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 Bitcoins
 IRS says bitcoins are property not currency
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rayg50
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2083 Posts
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NYC, NY
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Shadow Spirit 750DC

Posted - 03/26/2014 :  8:09 AM                       Like
I think the Q&A makes it a bit long to copy but the full article:

http://finance.yahoo.com/news/r-say...5947019.html

The Internal Revenue Service announced on Tuesday that bitcoin should be viewed and taxed as property, giving a little clarity to the shifting regulatory landscape of virtual currency.

Despite the fact that many users treat bitcoin like a regulated currency, "it does not have legal tender status in any jurisdiction," the agency said.

That means that employers who choose to pay wages in bitcoins will have to report those wages just like any other payment made with property, and bitcoin income will be subject to the normal federal income withholding and payroll taxes.

Shortly after the announcement, Senator Tom Carper, Democrat of Delaware, praised the decision by the I.R.S. "The Internal Revenue Service's guidance today provides clarity for taxpayers who want to ensure that they're doing the right thing and playing by the rules when utilizing bitcoin and other digital currencies," he said.

Bitcoin, the computer-driven virtual currency that has gained momentum since it first popped up in 2009, has presented challenges for regulators. It has attracted a growing following of users and merchants, but it has no central bank and no government oversight.

In the wake of the collapse of one of the largest online exchanges for buying and selling bitcoin last month, governments around the world have stepped up their efforts to figure out a way to protect consumers against fraud and other illegal activities.


rayg50
Male Moderator
2083 Posts
[Mentor]


NYC, NY
USA

Honda

Shadow Spirit 750DC

Posted - 03/26/2014 :  8:11 AM
quote:
governments around the world have stepped up their efforts to figure out a way to protect consumers against fraud and other illegal activities.

Translation - they want a piece of the action. They can't tax it if they don't define and attempt to regulate it.
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James R. Davis
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GoldWing 1500

Posted - 03/26/2014 :  9:18 AM Follow poster on Twitter  Join poster on Facebook as Friend  
Actually, the IRS has done bitcoin a relatively good service.

It has provided guidance along with recognition of value.

The people with the most problems relative to the guidelines are bitcoin miners. This will cause some of them to go out of business as the bitcoins they mine must now be treated with tax consequences and the cost of mining is already so high that many bitcoin mining rigs do not generate enough in the form of bitcoins to offset the cost of electricity to run the rigs. Add taxes and some of them simply don't break even. (Of course, if the price of bitcoins goes back up a few hundred dollars per, taxes are tolerable.

Holding those bitcoins, like an investor does, for a year plus a day changes the taxes due as a result of sale to capital gains instead of income. Big difference.

Winners may well be those who lost money in their buying and selling of bitcoins - this, particularly since the major bitcoin market correction this year. Those losses, it now appears (at least to me), are eligible for declarations as losses and, thus, are eligable for tax deductions.

As to bitcoins being viewed as a currency or not ... several governments are, in fact, attempting to create their own form of bitcoins to be used as currency. Iceland, for example, created the Auroracoin and has just launched a campaign to distribute them to its citizens (those who are interested). On the first day of distribution the market value of the Auroracoins fell by 50% - against the bitcoin!

It did not go 'worthless' as many had feared. Note, please, that the benchmark 'currency' used in valuation measurements is the bitcoin.

Spain is considering doing the same.

Unlike our IRS, Denmark declared that gains from the sale of bitcoins are NOT taxable, and that losses are NOT tax deductible.

If nothing else, bitcoins have changed the world's perception of 'currency'.

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