7 ms·

This isn't entirely related but I'd be interested if anyone knows the tax implications of _spending_ bitcoins. What happens if you receive bitcoins when they'r

This isn't entirely related but I'd be interested if anyone knows the tax implications of _spending_ bitcoins. What happens if you receive bitcoins when they're worth 10 USD and then spend them when they're worth 20 USD. What tax rules apply here?

ww520 14y ago
You pay tax with bitcoins?! On the serious note I think the tax implication is similar to foreign currency income/investment. (Sorry I don't know the ins and outs of international commerce and can't give you a definite answer.)
- zhoutong 14y ago
  Technically it's trivial to use Bitcoin to hide income. However NameTerrific is a GST-registered company so we (have to) openly collect taxes from Australian residents, even for Bitcoin payments.
  - betterunix 14y ago
    It is only trivial to hide income using Bitcoin if you never plan to spend your income. Otherwise, you have the same problem you have with paper money should you be audited or otherwise attract government attention.
  - zhoutongd 14y ago
    ZhouTong is a thief and con man. https://bitcointalk.org/index.php?topic=95738.0 https://bitcointalk.org/index.php?topic=95738.0 He WILL steal your money. Do not trust him.
zhoutong 14y ago
The same problem can happen with any foreign currency. So the normal foreign currency accounting rules apply. IF you're operating as a business: When you receive 1 BTC at 10, assuming your accounting currency is USD, you should record a 10 USD revenue and a 1 BTC cash inflow (shown as 10 USD in balance sheet). If the value of 1 BTC rises to 15, for example, you need to make an adjustment to the Unrealised Foreign Currency Gains and Losses account to reflect the change. The BTC cash account should be shown as 15 USD in balance sheet (with the same 1 BTC holdings) and there's an unrealised foreign currency gain of 5 USD (a temporary contra-expense account in equity section). When you finally spend the Bitcoin at 20 USD, close the "unrealised" account to the "realised" account, and increase the realised gains to 10 USD. Now you should have a 20 USD expense, 0 USD cash balance and a 10 USD realised foreign currency gain. That's 10 USD worth of "net" expense. So, 10 USD revenue and 10 USD "net" expense. Everything is balanced. That's 0 USD closed to P/L. IF you're a consumer: It should be treated as 10 USD capital gain because you disposed the asset at a higher value than the cost base. Equivalently, you can claim a capital loss if you dispose the asset at a lower value than the cost base. However, whether this is acceptable in your country depends on your actual circumstances.
- zhoutongd 14y ago
  ZhouTong is a thief and con man. https://bitcointalk.org/index.php?topic=95738.0 https://bitcointalk.org/index.php?topic=95738.0 He WILL steal your money. Do not trust him.
betterunix 14y ago
The same rules that apply to barter.

ww520 14y ago

You pay tax with bitcoins?! On the serious note I think the tax implication is similar to foreign currency income/investment. (Sorry I don't know the ins and outs of international commerce and can't give you a definite answer.)

zhoutong 14y ago
Technically it's trivial to use Bitcoin to hide income. However NameTerrific is a GST-registered company so we (have to) openly collect taxes from Australian residents, even for Bitcoin payments.
- betterunix 14y ago
  It is only trivial to hide income using Bitcoin if you never plan to spend your income. Otherwise, you have the same problem you have with paper money should you be audited or otherwise attract government attention.
- zhoutongd 14y ago
  ZhouTong is a thief and con man. https://bitcointalk.org/index.php?topic=95738.0 https://bitcointalk.org/index.php?topic=95738.0 He WILL steal your money. Do not trust him.

zhoutong 14y ago

The same problem can happen with any foreign currency. So the normal foreign currency accounting rules apply. IF you're operating as a business: When you receive 1 BTC at 10, assuming your accounting currency is USD, you should record a 10 USD revenue and a 1 BTC cash inflow (shown as 10 USD in balance sheet). If the value of 1 BTC rises to 15, for example, you need to make an adjustment to the Unrealised Foreign Currency Gains and Losses account to reflect the change. The BTC cash account should be shown as 15 USD in balance sheet (with the same 1 BTC holdings) and there's an unrealised foreign currency gain of 5 USD (a temporary contra-expense account in equity section). When you finally spend the Bitcoin at 20 USD, close the "unrealised" account to the "realised" account, and increase the realised gains to 10 USD. Now you should have a 20 USD expense, 0 USD cash balance and a 10 USD realised foreign currency gain. That's 10 USD worth of "net" expense. So, 10 USD revenue and 10 USD "net" expense. Everything is balanced. That's 0 USD closed to P/L. IF you're a consumer: It should be treated as 10 USD capital gain because you disposed the asset at a higher value than the cost base. Equivalently, you can claim a capital loss if you dispose the asset at a lower value than the cost base. However, whether this is acceptable in your country depends on your actual circumstances.

zhoutongd 14y ago
ZhouTong is a thief and con man. https://bitcointalk.org/index.php?topic=95738.0 https://bitcointalk.org/index.php?topic=95738.0 He WILL steal your money. Do not trust him.

betterunix 14y ago

The same rules that apply to barter.