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>>You simply need to have supporting documentation to defeat an audit if the IRS audits your return and challenges to applicability of the capital gains rates.
by otoburb 13y ago
>>You simply need to have supporting documentation to defeat an audit if the IRS audits your return and challenges to applicability of the capital gains rates.
This is the crux of the matter: what supporting documentation will be sufficient for the IRS? As Silk Road and other black market operations show, it is not easy to trace transactions and ascertain ownership.
The flip side is that hopefully one can try to use the blockchain to "prove" to the IRS that even though coins may have been transferred to different addresses (example: cold storage address cycling), all such addresses in the chain were owned by the same owner which would substantiate and satisfy the IRS.
Fun times.
- gamblor956 13y agoThe easiest way to have proof would simply be not to transfer the coins to other addresses; if they remain in a single address then it's fairly obvious what the holding period should be. If you cycle the coins, you'd probably have to prove that you were the owner of all the addresses involved. The standard that applies to Silk Road is not the standard that applies to tax supporting documentation. The Silk Road is a criminal prosecution and thus is held to the highest standard in the land. For the most part, tax documentation merely needs to be reasonable.