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And then you need to pay taxes on the bitcoin used to pay the taxes! Well, only if you bought it a while back, in the early stages of the pyramid.

bitxbitxbitcoin 8y ago
You need to have paid taxes on the USD you use to pay taxes, too. Just saying.
- ucaetano 8y ago
  Not really. Paying the taxes with USD doesn't generate a taxable event. Paying with Bitcoin does. Sure, you could say "Technically, you'd pay taxes on earning those USD...", but anything said after "technically" is irrelevant to the discussion.
pishpash 8y ago
Isn't this exactly a way to collect taxes in a way that doesn't require somebody to recognize gains? They can just fork over some bitcoins to Ohio.
- meritt 8y ago
  No, it still triggers a taxable event. "In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability." [1] https://www.irs.gov/irb/2014-16_IRB https://www.irs.gov/irb/2014-16_IRB
  - holtalanm 8y ago
    i'm not so sure that pertains to actually paying your taxes, otherwise we would all be in an infinite loop of tax paying.
    - belltaco 8y ago
      You're not taxed on the amount you pay, but if you made capital gains on your BTC. You can think of it with the same way with shares. Lets say you bought Apple shares for $100 a while ago. To pay your taxes, you sell five of them at $200. You now realized capital gains(aka profit) of $500, so next year that money gets added to your taxable income. Not sure if it works for BTC, but for shares you can deduct losses till a limit and reduce your capital income. In the above example if you had sold at $50 to pay taxes, you can deduct the $250 from taxable income as a loss next year.
      - holtalanm 8y ago
        but with BTC, it would be significantly different, wouldn't it? I mean, you're not selling the BTC to pay your taxes in this case, you are directly paying your taxes with BTC. I'm highly doubting there would be any capital gains tax for this situation.
        basch 8y ago
        "In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability." It literally says that exchanging the BTC for your debt counts the same as selling it for USD and then paying your debt. You would get the exchange rate at the time of the transaction. If I bought a coin at 1k and pay my taxes with it when its at 2k, it then triggers a liability of 1k, on the gains from buying it to using it.
        holtalanm 8y ago
        so i pay my taxes with bitcoin. which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes infinite loop.

bitxbitxbitcoin 8y ago

You need to have paid taxes on the USD you use to pay taxes, too. Just saying.

ucaetano 8y ago
Not really. Paying the taxes with USD doesn't generate a taxable event. Paying with Bitcoin does. Sure, you could say "Technically, you'd pay taxes on earning those USD...", but anything said after "technically" is irrelevant to the discussion.

pishpash 8y ago

Isn't this exactly a way to collect taxes in a way that doesn't require somebody to recognize gains? They can just fork over some bitcoins to Ohio.

meritt 8y ago
No, it still triggers a taxable event. "In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability." [1] https://www.irs.gov/irb/2014-16_IRB https://www.irs.gov/irb/2014-16_IRB
- holtalanm 8y ago
  i'm not so sure that pertains to actually paying your taxes, otherwise we would all be in an infinite loop of tax paying.
  - belltaco 8y ago
    You're not taxed on the amount you pay, but if you made capital gains on your BTC. You can think of it with the same way with shares. Lets say you bought Apple shares for $100 a while ago. To pay your taxes, you sell five of them at $200. You now realized capital gains(aka profit) of $500, so next year that money gets added to your taxable income. Not sure if it works for BTC, but for shares you can deduct losses till a limit and reduce your capital income. In the above example if you had sold at $50 to pay taxes, you can deduct the $250 from taxable income as a loss next year.
    - holtalanm 8y ago
      but with BTC, it would be significantly different, wouldn't it? I mean, you're not selling the BTC to pay your taxes in this case, you are directly paying your taxes with BTC. I'm highly doubting there would be any capital gains tax for this situation.
      - basch 8y ago
        "In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability." It literally says that exchanging the BTC for your debt counts the same as selling it for USD and then paying your debt. You would get the exchange rate at the time of the transaction. If I bought a coin at 1k and pay my taxes with it when its at 2k, it then triggers a liability of 1k, on the gains from buying it to using it.
        holtalanm 8y ago
        so i pay my taxes with bitcoin. which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes, which get paid in bitcoin, which triggers more taxes infinite loop.