 BlindMonkey
BlindMonkey's picture

Good luck to anyone looking for a USB stick.  Totally unenforcable IMO.

Tue, 03/25/2014 - 15:30 | 4591341 Matt
Matt's picture

How do you prove that an address does not belong to you? I mean, proving ownership of an address is feasible, but proving non-ownership is impossible.

Tue, 03/25/2014 - 17:06 | 4591724 frenzic
frenzic's picture

you still get to pay up

Tue, 03/25/2014 - 17:16 | 4591758 sleigher
sleigher's picture

The IRS is a division of the International Monetary Fund and is not a government agency.  If you do not consent to do business with them then don't.  They are just a private corporation and no law can make you do business with them.  HJR 192 and all that goodness...  Remove consent.  Challenge jurisdiction.

Tue, 03/25/2014 - 14:37 | 4591099 vincent
vincent's picture

Is'nt currency property?

Is'nt  property currency?

Tue, 03/25/2014 - 15:00 | 4591206 Theta_Burn
Theta_Burn's picture

No, and

No...

Tue, 03/25/2014 - 14:38 | 4591101 Mr Giggles
Mr Giggles's picture

A boarderless currency, count me in.

Tue, 03/25/2014 - 14:40 | 4591110 fonestar
fonestar's picture

Okay you're in!  Giggle accross that border crossing.

Tue, 03/25/2014 - 14:39 | 4591107 Toxicosis
Toxicosis's picture

""Does virtual currency that’s paid by an employer in return for services meet the definition of wages for payroll-tax purposes?""

""Yes, and it’s also subject to income-tax withholding.""

 

So this then makes it a currency, not property, doesn't it?? 

You don't withold income tax on property, only currency right??

Tue, 03/25/2014 - 15:14 | 4591271 BlindMonkey
BlindMonkey's picture

If I get paid in food when I hold up a "will work for food" sign, does the IRS withhold my munchies?

Tue, 03/25/2014 - 15:55 | 4591453 TPTB_r_TBTF
TPTB_r_TBTF's picture

your employer will withhold the necessary munchies and pay the IRS using Legal Tender.

... unless your employer is an outlaw ....

Tue, 03/25/2014 - 17:19 | 4591768 sleigher
sleigher's picture

Wages are not taxable by law.  Just because everyone is convinced it is true doesn't mean it is true.

Tue, 03/25/2014 - 14:41 | 4591116 Pseudonymous
Pseudonymous's picture

I believe someone was asking about something like this a few days ago:

Hooker on Craigslist Bangkok now accepting Bitcoin

No other reason I'm posting this, and no endorsement of any kind.

Tue, 03/25/2014 - 14:42 | 4591120 fonestar
fonestar's picture

fonestar would buy that for a satoshi!

Tue, 03/25/2014 - 15:48 | 4591389 TPTB_r_TBTF
TPTB_r_TBTF's picture

you wonT buy anything with a satoshi, because the miners refuse to confirm transactions that small.

 

Ways which bitcoin transactions can fail:

A transaction with an output less than 0.00005430 is also a non standart transaction and this is also an obstacle to your transaction be confirmed
The transaction is too small (less than 5430 satoshi's)

 

Tue, 03/25/2014 - 14:41 | 4591117 mobius8curve
mobius8curve's picture

Why do people treat bitcoin like its some secret currency they can sneak around on the web and buy stuff clandestinely.

Sure the time being they will let you while the currency gains popularity calling it property like gold but be assured going forward it will be recognized as currency.

Then you will not buy or sell with it online without first being registered in the system:

Revelation 13:16-17  And he causeth all, the small and the great, and the rich and the poor, and the free and the bond, that there be given them a mark on their right hand, or upon their forehead;  (17)  and that no man should be able to buy or to sell, save he that hath the mark, even the name of the beast or the number of his name.

He who controls the internet will control the buyers and sellers.

Ask yourself why all the mom and pop stores are gone and only big retail giants are left :o)

 

Tue, 03/25/2014 - 16:45 | 4591648 Matt
Matt's picture

Does it still count if the name or number is different? If there are 1 million different cryptocurrencies, are they all the mark of the beast? What if you are not required to have them? What if it is purely voluntary, does it still meet the description?

Tue, 03/25/2014 - 17:46 | 4591870 mobius8curve
mobius8curve's picture

Those who control the web will control what virtual currency arises and who is allowed to use it :o)

Tue, 03/25/2014 - 14:45 | 4591144 ivana
ivana's picture

ha ha ha IRS will tax a bird in the sky if they could ... Every breath you take , Every move you make, Every bond you break, Every step you take, I'll be TAXING you ha ha ha

Tue, 03/25/2014 - 14:49 | 4591158 DB Cooper
DB Cooper's picture

So, on the other hand, I can claim my losses through Fed induced inflation/FRN debasement over the years?

Tue, 03/25/2014 - 16:46 | 4591652 Matt
Matt's picture

Does this mean I can claim losses on Satoshi Dice as Capital Losses?

Tue, 03/25/2014 - 14:56 | 4591185 Ignatius
Ignatius's picture

Amazing how fonestar can be conjured into existence with a headline.

A ZH btc article mimics bitcoin mining that way.

And there will only ever be 21,000,000 fonestar comments...

Tue, 03/25/2014 - 14:54 | 4591189 Non Passaran
Non Passaran's picture

Only an idiot would declare.
There must be a government web site where one can report Bitcoins stolen in a .. mining accident?

Tue, 03/25/2014 - 15:08 | 4591241 vincent
vincent's picture

CURRENCY   Money or other items used to facilitate transactions.

Money (currency) is considered personal property and personal property is part of a person's estate.

Leave it to the IRS to clear things up

Tue, 03/25/2014 - 15:09 | 4591256 Seize Mars
Seize Mars's picture

Income tax is unconstitutional.
I'm going to hold my breath while our "brave men in uniform" come to our rescue, honoring their oaths. Oh wait, I forgot, they're cowards.

Tue, 03/25/2014 - 15:10 | 4591257 Kirk2NCC1701
Kirk2NCC1701's picture

"Property", you say.  Fine...

We know from RE (Real Estate) that there is such a thing as an "Exchange in Kind", whereby potential taxation is suspended after the sale of one RE Property, pending the purchase of the next -- toward which the sales proceeds can be applied.  This amounts to a Tax Deferral in RE.  Given this well-established process etc, it means...

That Crypto-Currencies can potentially also be treated as a Tax Deferral, under the Exchange In Kind option.  IOW, assuming that I realize a Gain/Loss within the US/IRS jurisdiction -- which is not the case for 7 Billion people on earth -- I have to do the right tap-dance and admin paperwork, to benefit from this Tax Deferral. 

If... "On the other hand (thumb and four fingers)**" I live outside the US/IRS jurisdiction -- I'm one of the 'unlucky' 7 Billion, who do not enjoy IRS 'guardianship'.  Which means that this ruling is Irrelevant to me.

** A line used by Hawkeye in 4077 MASH.

Tue, 03/25/2014 - 16:22 | 4591561 TheFutureReset
TheFutureReset's picture

Like kind exchange has to be for similar items. If you use Bitcoin to buy a computer or whatever, this rule would not apply. But if you use it to buy gold or silver it would. Right? 

Tue, 03/25/2014 - 17:07 | 4591725 chemystical
chemystical's picture

Not true in this context with re to payment in kind aka in-kind payment.  The merchant is giving you something worth $1300 USD in exchange for 2 Btc (something else worth $1300 USD). 'Worth' is the in-kind you're looking for.

Similarly as an estate's executor, if I'm required to divide the estate equally between you and your sister, then I can give you the $100K Barbie collection and give your sister the $100K Ferarri, and there's nothing you can do about it.  That's a distribution in-kind and for the same reason.

Giving a laborer room and board in exchange for the labor is an in-kind payment.

IRS is very clear on that.

Tue, 03/25/2014 - 15:11 | 4591262 silverserfer
silverserfer's picture

Bitcoin-property of NSA finacial crimes divison. Subject to vaporization as soon as the sheeps need to be shorn.

Tue, 03/25/2014 - 15:25 | 4591319 slightlyskeptical
slightlyskeptical's picture

Most bitcoins were purchased with an electronic transfer from a reporting institution to a bitcoin exchange. Don't believe for a second that the IRS doesn't have a good idea about who is using and holding bitcoin. Having that initial entry means they will not leave you alone until they know all transactions have been reported. They will get your money and punsih those who use bitcoin to avoid taxes and regulation.

Of course if you are a Soveriegn citizen (/s) then you probably have nothing to worry about.

Tue, 03/25/2014 - 15:45 | 4591384 Drifter
Drifter's picture

There's no such thing as a "Sovereign citizen" status this govt will recognize and honor. 

You're more likely to be viewed as a terrorist, as several govt publications state.

Tue, 03/25/2014 - 16:14 | 4591519 slightlyskeptical
slightlyskeptical's picture

(/s) means sarcasm

Tue, 03/25/2014 - 15:34 | 4591352 Drifter
Drifter's picture

Good IRS ruling, bitcoin isn't a currency, it has no characteristics of a currency, it's in the bartering area just as gold, silver, or any other non-currency item would be.  I've often said it's like stock in some imaginary company, it has characteristics of a stock, not a currency.

Tue, 03/25/2014 - 15:53 | 4591432 echoes
echoes's picture

As one of the biggest bashers of bitcoin you'll ever meet, today i proudly stand side by side with bitcoiners to say--------> fuck you Control Freaks, it aint none of your business who i associate with and how i trade with them !!!

Tue, 03/25/2014 - 16:20 | 4591477 Kirk2NCC1701
Kirk2NCC1701's picture

In view of IRS' ruling that BTC is "Property", let's examine this via the Scientific Principle, to see if it passes the Spock Test of Logic:

 

IDEAL 

MONEY                                   FIAT                GOLD               BTC         PROPERTY

1. Finite Supply                          N                       Y                     Y              Y

  a. Short-term store of Value     Y                       Y                     Y              N (e.g. Detroit vs NY)

  b. Long-term store of Value      N                       Y                     ?              Y (on a long enough timeline...)

2. Portable                                 Y                        Y                    Y              N

3. Fungible                                 Y                        Y                     Y             N

4. Non-forgeable                        N                        Y                    Y              Y

5. Divisible                                 Y                       Y+N                 Y              N (not for commerce/retail)

6. Private                                  N                        ?                     Y              Y

7. Acceptance                            Y                     Y, limited        Y, v. limited   Y

8. Confiscation & Theft resistant                                                                 Gov

   a. If securely stored                Y                        Y                     Y              --

   b. If Carried on Person             N                      N                      Y              --

9. Durable                                 N                       Y                     Y+N           Y

10. Trans-national utility            N*                       Y                      Y             N

       * Must be converted, or conversion fee is charged upon acceptance

11.  Used to settle Bal. of Trade   Y                      Y                     N               Y

 

Logic says that, on the balance of criteria/parameters, BTC behaves more like Currency/Money than Property.

At best, it can be argued that it is a Virtual Asset, created with Labor+Energy, purchased with Fiat, and backed by Faith.

On the other hand, Fiat is created By Decree, purchased with Labor, and backed by Force.

p.s. It might also be an interesting philosophical and legal distinction to make between an Asset and Property, in case the IRS is using the latter as a euphemysm for the former.

Tue, 03/25/2014 - 19:11 | 4592137 sessinpo
sessinpo's picture

Let me simplify what is going on.

Since the DOJ or Congress has/is not addressing digital currency, entities such as the IRS are attempting to regulate bitcoin in a manner best for the IRS.

Thus definition/ruling puts the burden on retailers that accept bitcoin. The negative effect might be that retailers might shy away from bitcoin for not only tax purposes but for bankruptcy purposes since any bitcoin they own is an asset up for litigation as property.

Tue, 03/25/2014 - 16:04 | 4591478 hangemhigh77
hangemhigh77's picture

How about instead of everyone trying to figure out how this affects their BitCoin purchases and how they will pay the IRS, how about some anger, as in who the fuck do these criminal bankster fuckers think they are. Maybe it's time to take some kind if stand. What's next these motherfuckers walk into our houses and go through the wife's jewelry? This is the fucking mafia and instead of trying to figure out how to pay them why don't we figure out how to get the fuck RID of them??

Tue, 03/25/2014 - 17:06 | 4591722 TPTB_r_TBTF
TPTB_r_TBTF's picture

... as if it would be possible to get rid of the mafia, lol

 

The only way to get rid of the old mafia is to form a new mafia which is stronger.

New mafia, same as the old mafia.

Tue, 03/25/2014 - 16:25 | 4591570 Pancho Villa
Pancho Villa's picture

I think that this means that any business that accepts bitcoins would need to keep track of their value on the day it accepted them. And then file a gain or loss based on their value the day they were spent. In other words, it would be an accounting nightmare.

Tue, 03/25/2014 - 17:16 | 4591757 chemystical
chemystical's picture

hardly an insurmountable task for any business - particularly one with even a modicum of IT, and it's mostly a forgone conclusion that a business that accepts crypto falls into that category.

March 22: sold antique chair for 15 Btc.

March 23: sold antique commode for 200 Ltc.

etc.

Those cryptos values on those days are easily trackable in real time (as they'd have to be so you knew how many to crypto in which to price the mdse) or at the end of year.

same for tracking basis and realized gain/loss if they didn't immediately convert the crypto to fiat.

 

Tue, 03/25/2014 - 16:33 | 4591603 mijev
mijev's picture

Does this mean that banks will let me take out a mortgage to buy bitcoins?

Tue, 03/25/2014 - 16:38 | 4591613 Duc888
Duc888's picture

 

 

 

Hey, all you guys are looking at this the wrong way!!!     :)

 

This means IRS endorses bitcoin.

 

/sarcasm

Tue, 03/25/2014 - 16:49 | 4591663 bluskyes
bluskyes's picture

If you purchase bitoin, is it subject to sales tax?

Tue, 03/25/2014 - 16:55 | 4591685 highwaytoserfdom
highwaytoserfdom's picture

Yea IRS  does not report beneficial owners or

Double Irish With A Dutch Sandwich intellectual property rights assigned by bit coin informed ..... resistance to ternary Amazingly ignorant k street kleptomaniacs. 

http://www.youtube.com/watch?v=gy2RgjIIZyA

"The Rothschilds, and that class of money-lenders of whom they are the representatives and agents -- men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest -- stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved." by: Lysander Spooner
(1808-1887) Political theorist, activist, abolitionist
Source: "No Treason #6" (1870)
Tue, 03/25/2014 - 17:18 | 4591767 highwaytoserfdom
highwaytoserfdom's picture

Meet the new boss
Same as the old boss

 

 

"Won't Get Fooled Again"

We'll be fighting in the streets
With our children at our feet
And the morals that they worship will be gone
And the men who spurred us on
Sit in judgement of all wrong
They decide and the shotgun sings the song

I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I'll get on my knees and pray
We don't get fooled again

The change, it had to come
We knew it all along
We were liberated from the fold, that's all
And the world looks just the same
And history ain't changed
'Cause the banners, they are flown in the next war

I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I'll get on my knees and pray
We don't get fooled again
No, no!

I'll move myself and my family aside
If we happen to be left half alive
I'll get all my papers and smile at the sky
Though I know that the hypnotized never lie
Do ya?

There's nothing in the streets
Looks any different to me
And the slogans are replaced, by-the-bye
And the parting on the left
Are now parting on the right
And the beards have all grown longer overnight

I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I'll get on my knees and pray
We don't get fooled again
Don't get fooled again
No, no!

Yeaaaaaaaaaaaaaaaaaaaaaaaaah!

Meet the new boss
Same as the old boss

Tue, 03/25/2014 - 18:26 | 4591976 Yen Cross
Yen Cross's picture

   This law is largely unenforceable. It's designed to make regular currency type transactions/purchases more difficult for BTC users, but I doubt it will have much of an impact on the price of BTC.

   There's a huge off the books barter market out there, and it's growing.

Tue, 03/25/2014 - 20:49 | 4592412 TheFutureReset
TheFutureReset's picture

When you increase the investment needed to produce (or in this case purchase) an asset, making it relatively more scarce relative to demand, it should be bullish for prices.

It definitely will make it more volatile, by delaying purchase or selling until a market signal. I think that's the goal of this. Bitcoin has shown signs of stability at the current prices. TPTB can't quite talk shit about it as volatile if it stick to a range. 

Tue, 03/25/2014 - 18:28 | 4591991 blindman
blindman's picture

forward guidance consists of a six shooter
loaded all around in a game of russian roulette
where the players have been psychopharmecueticaly
disembodied to know not what they ask and request
nothing more than a seat at the table, with one
wish. please shoot me in the head, who ever
i might be?
the irs can do that to a human mind.

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