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IRS Rules Bitcoin Is Property (Not Currency)
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.
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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.
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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So, some agent of the "United States" claims that BTC are "property". Great. Send the Secretary of the Treasury a registered letter. Ask him, for the record, to state that the "United States" has a claim to this "property" and the nature of the claim and source of the claim in the Organic Laws of the United States, as set forth in Volume 1 of the United State Code. Demand a response within 60 days to give him and his 1000s of high dollar attorney's a chance to think about it. Demand a wet ink signature from the man in that office. See what comes of it. I bet nothing.
Put a fork in it.
i'm starting to hate this world of bullshit,
semiotic, tangential non sense. that is the
plan you know. engender the rabble with disgust
to render them, generally, amenable to slaughter,
ubiquitous. no one is the wiser and there are no
nuernberg type trials.
what were we talking about? oh yea, bit con.
.
Bap Kennedy (& Steve Earle) - Angel is the Devil
http://www.youtube.com/watch?v=A4-X35Skk5I
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here i have this list of entertaining links ....
.
Keynesian Economic Theory As Applied To Private Sector Independent Contracting
https://www.youtube.com/watch?v=dT1AHDjzcsQ
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R.L. Burnside-"It's Bad You Know" from "Come on In"
https://www.youtube.com/watch?v=9naBXjcAPNQ
.
fracking fracking
http://www.youtube.com/embed/Il-M6B_-a_U
.
The Rolling Stones - Memory Motel (with Lyrics)
http://www.youtube.com/watch?v=bE96fz6BWqk
.
.."got the MInd of a fool and ... use it well...
just a memory, and it used to mean so much to me..." k.r/m.j.
.
ROLLING STONES MOONLIGHT MILE IN HD W/LYRICS
http://www.youtube.com/watch?v=aGEw5B850a4
.
Is San Francisco New York?
http://nymag.com/news/features/san-francisco-techies-2014-3/index1.html
.
"...Whatever the Silicon Valley gold rush has done or will do, it’s already given us an entirely new species of yuppie mogul: the one who stockpiles bitcoin and speaks in hacker pidgin, the one who wears Uniqlo on a Gulfstream and obsesses over single-origin coffees. The kind, in other words, who plays the underdog even while sitting on top of the world."
I just bought a Tesla S for 176BTC (103K USD) with coins I bought in May 2012 for 1K USD. So my capital gains is 102K USD but there is not way the IRS could trace the BTC from the Tesla dealership back to me.... Right?
I just bought a flatscreen from Overstock dot com with 4BTC. Capitabl gains tax of 2K USD but there is no way the IRS can follow a "paper trail" from Overstock back to me.... Right?
IRS= suckers, I win!!!
But precious metals are taxed as collectibles; 28% flat rate regardless of holding period.
Ergo. BTC has a strong tax preference over PMs by the IRS. Huge tax break for long-term hold. Big Brother must like BTC a lot!
The current property I live in has me a a sole occupier , and it is leased.
From the owner at a rent of $1 a year for 500 years .
The lease agreement has a clause that does not state the amount to be paid except as to be mutually agreed by the parties at intervals of no less than 5 years or to continue at the previous level if no initiation for an change takes place.
A loan was granted to the former occupier at an amount of the agreed amount that the owner needed, and the interest rate set at bank base rate for 50 years with interest accruing, and an option to extend the maturity for a further 50 years and issued by a finance company established the day before off shore.
The lease offers all rights to maintain, change even demolish the proiperty and to pay all local state and other taxes due as if I was th owner.
We are both very happy at the savings involved
Bitcoin leasing might just become a new option.
Do not sell your bitcoins, lease them on a loan basis for 500 years.
So what does this mean? When Bitcoin rallies another 10,000%, am I going to have to report capital gains every time I trade my Bitcoin for an item on Overstock.com or get groceries?