3 ms·

What's interesting here is that bitcoin is both an "investment" and "currency" (since you can pay for [some] goods and services with btc directly). From the "c

What's interesting here is that bitcoin is both an "investment" and "currency" (since you can pay for [some] goods and services with btc directly). From the "currency" point of view - exchange rate (FX) gains/losses technically only apply to officially recognized foreign currencies. So that is an interesting can of worms. If I buy bitcoin at price point X, it goes up to X+Y, but instead of selling it I use that Y to pay for something - was that Y a taxable gain?

mhluongo 10y ago
The IRS has already released guidance on this [1]. It might be interesting to think about, but right now it's straightforward in practice. IANAL, etc. Edit: Well, for some definition of straightforward :) [1] - https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan...
GrinningFool 10y ago
The IRS views crypto currency as property. In that context, they provided this recently: https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan... Which links to: https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf TL;DR - it's not currency, it's property, and as taxed as such in all ways (including recognizing gain/loss). Specifically re: your question: > Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property? > A-6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain.
VLM 10y ago
They can be an income source if you mine, too. Even more fun, if you mine back in the old days when difficulty was 3-digits, and then sell years later, they can be a long term capital gain.
omouse 10y ago
Canadian govt apparently treats bitcoin as an asset. I wonder how that affects your taxes if the price goes lower than you bought it for; do you treat it as a depreciation in assets and are allowed to pay less tax?

mhluongo 10y ago

The IRS has already released guidance on this [1]. It might be interesting to think about, but right now it's straightforward in practice. IANAL, etc. Edit: Well, for some definition of straightforward :) [1] - https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan...

GrinningFool 10y ago

The IRS views crypto currency as property. In that context, they provided this recently: https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan... Which links to: https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf TL;DR - it's not currency, it's property, and as taxed as such in all ways (including recognizing gain/loss). Specifically re: your question: > Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property? > A-6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain.

VLM 10y ago

They can be an income source if you mine, too. Even more fun, if you mine back in the old days when difficulty was 3-digits, and then sell years later, they can be a long term capital gain.

omouse 10y ago

Canadian govt apparently treats bitcoin as an asset. I wonder how that affects your taxes if the price goes lower than you bought it for; do you treat it as a depreciation in assets and are allowed to pay less tax?