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If you do, how do you figure out if the investment appreciated or depreciated? I mean, if I use BTC as a currency to buy things, I don't understand how I would

If you do, how do you figure out if the investment appreciated or depreciated? I mean, if I use BTC as a currency to buy things, I don't understand how I would evaluate every purchase at the end of the year to figure out whether I owe capital gains.

AlexandrB 7y ago
This is why most people don’t buy hamburgers with securities and why you’re gonna have a bad time come tax season.
zielmicha 7y ago
You can imagine you are converting BTC to dollars right before purchase. If you had 1 BTC worth $1000 at the beginning of the year and then 6 months later (when it was worth $1500) bought something with it - you earned $500 in capital gains. (Not saying this is the current law, but that method seems to make sense)
PeterisP 7y ago
It's certainly possible - one way would be to do like some people who do some casual stock trading where you record all the transactions in an excel sheet with the amounts and dates, and then submit the appropriate reporting to IRS. Similar measures apply if you do significant amounts of barter; e.g. if you as a farmer trade a truckload of produce for an old vehicle without any cash involved, then you may have (all kinds of legal caveats apply) to appraise the transaction at some dollar value and justify that appraisal. For bitcoin it's a bit simpler than barter since just taking daily reference prices from a major exchange is an objectively reasonable method of pricing. It's not that hard, but takes some work and skill - it may be prudent to hire a certified accountant to do that for you properly. In any case, the fact that in some circumstances the reporting is labor-intensive, or expensive, or unclear isn't a valid excuse to not do it. You can ask IRS or a CPA for assistance, and if you do your best then even if IRS eventually disagrees with something, then it's going to just be a correction (which may go in both directions).

AlexandrB 7y ago

This is why most people don’t buy hamburgers with securities and why you’re gonna have a bad time come tax season.

zielmicha 7y ago

You can imagine you are converting BTC to dollars right before purchase. If you had 1 BTC worth $1000 at the beginning of the year and then 6 months later (when it was worth $1500) bought something with it - you earned $500 in capital gains. (Not saying this is the current law, but that method seems to make sense)

PeterisP 7y ago

It's certainly possible - one way would be to do like some people who do some casual stock trading where you record all the transactions in an excel sheet with the amounts and dates, and then submit the appropriate reporting to IRS. Similar measures apply if you do significant amounts of barter; e.g. if you as a farmer trade a truckload of produce for an old vehicle without any cash involved, then you may have (all kinds of legal caveats apply) to appraise the transaction at some dollar value and justify that appraisal. For bitcoin it's a bit simpler than barter since just taking daily reference prices from a major exchange is an objectively reasonable method of pricing. It's not that hard, but takes some work and skill - it may be prudent to hire a certified accountant to do that for you properly. In any case, the fact that in some circumstances the reporting is labor-intensive, or expensive, or unclear isn't a valid excuse to not do it. You can ask IRS or a CPA for assistance, and if you do your best then even if IRS eventually disagrees with something, then it's going to just be a correction (which may go in both directions).