7 ms·

Should this be regarded as capital gains from currency speculation, when it comes to taxation, or how does something like this look to a tax attorney or account

by kmfrk 13y ago

Should this be regarded as capital gains from currency speculation, when it comes to taxation, or how does something like this look to a tax attorney or accountant?

ph0rque 13y ago
This might help: http://www.bitcointax.info/ http://www.bitcointax.info/
- Codhisattva 13y ago
  Wow. That's an exhaustive discussion. +1
  - nwatson 13y ago
    Not exhaustive enough. From the link: "Miners of Bitcoin face a host of unique tax issues that are outside the scope of this discussion." If I were mining I'd want to know the tax and legal implications, and there are no good sources out there from what I understand. The most burning questions: (1) for a miner based in the U.S., does the BTC miner realize a short-term gain the moment a bitcoin is awarded? or can they defer all gains until perhaps a year+ after mining and realize the whole sale as a long-term gain? (2) If short-term gains are due upon mining award, and the value at the time of award is US$1000/BTC, and the tax due on short-term gain would be US$300, and then BTC crashes to be worth $10/BTC before the miner sells the coin and never recovers, is the miner left holding the bag on the $300 short-term tax bill? (Similar things happened to stock option exercisers in the dot-com bust, people who held their exercised stock.) (3) Does tax treatment differ for solo- and pool-mining? I can see pool-mining being treated as offering a service to the pool, and any awards are immediately taxable as revenue, whereas in solo-mining perhaps one could argue the award isn't realized until one actually sells the BTC.
    - tokenizer 13y ago
      I am not an expert, and am definitely bias, but I think (1) is that all gains are deferred until market. If you're paying a 15% tax on bitcoins mined, then it would stand to reason they would tax you at market, aka, when you exchange that bitcoin for USD. This is me thinking in terms as bitcoin being a commodity however. If this isn't the case, I'd imagine they could structure it like the structure it like reserves and resources, (http://goo.gl/MkDFNX http://goo.gl/MkDFNX). I'm a webmaster for hundreds of mining companies in Canada, and any of them who choose to trade on the TSX or TSX.V need to post this information. I don't know what the tax situation on that is however.
    - gamblor956 13y ago
      1) It depends on whether the mining reward is treated as compensation. It probably should be considered compensation, in which case it is taxable ordinary income when received. However, on a subsequent sale, it should be taxable gain only to the extent that the sales price exceeds the value already taxed as ordinary income. 2) If the value of BC crashes between the time earned and the time the tax is paid....then yes, you're SOL and still owe taxes on the value of the BC when received. However, usually there is a corresponding deduction to help alleviate that. 3) Pool mining almost certainly is taxed differently, since it is more akin to investment income than to compensation income.
- logfromblammo 13y ago
  Wow. I had no idea that complying with the tax laws would be so much more difficult than just ignoring them and concealing your Bitcoin activities from anyone beholden to the authorities. If there is anyone in Congress with even a quarter of a brain, they might want to take a look at how to keep Bitcoin users in the system. Otherwise, as more people read that guide, say "WTF?!", and decide to pay it all as much heed as "use tax" on interstate retail transactions, they will be forced to lean more heavily on debasement of the currency they can control.
  - jrochkind1 13y ago
    Hint: Complying with tax laws is much more difficult than just ignoring them and concealing your activities from anyone beholden to the authorities without bitcoin too. That's not unique to bitcoin, I'm surprised you were surprised. Ask any small business owner around tax time whether filing your taxes is more 'difficult' than simply... not filing your taxes. At least unless-until you get caught and prosecuted, then you might re-evaluate which path involved more 'difficulty', depending on how difficult you find fines, hearings, trials, jail, etc.
    - logfromblammo 13y ago
      Your hint is simply not true. Traditional banking rules require attachment of identities to accounts, and automatically trigger reporting to the tax authority for any significant movement of cash. Any account can be frozen and seized with an official-looking piece of paper. The system has tax compliance built into it. Bitcoin has no such requirements. It is actually possible to be secretly, anonymously wealthy. Your accounts cannot be seized or frozen unless you give up your private keys. It is true that people evade taxes in other ways. These often involve foreign accounts in countries that do not strictly comply with tax-reporting demands. Assuming the tax authority cares, it would also have to present evidence, which is somewhat harder to get out of the Bitcoin system. And it is also true that for most people with dollar income, taxes are as simple as filing 1040EZ. There is no need to calculate basis or holding period or do a million lookups of tax code minutiae. If you make $50000 a year, compliance is easy and the risk is low. If you buy something with 10BTC, you have to hire an accountant to strictly comply with the law.
a3voices 13y ago
It is capital gains if it appreciates in value and is traded for anything else (dollars, euros, gold, real estate, livestock, etc.)
gsharon 13y ago
The government would have to consider Bitcoins as a currency for it to be taxed like a currency. Right now it has no status identified for legal purposes so no way to tax it. I am sure that several governments are looking in to it as we speak. Death and taxes
- deleted 13y ago
  [deleted]
- raverbashing 13y ago
  I don't think that's how it works. Tax over selling a property are not dependent on the property (ok, it depends sometimes, like real estate) but in principle they exist regardless of the nature of the property.
- steven2012 13y ago
  The government can tax anything it wants. For example, barter exchanges are taxable by the government, even if no actual money changed hands. They would just put a dollar figure on the barter, and then tax it accordingly. Bitcoin doesn't have to be a currency in order for the government to tax any gains made on its sale or transfer.
  - Blue_Hole 13y ago
    Government can tax anything they want. Even the babysitter and making change from a stranger.
    - logfromblammo 13y ago
      Attempting to strictly enforce tax on such transactions would probably cost more than any revenue generated.
      - penguindev 13y ago
        ... and the government cares about that why?
navyrain 13y ago
It should be noted that all we can know about an arbitrary transfer like this is BTC was moved. We do not know if ownership of said BTC changed; people can own many bitcoin addresses.
- mkramlich 13y ago
  Agreed. One of the many wonderful elegant qualities of Bitcoin. It's actually a very public way of transferring value between endpoints but in a way that lets you "tune" the tradeoffs to just the right mix between privacy/anonymity and full-disclosure, to taste. You can't do that with government/bank/fiat systems.
drzaiusapelord 13y ago
This would be capital gains.
smtddr 13y ago
Probably capital gains, like striking it big in the stock-market. e.g., someone selling a bunch of Apple stock they purchased back before iPods became popular. Can you even imagine trying to file this on your taxes? Unless you're a mega-corp, the first thing that will happen is that within 24hrs of the deposit, your bank would call you to say how much they appreciate you using $BANK_NAME for your banking needs and assign you a personal banker that you can reach at anytime to answer any questions. You'll probably also be sent flowers & a mug & all kinds of swag. They'll send you a birthday & holiday cards too..... then a few days later the police will show up....
- kmfrk 13y ago
  Don't the FBI still belong under Treasury for counterfeiting practice? I wonder what their jurisdiction is, when it comes to bitcoins as currency. In terms of tipping off authorities, it's just a matter of finding the right bank to do business with: https://en.wikipedia.org/wiki/Hsbc#Money_laundering https://en.wikipedia.org/wiki/Hsbc#Money_laundering. :)
- desbest 13y ago
  Yes the police do show up asking you where you got the money from. And if you can't say, they take the money off you.

by kmfrk 13y ago

Should this be regarded as capital gains from currency speculation, when it comes to taxation, or how does something like this look to a tax attorney or accountant?

ph0rque 13y ago

This might help: http://www.bitcointax.info/ http://www.bitcointax.info/

Codhisattva 13y ago
Wow. That's an exhaustive discussion. +1
- nwatson 13y ago
  Not exhaustive enough. From the link: "Miners of Bitcoin face a host of unique tax issues that are outside the scope of this discussion." If I were mining I'd want to know the tax and legal implications, and there are no good sources out there from what I understand. The most burning questions: (1) for a miner based in the U.S., does the BTC miner realize a short-term gain the moment a bitcoin is awarded? or can they defer all gains until perhaps a year+ after mining and realize the whole sale as a long-term gain? (2) If short-term gains are due upon mining award, and the value at the time of award is US$1000/BTC, and the tax due on short-term gain would be US$300, and then BTC crashes to be worth $10/BTC before the miner sells the coin and never recovers, is the miner left holding the bag on the $300 short-term tax bill? (Similar things happened to stock option exercisers in the dot-com bust, people who held their exercised stock.) (3) Does tax treatment differ for solo- and pool-mining? I can see pool-mining being treated as offering a service to the pool, and any awards are immediately taxable as revenue, whereas in solo-mining perhaps one could argue the award isn't realized until one actually sells the BTC.
  - tokenizer 13y ago
    I am not an expert, and am definitely bias, but I think (1) is that all gains are deferred until market. If you're paying a 15% tax on bitcoins mined, then it would stand to reason they would tax you at market, aka, when you exchange that bitcoin for USD. This is me thinking in terms as bitcoin being a commodity however. If this isn't the case, I'd imagine they could structure it like the structure it like reserves and resources, (http://goo.gl/MkDFNX http://goo.gl/MkDFNX). I'm a webmaster for hundreds of mining companies in Canada, and any of them who choose to trade on the TSX or TSX.V need to post this information. I don't know what the tax situation on that is however.
  - gamblor956 13y ago
    1) It depends on whether the mining reward is treated as compensation. It probably should be considered compensation, in which case it is taxable ordinary income when received. However, on a subsequent sale, it should be taxable gain only to the extent that the sales price exceeds the value already taxed as ordinary income. 2) If the value of BC crashes between the time earned and the time the tax is paid....then yes, you're SOL and still owe taxes on the value of the BC when received. However, usually there is a corresponding deduction to help alleviate that. 3) Pool mining almost certainly is taxed differently, since it is more akin to investment income than to compensation income.
logfromblammo 13y ago
Wow. I had no idea that complying with the tax laws would be so much more difficult than just ignoring them and concealing your Bitcoin activities from anyone beholden to the authorities. If there is anyone in Congress with even a quarter of a brain, they might want to take a look at how to keep Bitcoin users in the system. Otherwise, as more people read that guide, say "WTF?!", and decide to pay it all as much heed as "use tax" on interstate retail transactions, they will be forced to lean more heavily on debasement of the currency they can control.
- jrochkind1 13y ago
  Hint: Complying with tax laws is much more difficult than just ignoring them and concealing your activities from anyone beholden to the authorities without bitcoin too. That's not unique to bitcoin, I'm surprised you were surprised. Ask any small business owner around tax time whether filing your taxes is more 'difficult' than simply... not filing your taxes. At least unless-until you get caught and prosecuted, then you might re-evaluate which path involved more 'difficulty', depending on how difficult you find fines, hearings, trials, jail, etc.
  - logfromblammo 13y ago
    Your hint is simply not true. Traditional banking rules require attachment of identities to accounts, and automatically trigger reporting to the tax authority for any significant movement of cash. Any account can be frozen and seized with an official-looking piece of paper. The system has tax compliance built into it. Bitcoin has no such requirements. It is actually possible to be secretly, anonymously wealthy. Your accounts cannot be seized or frozen unless you give up your private keys. It is true that people evade taxes in other ways. These often involve foreign accounts in countries that do not strictly comply with tax-reporting demands. Assuming the tax authority cares, it would also have to present evidence, which is somewhat harder to get out of the Bitcoin system. And it is also true that for most people with dollar income, taxes are as simple as filing 1040EZ. There is no need to calculate basis or holding period or do a million lookups of tax code minutiae. If you make $50000 a year, compliance is easy and the risk is low. If you buy something with 10BTC, you have to hire an accountant to strictly comply with the law.

a3voices 13y ago

It is capital gains if it appreciates in value and is traded for anything else (dollars, euros, gold, real estate, livestock, etc.)

gsharon 13y ago

The government would have to consider Bitcoins as a currency for it to be taxed like a currency. Right now it has no status identified for legal purposes so no way to tax it. I am sure that several governments are looking in to it as we speak. Death and taxes

deleted 13y ago
[deleted]
raverbashing 13y ago
I don't think that's how it works. Tax over selling a property are not dependent on the property (ok, it depends sometimes, like real estate) but in principle they exist regardless of the nature of the property.
steven2012 13y ago
The government can tax anything it wants. For example, barter exchanges are taxable by the government, even if no actual money changed hands. They would just put a dollar figure on the barter, and then tax it accordingly. Bitcoin doesn't have to be a currency in order for the government to tax any gains made on its sale or transfer.
- Blue_Hole 13y ago
  Government can tax anything they want. Even the babysitter and making change from a stranger.
  - logfromblammo 13y ago
    Attempting to strictly enforce tax on such transactions would probably cost more than any revenue generated.
    - penguindev 13y ago
      ... and the government cares about that why?

navyrain 13y ago

It should be noted that all we can know about an arbitrary transfer like this is BTC was moved. We do not know if ownership of said BTC changed; people can own many bitcoin addresses.

mkramlich 13y ago
Agreed. One of the many wonderful elegant qualities of Bitcoin. It's actually a very public way of transferring value between endpoints but in a way that lets you "tune" the tradeoffs to just the right mix between privacy/anonymity and full-disclosure, to taste. You can't do that with government/bank/fiat systems.

drzaiusapelord 13y ago

This would be capital gains.

smtddr 13y ago

Probably capital gains, like striking it big in the stock-market. e.g., someone selling a bunch of Apple stock they purchased back before iPods became popular. Can you even imagine trying to file this on your taxes? Unless you're a mega-corp, the first thing that will happen is that within 24hrs of the deposit, your bank would call you to say how much they appreciate you using $BANK_NAME for your banking needs and assign you a personal banker that you can reach at anytime to answer any questions. You'll probably also be sent flowers & a mug & all kinds of swag. They'll send you a birthday & holiday cards too..... then a few days later the police will show up....

kmfrk 13y ago
Don't the FBI still belong under Treasury for counterfeiting practice? I wonder what their jurisdiction is, when it comes to bitcoins as currency. In terms of tipping off authorities, it's just a matter of finding the right bank to do business with: https://en.wikipedia.org/wiki/Hsbc#Money_laundering https://en.wikipedia.org/wiki/Hsbc#Money_laundering. :)
desbest 13y ago
Yes the police do show up asking you where you got the money from. And if you can't say, they take the money off you.