posted by
LaminatorX
on Wednesday March 26 2014, @08:40AM
from the you-know-you've-arrived-when dept.
from the you-know-you've-arrived-when dept.
gishzida writes:
Reuters reports, "Wading into a murky tax question for the digital age, the Internal Revenue Service said on Tuesday that virtual currencies such as Bitcoin are to be treated as property for tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency," the IRS said in a statement."
Better put that BTC wallet in a mattress.
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IRS: Virtual Currencies are Taxable
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(Score: 1) by That_Dude on Wednesday March 26 2014, @09:09AM
that virtual currencies will be taxed? Seems kind of hypocritical to me that they aren't recognizing it as a currency while raking in the dough. It's economic snobbery I tell you!
(Score: 5, Informative) by Thexalon on Wednesday March 26 2014, @09:16AM
Regardless of whether "virtual currency" is in fact a currency, your virtual currency holdings are definitely assets. Non-cash assets can be taxed - for example, you pay taxes on any real estate you own. They can and do also factor in transactions involving securities, commodities, and foreign currency when determining how much you owe them.
Every task is easy if somebody else is doing it.
(Score: 4, Informative) by VLM on Wednesday March 26 2014, @09:19AM
A simplification. If you read it, and I had to because of some financial dealings, mining is income.
Finally I can start my taxes. At least the had the decency to publish before apr 14th.
(Score: 1) by mwvdlee on Wednesday March 26 2014, @09:24AM
So basically, just like recording your own music to a digital file, mining bitcoins is not taxable.
And just like selling digital files of your own music recordings, selling bitcoins is taxable.
(Score: 5, Interesting) by VLM on Wednesday March 26 2014, @10:04AM
Not as I interpret it, no.
The mining has to be declared as income at market rate at the time of mining.
When I software mined, my coins had a total market value of a few cents, a rounding error. I assure you they didn't exchange for much and the 5000 BTC pizza is no myth. So I think I'm all good. However, if I ASIC mined 100 coins today (I'm not into that, but, in theory...), that's a substantial amount of income to declare this year.
Buy and sell is a mere cap gain under cap gain rules, or so they say.
The more important question is now that its categorized, how is the IRS going to require documentation? I certainly can claim long term capgains out of the blue, but if audited how do I prove it? There is some safety in just declaring the whole thing as taxable misc income, I believe no possible audit outcome could involve anything other than a small refund check coming back to me.
I software mined on a machine that hasn't physically existed for years and I certainly have no access and no multiple year old backups. How can I prove in court if it became necessary that someone else did not mine and then pay me income for "whatever" as opposed to the transfer came from a miner that no longer exists but I claim was once mine? And there's a handful of coins I had that spent time living on a mobile phone wallet that no longer exists, lived on a machine I do still have control over, went to my own version of cold storage for awhile, went to an account I control on coinbase... it seems very tricky to prove its long term capgains and not regular income.
Luckily for me its hobby sized money and not my bread and butter. Those guys in the biz must be tearing their hair out over the .gov getting in the way. Providing only half guidance is worse than none at all. As a small amount windfall from hobby screwing around, I personally plan to declare the whole dollar amount from selling on coinbase last fall as plain old taxable income, but to each their own.
(Score: 1) by compro01 on Wednesday March 26 2014, @11:13AM
AFAICT, mining is income IFF and only when you convert it to dollars or some other usual currency.
(Score: 5, Informative) by VLM on Wednesday March 26 2014, @11:39AM
The IRS seems to disagree with you:
http://www.irs.gov/pub/irs-drop/n-14-21.pdf [irs.gov]
Q-8: Does a taxpayer who “mines†virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
A-8: Yes, when a taxpayer successfully “mines†virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.
So when you receive or gain control over (aka create) the BTC is when you declare it as income at the market rate. Doesn't seem open to interpretation. On the other hand if you're in a pool, you're not liable for tax until you gain control over your share of the pool, and at the instant your share is "yours" then you pay tax on its dollar equivalent.
This is fairly intuitive. If you paid taxes on it when you spent it, they'd call it a sales tax not an income tax.
(Score: 5, Interesting) by Koen on Wednesday March 26 2014, @09:28AM
So, what does this mean for InterStellar Kredit (ISK) in EVE Online? Due to PLEX (Pilot's License Extention) it has a real-world value.
Next, what does this mean for spaceships in EVE, since due to ISK and PLEX they have a real-world value?
Then, what does this mean for WoW gold? Officially it has no real world value, but due to gold farmers and black market it has.
Will they tax a virtual Vorpal Sword? An avatar?
On the other hand: what is the difference between Bitcoins and a number in the database of an officially licensed bank?
/. refugees on Usenet: comp.misc [comp.misc]
(Score: 2, Interesting) by Anonymous Coward on Wednesday March 26 2014, @09:36AM
If any of those items are exchanged for cash, you should pay tax when you sell them.
(Score: 3, Informative) by VLM on Wednesday March 26 2014, @10:16AM
The taxation stuff is moderately interesting, but the real excitement is we have a whole civil law structure oriented around ownership and exchange of assets... so that ship in Eve is an asset with a dollar value, and its destruction could very well involve IRL lawsuits. And not just destruction in the course of normal play, but double crossing secret agent stuff, and the games owners nerfing a feature. The EULA must be interesting.
Also I haven't played EVE since 2006 but when I did, they had something of an unregulated commodities market in game trading assets which apparently now hold real value. One aspect of my gameplay in noob land was buying ground up asteroids cheap at the end of the USA day at a depressed price and re selling the commodities to anyone thru the day especially before the USA players started playing. Guaranteed money maker, although not much, and was kind of boring. Anyway I guess statute of limitations has expired but I theoretically owe cap gains on my commodity trading of real world assets in Eve back in '06.
On a meta issue I never understood those guys who would grind asteroids and then sell when everyone else was selling at the end of the day, and the builders who always bought at the start of their day. Why do you guys like buying high and selling low? So I'd do the opposite. Its much like the housing market or retail stocks, J6P only buys those after they go up, and only sells them after they've gone down. Which is why they're poor.
(Score: 0) by Anonymous Coward on Wednesday March 26 2014, @12:39PM
I'm running out of time to do my taxes.
Someone meet me in lowsec, I need to lose a fleet of battleships.
(Score: 5, Interesting) by Dale on Wednesday March 26 2014, @01:02PM
If I buy a rock for $5 and later sell it for $7 I owe the IRS tax on the $2 gain (long term or short term based on when I bought and sold).
If I do someone's taxes (CPA here) and they fix my car in lue of payment I still have to claim income on the fair market value of the services I received ($500 car repair for doing the taxes for example).
Bit coin is no different.
If I buy a bitcoin for $600 and later sell it for $800 I would owe tax on the $200 gain.
If for doing the mining I gain a coin worth $800 I have $800 in income that has to be claimed in the year I got the coin (not when converted to cash).
There are not new rules needed for this stuff, they are just applying the existing rules and concepts to it.
Documentation and tracking are a whole different headache. I can't imagine the fun of trying to document buying a coin for $700 and then spending it later in small pieces and trying to allocate any gain or loss to the individual transactions. It could be done, but it would be a royal pita.
The IRS would have an equally difficult time trying to prove its case against the user. If people get too crazy and try to play off no gains when there obviously are there will still be issues that will come up.
Like with most things, people should claim income when they have it and pay tax on gains when appropriate. Issues arise when people trying to lie/cheat/steal/whatever.