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For anyone that has had their bitcoins for a little while, cashing them out to buy a car will incur a hefty capitol gains tax to do so.

baby 6y ago
Does it though? If you actually use bitcoin like a currency to purchase goods then I doubt these laws would work the same.
- Thrymr 6y ago
  Oh yes it does, according to the IRS: > Q16. Will I recognize a gain or loss if I exchange my virtual currency for other property? > A16. Yes. If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss. For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets. Source: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq...
  - chki 6y ago
    Which makes sense, right? Otherwise I'll declare my stock and property to be currency and directly exchange it at the dealership for a new car, avoiding the capital gain tax.
- ineedasername 6y ago
  Yep, same thing as investing in a foreign currency that increases relative to the USD. When you convert it into a purchase you are realizing a gain, which is taxed. Heck, even savings account interest is taxable.
seabass 6y ago
In this case you're not "cashing" them out, though. You are directly purchasing goods. Does that sort of thing still incur capital gains tax in the US?
- stale2002 6y ago
  > Does that sort of thing still incur capital gains tax in the US? Yes it does. It would be same as if you purchased a large amount of gold, and then exchanged the gold for a car, after gold had increased in price. In the gold situation, you would also pay capital gains, and the US treats crypto the same as property, in this regard.
- ineedasername 6y ago
  Still taxed. You're effectively selling them your Bitcoin for the car. Or think if it with any other currency: if you bought Yen as part of your investment portfolio and it increased relative to USD, you still have capitol gains when you cashed it out. Basically whenever you leave any financial position that increased in value for something not a financial asset then capitol gains are likely (there are exceptions)
- belltaco 6y ago
  Imagine if buying goods didn't incur capital gains. That'd mean you can resell the goods in new condition for a very small loss and get USD but save much more in taxes. IRS said a long time ago that crypto was like any other asset, like gold.

baby 6y ago

Does it though? If you actually use bitcoin like a currency to purchase goods then I doubt these laws would work the same.

Thrymr 6y ago
Oh yes it does, according to the IRS: > Q16. Will I recognize a gain or loss if I exchange my virtual currency for other property? > A16. Yes. If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss. For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets. Source: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq...
- chki 6y ago
  Which makes sense, right? Otherwise I'll declare my stock and property to be currency and directly exchange it at the dealership for a new car, avoiding the capital gain tax.
ineedasername 6y ago
Yep, same thing as investing in a foreign currency that increases relative to the USD. When you convert it into a purchase you are realizing a gain, which is taxed. Heck, even savings account interest is taxable.

seabass 6y ago

In this case you're not "cashing" them out, though. You are directly purchasing goods. Does that sort of thing still incur capital gains tax in the US?

stale2002 6y ago
> Does that sort of thing still incur capital gains tax in the US? Yes it does. It would be same as if you purchased a large amount of gold, and then exchanged the gold for a car, after gold had increased in price. In the gold situation, you would also pay capital gains, and the US treats crypto the same as property, in this regard.
ineedasername 6y ago
Still taxed. You're effectively selling them your Bitcoin for the car. Or think if it with any other currency: if you bought Yen as part of your investment portfolio and it increased relative to USD, you still have capitol gains when you cashed it out. Basically whenever you leave any financial position that increased in value for something not a financial asset then capitol gains are likely (there are exceptions)
belltaco 6y ago
Imagine if buying goods didn't incur capital gains. That'd mean you can resell the goods in new condition for a very small loss and get USD but save much more in taxes. IRS said a long time ago that crypto was like any other asset, like gold.