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I really don't think its that simple. Do you get taxed when dollars deflate ? do you claim a loss when dollars inflate? nope you really don't have to go in an

I really don't think its that simple. Do you get taxed when dollars deflate ? do you claim a loss when dollars inflate? nope you really don't have to go in and out of USD with crypto currency .. you never have to touch USD again. sure they can try auditing your assets vs your salary and come up with some bullshit number you will then have to fight, but there will be many ways to come up with how much you owe and what if you elect to get your salary in crypto currency? if that currency inflates what taxes are you paying? hmm lots of down votes. didn't think my statements were that offensive or ridiculous :) nor am i a "Bitconian" really own 0.2 of BTC. Simply trying to understand what IRS is doing here..

daveguy 9y ago
You don't claim a loss when dollars inflate because dollars are the official currency of the US. Any other asset (BTC, fiat, etc) is assessed on it's value relative to USD. If you sell back to USD you owe on the difference -- whether you do it all at once or one purchase at a time. If you get paid in crypto then you owe income tax for its value at the time of salary payment. If your salary is specified in BTC you should be prepared to pay lots of tax when you are paid. If it is specified in USD but paid in BTC then accounting will be easier. I hope you have a good accountant and a good lawyer, especially if you are one of those the IRS is investigating.
ska 9y ago
Here is something simple. You don't get to decide what BTC is for tax purposes. That is decided by whatever country or countries you are tax resident. If, for example, they decide your transactions are a deemed disposition an an asset, you owe capital gains tax on it. It really is that simple.
davidu 9y ago
Forex traders do on their positions when they realize a gain or loss. So yes.
- SonicSoul 9y ago
  ok im no accountant so maybe i just don't understand it the way i thought i did, but in this case FX traders are using a currency like an asset you buy and sell. but what if you earn money in that currency and never exchange it for any other currency just use it for life. the government would literately have to audit your savings account and proclaim that you owe X because your savings went up in value (and im not talking about interest paid by bank, i'm talking about just buying power of underlying currency). that is no different than owning a gold necklace and government taxing you on it because gold went up in price. I don't think this is happening right now
  - deleted 9y ago
    [deleted]
  - sbov 9y ago
    > when they realize a gain or loss. Holding bitcoin while it goes up in value isn't realizing a gain or loss.
  - amdavidson 9y ago
    They are not taxing bitcoin this way either, nor do they for a stock share that you own. You're taxed on the realized gain (or loss) when you sell the asset. The same as you are when you convert a currency back into USD.
  - maxander 9y ago
    Its worth pointing out that when you spend Bitcoin (or other currency), that is the same as selling it. I don't know what you mean by "use it for life"- yes, you can hold onto Bitcoin (or gold or whatever) and not get taxed, but as long as its sitting under your mattress it doesn't do you any good regardless. There's no way to use the value to get anything else without getting taxed.
  - s73ver_ 9y ago
    No. To the US Government, there is no other currency than the dollar. If you are a US Citizen, and working in the US, then you are using US Dollars. Everything else would be an asset. So if you are getting paid in BTC, that, to them, would be the same as you being paid in an equivalent amount of USD, then purchasing that much BTC. When you buy something using BTC, that would be the same as selling that amount of BTC, and then spending the USD.
maxander 9y ago
Is that how it works? Then I'll just ask to be paid in pounds rather than dollars and therefore avoid all U.S. taxes. Brilliant! That's not how it works, with Bitcoin or any other asset.
- SonicSoul 9y ago
  not sure I understand the analogy. i am not saying you don't get taxed with bitcoin. you still pay income tax, sales tax when you use them etc. but when your dollars gain in value due to deflation, do you pay tax on that ? seems that is what we're talking about here. btc gaining value.
  - daveguy 9y ago
    You can't simply claim you are a bitcoinian and now all of your income and assets are referenced to BTC. You are still subject to the currency of your resident country. That is the basis of value reference. Not bitcoin. Edit: if you bought it, but haven't sold it you haven't realized a profit and don't have to pay taxes on the gains yet, but you definitely have to pay taxes on the income as Bitcoin. If you are buying everything with Bitcoin you have just created an accounting/auditing nightmare for yourself, because you owe additional taxes on asset appreciation every time you "use" it.
  - cortesoft 9y ago
    Taxes are paid in dollars, so when your dollars change value because of inflation or deflation, your taxes will go up or down by the same amount because they are being paid in the same currency. A dollar can never inflate or deflate relative to itself. You seem to be trying to make the analogy of bitcoin being a currency, so a better comparison would be to look at tax law for foreign currencies. Luckily, the IRS puts out documents about that very thing: https://www.irs.gov/pub/int_practice_units/fcu_cu_c_18_2_1_04.pdf https://www.irs.gov/pub/int_practice_units/fcu_cu_c_18_2_1_0... Now, whether bitcoin is a currency or an asset is not fully settled, although the IRS treats it as an asset, not a currency: https://www.irs.gov/newsroom/irs-virtual-currency-guidance https://www.irs.gov/newsroom/irs-virtual-currency-guidance
mullen 9y ago
You might be the very person that the OP is talking about. You bring up topics that were resolved years ago in tax law and think they are new topics. > I really don't think its that simple. Do you get taxed when dollars deflate ? do you claim a loss when dollars inflate? Are you trying to argue that Bitcoin is on the same footing as USD, because it is not. Bitcoin is treated like gold or any other asset. It has a value when you acquire it and it has a value when you sell it. This value is in USD as far as the IRS is concerned. > you really don't have to go in and out of USD with crypto currency .. you never have to touch USD again. sure they can try auditing your assets vs your salary and come up with some bullshit number you will then have to fight, but there will be many ways to come up with how much you owe Your Bitcoins are worth a specific value at any moment in time. Again, when you buy it, it is worth X amount of value and when you sell it, it is worth Y amount of value. That value is in USD. Do the math like you bought or sold gold or silver. > and what if you elect to get your salary in crypto currency? if that currency inflates what taxes are you paying? Simple. You are paid X amount in USD and that is given to you in Bitcoin. Your employer is writing in their ledger that they paid you X amount of USD. If you get your paycheck in gold or silver or Bitcoin is irrelevant. Your value is in USD as far as the IRS is concerned and you and your employer will pay taxes on that.
- deleted 9y ago
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stult 9y ago
>Do you get taxed when dollars deflate ? do you claim a loss when dollars inflate? No, because there was no taxable event. For income to be taxed, it has to be realized. Realization can be a tricky concept, but it basically means when the income is earned or when a non-cash asset is exchanged for cash. By law and under IRS regulations, the US dollar is the functional currency for US taxpayers, which means it is the final currency by which all taxable income must be measured. You don't recognize any gains or losses on its fluctuations because it is itself the measuring stick for gains and losses. Another way to look at it is this: as soon as you receive a dollar, you have realized income and you cannot be forced to realize income on the same asset again if there has been no change in ownership and there has been no change in its dollar value (which there can never be for a dollar unless the Fed or Congress do something really whacky). And this makes sense. Your tax burden is measured in dollars, so it scales and declines in tandem with the value of the dollar. If the dollar deflates, your tax burden increases relatively, but your income in dollars was worth more anyway. And, in the regular course of events, there shouldn't be that much currency fluctuation in the single year over which you incur and pay taxes anyway. >and what if you elect to get your salary in crypto currency? if that currency inflates what taxes are you paying? This is actually extremely common with stock options. People accept equity in lieu of cash payment. The tax code taxes "income from whatever source derived," which is basically a roundabout way of saying literally anything can be income if it has value, including stock options or crypto currency. Unlike stock options though, the income on crypto would need to be recognized immediately because the value is realized immediately (you get taxed on stock options when you exercise them). Similarly though, if you were paid in crypto and then the crypto declined in value, you could recognize a loss on that once you sold the crypto. And just to clarify since you don't seem very familiar with tax law, losses are good for tax purposes because you can net them against gains to offset taxable income. So it's not all bad.
- SonicSoul 9y ago
  thanks for this! I appreciate the thoughtful response. Unlike stock options though, the income on crypto would need to be recognized immediately because the value is realized immediately (you get taxed on stock options when you exercise them)...Similarly though, if you were paid in crypto and then the crypto declined in value, you could recognize a loss on that once you sold the crypto. so the part that's not covered here is when you hold crypto, it gains in value, but you don't sell it to USD. That was my only point with this crazy thread.. At what point do you get hit with capital gains? Is it when you buy a boat with bitcoin? They will charge you sales tax, and then figure out your capital gains based on the boat value vs your purchase price of btc?
deleted 9y ago
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daveguy 9y ago

You don't claim a loss when dollars inflate because dollars are the official currency of the US. Any other asset (BTC, fiat, etc) is assessed on it's value relative to USD. If you sell back to USD you owe on the difference -- whether you do it all at once or one purchase at a time. If you get paid in crypto then you owe income tax for its value at the time of salary payment. If your salary is specified in BTC you should be prepared to pay lots of tax when you are paid. If it is specified in USD but paid in BTC then accounting will be easier. I hope you have a good accountant and a good lawyer, especially if you are one of those the IRS is investigating.

ska 9y ago

Here is something simple. You don't get to decide what BTC is for tax purposes. That is decided by whatever country or countries you are tax resident. If, for example, they decide your transactions are a deemed disposition an an asset, you owe capital gains tax on it. It really is that simple.

davidu 9y ago

Forex traders do on their positions when they realize a gain or loss. So yes.

SonicSoul 9y ago
ok im no accountant so maybe i just don't understand it the way i thought i did, but in this case FX traders are using a currency like an asset you buy and sell. but what if you earn money in that currency and never exchange it for any other currency just use it for life. the government would literately have to audit your savings account and proclaim that you owe X because your savings went up in value (and im not talking about interest paid by bank, i'm talking about just buying power of underlying currency). that is no different than owning a gold necklace and government taxing you on it because gold went up in price. I don't think this is happening right now
- deleted 9y ago
  [deleted]
- sbov 9y ago
  > when they realize a gain or loss. Holding bitcoin while it goes up in value isn't realizing a gain or loss.
- amdavidson 9y ago
  They are not taxing bitcoin this way either, nor do they for a stock share that you own. You're taxed on the realized gain (or loss) when you sell the asset. The same as you are when you convert a currency back into USD.
- maxander 9y ago
  Its worth pointing out that when you spend Bitcoin (or other currency), that is the same as selling it. I don't know what you mean by "use it for life"- yes, you can hold onto Bitcoin (or gold or whatever) and not get taxed, but as long as its sitting under your mattress it doesn't do you any good regardless. There's no way to use the value to get anything else without getting taxed.
- s73ver_ 9y ago
  No. To the US Government, there is no other currency than the dollar. If you are a US Citizen, and working in the US, then you are using US Dollars. Everything else would be an asset. So if you are getting paid in BTC, that, to them, would be the same as you being paid in an equivalent amount of USD, then purchasing that much BTC. When you buy something using BTC, that would be the same as selling that amount of BTC, and then spending the USD.

maxander 9y ago

Is that how it works? Then I'll just ask to be paid in pounds rather than dollars and therefore avoid all U.S. taxes. Brilliant! That's not how it works, with Bitcoin or any other asset.

SonicSoul 9y ago
not sure I understand the analogy. i am not saying you don't get taxed with bitcoin. you still pay income tax, sales tax when you use them etc. but when your dollars gain in value due to deflation, do you pay tax on that ? seems that is what we're talking about here. btc gaining value.
- daveguy 9y ago
  You can't simply claim you are a bitcoinian and now all of your income and assets are referenced to BTC. You are still subject to the currency of your resident country. That is the basis of value reference. Not bitcoin. Edit: if you bought it, but haven't sold it you haven't realized a profit and don't have to pay taxes on the gains yet, but you definitely have to pay taxes on the income as Bitcoin. If you are buying everything with Bitcoin you have just created an accounting/auditing nightmare for yourself, because you owe additional taxes on asset appreciation every time you "use" it.
- cortesoft 9y ago
  Taxes are paid in dollars, so when your dollars change value because of inflation or deflation, your taxes will go up or down by the same amount because they are being paid in the same currency. A dollar can never inflate or deflate relative to itself. You seem to be trying to make the analogy of bitcoin being a currency, so a better comparison would be to look at tax law for foreign currencies. Luckily, the IRS puts out documents about that very thing: https://www.irs.gov/pub/int_practice_units/fcu_cu_c_18_2_1_04.pdf https://www.irs.gov/pub/int_practice_units/fcu_cu_c_18_2_1_0... Now, whether bitcoin is a currency or an asset is not fully settled, although the IRS treats it as an asset, not a currency: https://www.irs.gov/newsroom/irs-virtual-currency-guidance https://www.irs.gov/newsroom/irs-virtual-currency-guidance

mullen 9y ago

You might be the very person that the OP is talking about. You bring up topics that were resolved years ago in tax law and think they are new topics. > I really don't think its that simple. Do you get taxed when dollars deflate ? do you claim a loss when dollars inflate? Are you trying to argue that Bitcoin is on the same footing as USD, because it is not. Bitcoin is treated like gold or any other asset. It has a value when you acquire it and it has a value when you sell it. This value is in USD as far as the IRS is concerned. > you really don't have to go in and out of USD with crypto currency .. you never have to touch USD again. sure they can try auditing your assets vs your salary and come up with some bullshit number you will then have to fight, but there will be many ways to come up with how much you owe Your Bitcoins are worth a specific value at any moment in time. Again, when you buy it, it is worth X amount of value and when you sell it, it is worth Y amount of value. That value is in USD. Do the math like you bought or sold gold or silver. > and what if you elect to get your salary in crypto currency? if that currency inflates what taxes are you paying? Simple. You are paid X amount in USD and that is given to you in Bitcoin. Your employer is writing in their ledger that they paid you X amount of USD. If you get your paycheck in gold or silver or Bitcoin is irrelevant. Your value is in USD as far as the IRS is concerned and you and your employer will pay taxes on that.

deleted 9y ago
[deleted]

stult 9y ago

>Do you get taxed when dollars deflate ? do you claim a loss when dollars inflate? No, because there was no taxable event. For income to be taxed, it has to be realized. Realization can be a tricky concept, but it basically means when the income is earned or when a non-cash asset is exchanged for cash. By law and under IRS regulations, the US dollar is the functional currency for US taxpayers, which means it is the final currency by which all taxable income must be measured. You don't recognize any gains or losses on its fluctuations because it is itself the measuring stick for gains and losses. Another way to look at it is this: as soon as you receive a dollar, you have realized income and you cannot be forced to realize income on the same asset again if there has been no change in ownership and there has been no change in its dollar value (which there can never be for a dollar unless the Fed or Congress do something really whacky). And this makes sense. Your tax burden is measured in dollars, so it scales and declines in tandem with the value of the dollar. If the dollar deflates, your tax burden increases relatively, but your income in dollars was worth more anyway. And, in the regular course of events, there shouldn't be that much currency fluctuation in the single year over which you incur and pay taxes anyway. >and what if you elect to get your salary in crypto currency? if that currency inflates what taxes are you paying? This is actually extremely common with stock options. People accept equity in lieu of cash payment. The tax code taxes "income from whatever source derived," which is basically a roundabout way of saying literally anything can be income if it has value, including stock options or crypto currency. Unlike stock options though, the income on crypto would need to be recognized immediately because the value is realized immediately (you get taxed on stock options when you exercise them). Similarly though, if you were paid in crypto and then the crypto declined in value, you could recognize a loss on that once you sold the crypto. And just to clarify since you don't seem very familiar with tax law, losses are good for tax purposes because you can net them against gains to offset taxable income. So it's not all bad.

SonicSoul 9y ago
thanks for this! I appreciate the thoughtful response. Unlike stock options though, the income on crypto would need to be recognized immediately because the value is realized immediately (you get taxed on stock options when you exercise them)...Similarly though, if you were paid in crypto and then the crypto declined in value, you could recognize a loss on that once you sold the crypto. so the part that's not covered here is when you hold crypto, it gains in value, but you don't sell it to USD. That was my only point with this crazy thread.. At what point do you get hit with capital gains? Is it when you buy a boat with bitcoin? They will charge you sales tax, and then figure out your capital gains based on the boat value vs your purchase price of btc?

deleted 9y ago

[deleted]