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IRS: Bitcoin Is Property, Not Currency

Soulskill posted about 4 months ago | from the cryptoproperty-doesn't-have-the-same-ring-to-it dept.

Bitcoin 273

An anonymous reader sends this news from Bloomberg: "The U.S. government will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions, the Internal Revenue Service said in its first substantive ruling on the issue. Today's IRS guidance will provide certainty for investors, along with potential income-tax liability. Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop. ... Under the IRS ruling, Bitcoin investors would be treated like stock investors. Bitcoins held for more than a year and then sold would pay the lower tax rates applicable to capital gains — a maximum of 23.8 percent compared with the 43.4 percent top rate on property sold within a year of purchase. For investors with losses, U.S. tax law allows taxpayers to subtract capital losses from any capital gains. They can also subtract up to $3,000 of capital losses a year from ordinary income.'"

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This seems like good news (4, Interesting)

JustNiz (692889) | about 4 months ago | (#46577067)

...as you can offset a drop in the value of your bitcoins as a tax deduction.

Re:This seems like good news (1, Offtopic)

Jeremiah Cornelius (137) | about 4 months ago | (#46577145)

I had to type in a CAPTCHA to access Mt Gox.

And... Summoned the old ones!

"tyltylnc tymrkth"

Re:This seems like good news (1)

Anonymous Coward | about 4 months ago | (#46577153)

IFF you exchange them back to dollars, to capture the loss.

Re:This seems like good news (1, Insightful)

bobbied (2522392) | about 4 months ago | (#46577451)

Which I suggest you do ASAP..

Re:This seems like good news (0)

Anonymous Coward | about 4 months ago | (#46577161)

Well, it's not so bad news.

A tax deduction affects pre-tax income. So if you lose $3,000 in bitcoins, and you made $10,000 on stocks, you could only be taxed on $7,000 worth of capital gains income - for short terms capital gains, it means you'd pay only $2,450 in short term capital gains taxes, instead of $3,500. So you'd still "lose" $2,000.

If you held on to your bitcoins and stocks for over a year and managed to lose $3000 on bitcoin (how?) and gain $10,000 on stocks, it's even worse - instead of paying $1,500 in taxes, you'd only pay $1,050. So you'd still lose over $2,500.

Re:This seems like good news (5, Interesting)

Gothmolly (148874) | about 4 months ago | (#46577197)

Only if you sell them at a loss. So if you want to take a loss in order to deduct part of that loss, knock yourself out. That'll show them.

Re:This seems like good news (1, Insightful)

VortexCortex (1117377) | about 4 months ago | (#46577465)

Oh that's great news! Because that means I can give the property value assessor the finger! I don't owe the IRS any increased taxes due to my property's appreciation since I haven't sold it at a gain! WOW!

Re:This seems like good news (1)

beelsebob (529313) | about 4 months ago | (#46577659)

And only if you had made a capitol gain somewhere else.

Re:This seems like good news (1)

PRMan (959735) | about 4 months ago | (#46577661)

Yes. But if you had to sell a couple to pay for Christmas and they were lower in January than when you bought them, it's nice to take that loss on your taxes.

Also, this confirms that if you keep your bitcoins over a year and then they go up enough for you to retire, you can live on them tax free the rest of your life (unless the lowest tier changes rates).

Re:This seems like good news (3, Informative)

lgw (121541) | about 4 months ago | (#46577217)

...as you can offset a drop in the value of your bitcoins as a tax deduction.

As most of us who went through the dot-bust can tell you: only if you have gains to offset. If you have net losses, you can only take them at $3000/yr.*

TFA doesn't seem to have a link to the actual IRS ruling - WTF Bloomberg? New to the intarwebs? We do links here!

Not all capital gains are the same. If BTC is treated like stocks, that's great - most people will pay 15%* on long-term gains. Compare that to gold/silver, which are taxed as collectibles, with a 28% gains rate!*

*Don't take tax advice from random internet strangers like me - consult your tax professional.

Re:This seems like good news (2, Informative)

Anonymous Coward | about 4 months ago | (#46577689)

TFA doesn't seem to have a link to the actual IRS ruling - WTF Bloomberg? New to the intarwebs? We do links here!

http://www.irs.gov/pub/irs-dro... [irs.gov]

Re:This seems like good news (1)

aliquis (678370) | about 4 months ago | (#46577239)

Also you can sell $3001 worth of bitcoins to your friend in some other country for $1 .. and well, what happens next is unknown.

Re:This seems like good news (1)

Joce640k (829181) | about 4 months ago | (#46577265)

So...just like stocks/shares then? Or any other property you own.

Sounds to me like you think the IRS got it right.

if unknown == jail (1)

raymorris (2726007) | about 4 months ago | (#46577509)

You CAN commit tax fraud. What happens next IS unknown, it could be jail ...

Re: This seems like good news (0)

Anonymous Coward | about 4 months ago | (#46577273)

Only if you sell it for a loss, not if it drops.

Yeah... (1)

Anonymous Coward | about 4 months ago | (#46577081)

Good luck getting anyone to declare they own any and therefore owe you money. Chumps.

Re:Yeah... (1)

Opportunist (166417) | about 4 months ago | (#46577241)

Hush, why shouldn't we be able to evade tax for a change?

Re:Yeah... (1)

Anonymous Coward | about 4 months ago | (#46577669)

why shouldn't we be able to evade tax for a change?

Deductible mortgage and education debt interest, dependent and childcare deductions, tax free employer-provided health care benefits, untaxed retirement contributions, capital gains exception on primary residences, deductible property taxes, earned income tax credit, etc. etc.

Yeah, the 99% never catch a break, do they?

The lower half of the income histogram pays nothing at all to the US Treasury. They pay part of their FICA, but that's all entitlement money they drain several times over in retirement. Nothing is contributed the general spending authority of the US government, the deficit, or anything that isn't ultimately a personal benefit.

Re:Yeah... (1)

PRMan (959735) | about 4 months ago | (#46577673)

I actually declared mine this year. I don't want to be in trouble for tax evasion if they go up to $10,000 each.

At last (0)

Anonymous Coward | about 4 months ago | (#46577095)

This is actually good news. Tax on Bitcoin legitimize the currency, and is good for the common good since it will bring in more tax money.

Re:At last (-1, Offtopic)

Squidlips (1206004) | about 4 months ago | (#46577159)

Why is bringing in my tax revenue good? Like my wife, the State and Feds have an infinite capacity to overspend. No matter what their revenue is, they will be broke. The huge windfall as a result of the the Tobacco settlement is proof of this as is the Stimulus Package. The state of MA got over 4 billion in the Stimulus Package and it is gone with no jobs to show for it.

Re:At last (0)

Anonymous Coward | about 4 months ago | (#46577223)

Seriously, you're asking why we collect tax? Ask that question again the next time you visit a public library.

Re:At last (0)

Squidlips (1206004) | about 4 months ago | (#46577283)

You mean the next time I hop in horse and buggy and head into town for a gander at the library? Collary: No matter how high taxes are, the taxing government will be broke.

Re:At last (1)

cheater512 (783349) | about 4 months ago | (#46577301)

You are mixing two different issues.
If you've ever touched a road, you wouldn't be asking that stupid question.

Discussing government waste is legitimate, but completely off topic.

Re:At last (1)

TheCarp (96830) | about 4 months ago | (#46577387)

Not sure I agree. when the topic is taxes, government waste is definitely on topic....because it calls into question how much they actually need. We are talking about the government that is handing out money left and right to militarise local police all over the country and fund useless project. We are talking about a government that seems to have no problem placing orders for more equipment than the military asks for (C-130s anyone? Congress has only approved 5000% more be purchased than were ever requested...and they even did it just before the "sequestors" hit too).

Honestly, they have too much money. The only discussion we should have about taxes these days are how to decrease them and eliminate useless programs.

the topic is MORE federal taxes. libraries are loc (1)

raymorris (2726007) | about 4 months ago | (#46577595)

It was a response to saying MORE federal taxes are a good thing. More federal taxes do not result in more libraries.

Libraries, police, firefighters, most roads ... virtually all of the things pro-tax people put forth as good things paid for by taxes are mostly paid for with the ~ 8% local and state taxes. The feds take four times as much of your money and it doesn't go toward any of those things. Federal taxes do, however, pay for the NSA, billion-dollar bombers, and handouts to campaign contributors.

Re:At last (2, Insightful)

RightSaidFred99 (874576) | about 4 months ago | (#46577199)

Would it surprise you to know that selling heroine illegally falls under the same set of guidelines? This does not legitimize anything. Bitcoin is no more a currency than junk penny stocks are.

Re:At last (4, Funny)

ColdWetDog (752185) | about 4 months ago | (#46577277)

Selling human beings, especially heroines is illegal and generally Frowned Upon. Sort of like selling heroin except worse.

Re:At last (0)

RightSaidFred99 (874576) | about 4 months ago | (#46577317)

Ahh, the old "literal interpretation of a misspelling" bit! Cutting!

Re:At last (0)

AK Marc (707885) | about 4 months ago | (#46577353)

But it would fall under the same tax rules as bitcoin, so bitcoin is as "legitimate" as any illegal enterprise.

Re:At last (1)

geekoid (135745) | about 4 months ago | (#46577421)

That's becasue the IRS does not actually care where the income comes from.
Only under court order do they report what you do to any other agency.

Re:At last (1)

Opportunist (166417) | about 4 months ago | (#46577253)

Considering what they blow our tax money on, I can't really see the "common good".

Unless owning a bank has become very common lately.

Re:At last (1)

Bob9113 (14996) | about 4 months ago | (#46577429)

Considering what they blow our tax money on, I can't really see the "common good".

Not sure if you're just being playfully facetious or if you've actually been drinking the silly-juice. Just in case it's the latter, keep in mind that while there is a lot of inefficiency in government, the vast majority of it is still net positive. I don't like the heavy-handed Middle East adventurism, but it does get us cheap oil by keeping OPEC in check. I don't like our unsustainable social security policy, but it gets rolled back into the economy in relatively efficient spending. I don't like the lackadaisical work ethic of some road crew members or crony corporation asphalt price gouging, but our highway system enables trade and labor mobility that makes all our lives better.

It is a good thing to be critical of wastefulness in government, to treat our policies with a certain degree of distrust, and to work for improvement in government accountability. But to conflate that with the notion that tax evasion might be pro-social is sheer lunacy. Failing to pay our bills would be vastly more destructive than paying bills that are somewhat inefficient. People and corporations that shirk their duty to help shoulder the load are despicable.

Re: At last (0)

Anonymous Coward | about 4 months ago | (#46577677)

Why should I care about paying the governments incredible bills? They're the ones that committed to all the spending. I'll pay my share for the roads, I use the roads. But I sure as hell didn't sign up for endless wars and a $15 trillion debt burden. Basic infrastructure does not cost what is being spent. Why would you defend these people? They cannot make a budget, therefore why should they be entitled to spend money on my behalf?

Re:At last (2)

Joce640k (829181) | about 4 months ago | (#46577281)

This is actually good news. Tax on Bitcoin legitimize the currency.

Riiight. I can see all those Bitcoin miners heading out to get their tax forms right now so they can declare their coins.

My steel toe boot is property too (0)

Anonymous Coward | about 4 months ago | (#46577113)

And I use it to kick the IRS in the ass!

You just got told (1)

Anonymous Coward | about 4 months ago | (#46577121)

Not a currency, and instead merely a speculative instrument on par with stocks. Bitcoin is done.

Re:You just got told (2)

ArcadeMan (2766669) | about 4 months ago | (#46577143)

Quite the opposite. Since the value of Bitcoins can fluctuate, just like stocks, it not only makes sense for the government but it also makes it a legitimate and legal market in the USA.

Re:You just got told (0)

Anonymous Coward | about 4 months ago | (#46577587)

Idiot - the market was already legal and legit, even if filled with mouth breathing retards like you. What this simply does is define how the IRS views the trading. And the IRS have simply defined Bitcoin exactly how it is, despite the financially illiterate mutterings to the contrary that it is a currency. It's not.

NO! YOU just got told! (0)

Anonymous Coward | about 4 months ago | (#46577619)

Arcademan just smacked that ass for ya son! Keep hatin on BTC. AC is done.

Re:You just got told (1)

bobbied (2522392) | about 4 months ago | (#46577683)

Not a currency, and instead merely a speculative instrument on par with stocks. Bitcoin is done.

I'm going to agree with others here. BitCoin is NOT done, at least not because of this. It is now just something you can own and trade as you see fit. For tax purposes it is treated as any other unregulated asset (Like trading in racing cars, or buying and selling small businesses.)

BitCoin was never really a "currency" (Officially). Some wanted to claim it was, but legally it never was or could be one. Best you could say was it was just property. The only thing this IRS action does is to solidify the fact that it's property for tax purposes. Which just means that gains and losses are only realized for tax purposes when you convert into a conventional currency (i.e. US $). This really changes nothing, except dismiss the "it's a valid currency" claim, at least for the US. Now it's just legally property you can buy, sell and trade. But you could do that anyway.

Nothing has changed.

Re:You just got told (1)

PRMan (959735) | about 4 months ago | (#46577693)

You're right! I can no longer send them to people around the world for free. Oh, wait! I still can.

BiT3h (-1)

Anonymous Coward | about 4 months ago | (#46577135)

to yet Another a lo5ing battle;

Yet another reason... (0)

Anonymous Coward | about 4 months ago | (#46577137)

Yet another reason *NOT* to use Bitcoin. But don't listen to me...listen to that guy in Omaha!
http://www.cnbc.com/id/101494937

Re:Yet another reason... (0)

ArcadeMan (2766669) | about 4 months ago | (#46577175)

That's like saying nobody should use PayPal, nobody should buy stocks.

Just let it go already. You didn't mine Bitcoins at the beginning and now you're pissed off because you're not rich.

Re:Yet another reason... (2)

Jeff Flanagan (2981883) | about 4 months ago | (#46577323)

>Just let it go already. You didn't mine Bitcoins at the beginning and now you're pissed off because you're not rich.

I'd think that that would have sounded stupid in your head, so you wouldn't have posted it. What went wrong?

Re:Yet another reason... (1)

ArcadeMan (2766669) | about 4 months ago | (#46577535)

People who mined Bitcoins at the beginning are now millionaires, what's stupid about that?

Re:Yet another reason... (0)

Anonymous Coward | about 4 months ago | (#46577641)

Haters gonna hate. You sound jelly bro.

Re:Yet another reason... (0)

Anonymous Coward | about 4 months ago | (#46577337)

nobody should use PayPal, nobody should buy stocks

Sounds reasonable to me ...

Re:Yet another reason... (1)

darkwing_bmf (178021) | about 4 months ago | (#46577459)

There are plenty of reasons to not use bitcoin but taxes ain't one of them. You're going to be legally liable for taxes on any income (including any coming from bitcoin) regardless of the IRS ruling but the ruling adds clarity on how it's taxed.

Re:Yet another reason... (1)

PRMan (959735) | about 4 months ago | (#46577701)

Many people at the beginning bought them with cash from companies that are no longer in business. It might be a little hard for the IRS to track.

Re:Yet another reason... (0)

Anonymous Coward | about 4 months ago | (#46577749)

It's not their job to track. It's your job to prove the cost - basis for the BTC. The burden of proof is with the tax payer.

Fair? (1)

phorm (591458) | about 4 months ago | (#46577155)

This sounds remarkably fair coming from the tax-man. I've heard horror stories of certain investments that got taxed at a high value but then tanked and had little value for sale. I would have expected something terribly complicated and convoluted in regards to BC, but this actually seems to make sense.

except when you realize (0)

Anonymous Coward | about 4 months ago | (#46577201)

The whole tax system is a illegal scheme to enrich private international bankers, which didn't exist before 1913, and Andrew Jackson did not renew the international bank's privileged to issue money at interest for the USA.

Yep, keep thinking the current tax system is fair in any way shape or form.

I like to think of it as fucking my asshole without making it bleed.

"Wow you really did fuck my asshole and violated my every right, but thanks for not making my asshole bleed!."

Re:except when you realize (0)

Anonymous Coward | about 4 months ago | (#46577643)

For anyone reading this comment thread: the commenter above is the perfect example of someone with more paranoia than knowledge. He's right in that this system didn't exist before the 1820s, but then again the financial lanscape of the world had vast, sweeping changes that had to happen based on things like industry, and progress, and population.

Modern financial systems are extremely successful, and have become more successful as our economic policies have matured.

Re:Fair? (1)

Sarten-X (1102295) | about 4 months ago | (#46577289)

Despite common perception, the IRS is actually pretty reasonable to work with, if you're not trying to cheat them out of their Congress-determined fair cut.

The difficulty comes in determining exactly what that fair cut is, given all the many ways to get income, and the many more ways to hide that income.

Re:Fair? (1)

bobbied (2522392) | about 4 months ago | (#46577747)

The difficulty comes in determining exactly what that fair cut is, given all the many ways to get income, and the many more ways to hide that income.

And I'd like to point out that this difficulty is due to the tax code and the patch work of laws the IRS is tasked with enforcing. We've been doing social engineering using the Tax Code for far too long and as all things governmental, it is hugely complex spaghetti mess of laws and unintended consequences which is beyond the average tax filer's ability to understand.

This didn't require any ruling. (1, Insightful)

RightSaidFred99 (874576) | about 4 months ago | (#46577181)

It's self evident. And it doesn't especially "legitimize" Bitcoin. If you don't pay your taxes on profits from selling crack cocaine they can get you for that.

Like anything else someone thinks has 'value', you bought something and then you sold it or exchanged it for goods - that transaction is taxable.

Re:This didn't require any ruling. (4, Informative)

ZombieBraintrust (1685608) | about 4 months ago | (#46577369)

The ruling is more about what forms you need to fill out when your report your taxes. There are separate formulas for currency than for property. Bitcoins don't have some of the complexity that foriegn currencies do.(exchange rates, trade agreements) So the property forms are less work for the IRS.

fat chance (1)

Bramlet Abercrombie (1435537) | about 4 months ago | (#46577209)

nope.

Deflationary by design = Asset (1)

rsborg (111459) | about 4 months ago | (#46577213)

Common sense, despite all the hoopla, bitcoin really does make a poor "currency". It's really like buying commodities at a certain price, and selling them again at another price

Best example off the top of my head is Oil futures - since both that and BTC have a) a steady increase in value due to limited supplies and b) incredible volatility at times as the market itself is really controlled by big players

Exactly the type of market that Wall Street loves.

This makes perfect sense (2)

ClickOnThis (137803) | about 4 months ago | (#46577219)

In effect, the IRS is treating Bitcoin like any other "foreign" currency, which amounts to the same thing as treating it as property. When you sell (i.e., spend) Bitcoin, you're realizing a profit or loss, depending on the value it had when you received (bought) it, compared to the value it had when you sold it.

IANAA, but as I read this, it means that if you get paid for work in Bitcoin, you would pay tax on its value at that time, and that value would be considered your cost-basis for future sales of Bitcoin, so you don't get taxed twice on the cost-basis amount.

Re:This makes perfect sense (1)

hoeferbe (168081) | about 4 months ago | (#46577371)

ClickOnThis wrote [slashdot.org] :

In effect, the IRS is treating Bitcoin like any other "foreign" currency, which amounts to the same thing as treating it as property.

I don't believe that is right. From my understanding of the 2 possible ways of treating Bitcoin, it can either be treated like a commodity (property) and taxed at capital gain rates or it could be treated like a currency with gains taxed at the normal rates -- but with a $200 gain per incident exemption. Please see the "Characterization of Income from Bitcoin Sales" section of Tyler S. Robbins' primer on Bitcoin taxation in the U.S. [bitcointax.info]

Today, the IRS has said they are treating it like the former and not the latter. Either way would make it inconvenient for those wanting to follow the rules, but if they had treated it like a foreign currency at least the $200 gain exemption would have taken the burden of keeping records off of many purchases.

Re:This makes perfect sense (1)

Trepidity (597) | about 4 months ago | (#46577463)

Either way would make it inconvenient for those wanting to follow the rules, but if they had treated it like a foreign currency at least the $200 gain exemption would have taken the burden of keeping records off of many purchases.

True, though it would've made it worse for people with large amounts. With this ruling, gains realized after >1 yr of holding bitcoin are taxed at capital-gains rates, while with the alternative ruling that bitcoin is currency, large gains would've been taxed at ordinary income rates (like forex-trading gains are).

Technically. (1)

nurb432 (527695) | about 4 months ago | (#46577221)

Its just a barter system, so that makes sense.

Still dont like the idea of the Feds trying to tax me more, but the concept of property is sound at least.

Re:Technically. (1)

jbmartin6 (1232050) | about 4 months ago | (#46577279)

Its just a barter system

This applies to any currency, unless you are dealing in chocolate coins.

Re:Technically. (1)

bobbied (2522392) | about 4 months ago | (#46577761)

Its just a barter system

This applies to any currency, unless you are dealing in chocolate coins.

Actually, I like your example.. BitCoins are almost EXACTLY like trading chocolate coins, except they are not filled with chocolate..

If BITC are property.. (0)

jcr (53032) | about 4 months ago | (#46577275)

Then exchanging bit coins for coffee is a barter transaction, and no tax applies.

-jcr

Re:If BITC are property.. (5, Informative)

bws111 (1216812) | about 4 months ago | (#46577315)

What makes you think no tax applies to a barter transaction?

Re:If BITC are property.. (2)

CanHasDIY (1672858) | about 4 months ago | (#46577411)

What makes you think no tax applies to a barter transaction?

The fact that no treasury notes change hands, if I were a bettin' man.

Re:If BITC are property.. (2)

iggymanz (596061) | about 4 months ago | (#46577431)

your lawmakers, state and federal, have a different opinion of the subject. Also the IRS.

Re:If BITC are property.. (1)

CanHasDIY (1672858) | about 4 months ago | (#46577537)

I don't disagree, I was merely answering the question as to what OP's rationale may be.

Re:If BITC are property.. (1)

PRMan (959735) | about 4 months ago | (#46577723)

The fact that most barter transactions are probably not reported by either party. Not saying that people shouldn't pay taxes on them, just that they probably won't.

Re:If BITC are property.. (0)

Anonymous Coward | about 4 months ago | (#46577363)

Not true.... http://www.irs.gov/taxtopics/tc420.html You must report barter income via your 1040.

Re:If BITC are property.. (1)

bloodhawk (813939) | about 4 months ago | (#46577409)

Barter transactions are taxable in most countries of the world.

Re:If BITC are property.. (0)

Anonymous Coward | about 4 months ago | (#46577793)

Including the USA.

If you buy something and pay for it with a live chicken you raised on your farm, the merchant has to declare the estimated value (in dollars) of one live chicken on his taxes.
If you buy something and pay for it with gold nuggets you dug up in your backyard, the merchant has to declare the estimated value (in dollars) of that gold on his taxes.
If you buy something and pay for it with illegal drugs, the merchant has to declare the estimated value (in dollars) of those drugs on his taxes. (And yes, annoyed prosecutors will nail drug dealers for tax evasion for not declaring illegal income...)
If you buy something and pay for it with pesos, euros, or any other foreign currency, the merchant has to declare the estimated value (in dollars) of that currency on his taxes.
If the merchant is doing very many transactions via barter, they will rapidly find themselves in a position where they need to have some serious documentation and justification for their estimated values, or the IRS will get mad at them.

If you buy something and pay for it in bitcoins, the merchants is, not surprisingly, required to do EXACTLY THE SAME THING AS THEY DO IN ALL THOSE OTHER CASES. Being all digital and hip and internet enabled does not magically free you from taxes or regulations. All the IRS is doing is clarifying which of the many forms you should use for bitcoin-related-income. Now go pay your taxes, before the IRS audits you and levies a fine!

Re:If BITC are property.. (0)

Anonymous Coward | about 4 months ago | (#46577419)

http://www.irs.gov/taxtopics/tc420.html

You're not getting off that easily.

Re:If BITC are property.. (4, Informative)

Tony Isaac (1301187) | about 4 months ago | (#46577763)

Not so fast. The IRS does tax barter transactions.

http://www.irs.gov/taxtopics/t... [irs.gov]

Looney (1)

Impy the Impiuos Imp (442658) | about 4 months ago | (#46577327)

How does the IRS handle foreign currencies? What about stores and restaurants near the border that accept Canadian currency? Is it the exchange value at the time of sale?

Re:Looney (1)

bloodhawk (813939) | about 4 months ago | (#46577617)

How does the IRS handle foreign currencies? What about stores and restaurants near the border that accept Canadian currency? Is it the exchange value at the time of sale?

Gains made in foreign currency are also taxable events when you exchange them and yes they are done based on the value at the time of exchange (when dealing in foreign currencies you keep records of your exchange rates). The government doesn't care what currency you accept or trade in, you report based on your profits and losses in the country you are doing business.

Probably really bad news for bitcoin, actually (3, Interesting)

Primate Pete (2773471) | about 4 months ago | (#46577351)

I would think this is really bad news in disguise for bitcoin, because it discourages the use of bitcoin for commerce both because of the tax issue and because of the reporting requirements. (Who wants to deal with computing a wash sale just to buy a cup of coffee?) If people are inspired to sit on bitcoin until they cross the 1-year capital gains threshold, that behavior change could move bitcoin one step away from use as a currency, and put it in the same illiquid category as gold or bearer bonds.

Re:Probably really bad news for bitcoin, actually (0)

ArcadeMan (2766669) | about 4 months ago | (#46577457)

Most commerces won't bother with trading Bitcoins directly just like they don't deal with credit cards directly. Right now they use POS systems to deal with VISA and MasterCard, and they'll use a service like BitPay [bitpay.com] to accept Bitcoins.

Re:Probably really bad news for bitcoin, actually (0)

Anonymous Coward | about 4 months ago | (#46577561)

It creates the problem for the buyer! by making a purchase with bitcoins they have just initiated a reportable taxable event on their own part, whether it is for a new computer or a cup of coffee and as they will have had to use something like bitpay the tax liability will be tracable to you.

Re:Probably really bad news for bitcoin, actually (0)

Anonymous Coward | about 4 months ago | (#46577479)

As long as you convert to USD right away I don't think this creates any complications as there are no losses or gains.

Re:Probably really bad news for bitcoin, actually (3, Insightful)

DerekLyons (302214) | about 4 months ago | (#46577553)

I would think this is really bad news in disguise for bitcoin, because it discourages the use of bitcoin for commerce both because of the tax issue and because of the reporting requirements. (Who wants to deal with computing a wash sale just to buy a cup of coffee?)

If they'd ruled it was a currency, you'd still have to deal with taxes and a raftload of paperwork (plus a whole slew of specific regulations for currency exchange to boot). You can't have a legitimate medium of exchange *and* be free of taxes and paperwork, they're (if you'll pardon the pun) two sides of the same coin. That's been one of the deep flaws in the thought processes of Bitcoin fanboys all along - the failure the recognize that along with real world legitimacy comes all the other baggage of the real world.

Re:Probably really bad news for bitcoin, actually (1)

ZombieBraintrust (1685608) | about 4 months ago | (#46577555)

It could be coded into the software that does the transaction. Your exchange could just email you a tax form in Jan the same way your bank or stock exchange does.

Re:Probably really bad news for bitcoin, actually (1)

PRMan (959735) | about 4 months ago | (#46577733)

What exchange? Many people trade them in person. But yeah, now that there is guidance, it would be nice to get a tax form from the exchanges.

Money (1, Interesting)

roman_mir (125474) | about 4 months ago | (#46577355)

Government cannot declare anything to be money any more than I can declare myself to be a ballerina.

People decide what things are money, people decided that gold is money for example, it was never a government decision to make. Government tries to control the currency of the state by making it a 'legal tender' (all debts to creditors can be paid legally in government issued fiat). Constitutionally government has the authority to declare weights and measures (this much gold of this purity is required to mint a gold dollar). Government has the authority to offer you mint services (they can mint a coin for you from your own gold even though it may require a small fee, this is useful to have easily recognisable money on you).

Declaring paper to be money or more correctly - defaulting on the gold dollar has marked the beginning of the end of USA economy. At this point it does not matter what government declares anything to be, currency or property, none of it matters. They are way beyond all of their legal authority anyway. Do not pay any taxes, avoid and evade as much as you can, that's pretty much the only you can do now, you no longer have a Constitutional authorised legal government, there is no rule of law.

Bitcoins were designed to be money, from my perspective they are not, because they can't store value, so I won't take Bitcoins as payment for goods and services, but I will take gold. Government has declared gold to be 'property' long ago, applying capital gains taxes to it, thus trying to steal your gold from you, because it is the value of the dollar (the perceived value) that is going down relative to the gold, gold is not increasing in size or volume over time, it's the relative perceived value of the dollar that is falling, so government is trying to tax your gold holdings with the nonsensical 'capital gains' taxes that are pure theft. Nothing was gained from gold that was in the vault except for inflation protection.

Re:Money (1)

ArcadeMan (2766669) | about 4 months ago | (#46577503)

Government cannot declare anything to be money any more than I can declare myself to be a ballerina.

I'm pretty sure you can declare yourself a ballerina if you want to. Who's going to check? The ballerina police?

Re:Money (1)

ZombieBraintrust (1685608) | about 4 months ago | (#46577759)

defaulting on the gold dollar has marked the beginning of the end of USA economy

You saying there has been no economic growth in the US sense the depression? No jobs created in that period. No increase in property and assets?

And Thomas Jefferson rules... (-1)

Anonymous Coward | about 4 months ago | (#46577379)

that niggers are property not currency.

Who else always thinks these banners ad top are ad (0)

Anonymous Coward | about 4 months ago | (#46577445)

Opening the new 'layout' of slashdot always makes me think my adblocker is broken .. .. anyone able to read those titles over these ad-banner-like images nearly as good as the other plain story-titles? I have a really hard time dechifrating this text over ad-images .. maybe as my brain automatically fades out banners?

Bitcoin's true value (1)

ArcadeMan (2766669) | about 4 months ago | (#46577475)

One Bitcoin will always equal 100,000,000 satoshis.

Re:Bitcoin's true value (1)

ArcadeMan (2766669) | about 4 months ago | (#46577489)

Sorry, forgot to edit my copy/paste.

One Bitcoin will always equal 100 000 000 satoshis.

Bravo Slashdot. I can't even write a non-breaking space nor use   in my comments, even in 2014. Bravo.

Goatse spam (1)

tepples (727027) | about 4 months ago | (#46577729)

I'm assuming that Slashdot administrators changed how the software handles non-breaking spaces after seeing how certain users have used them to post obscene ASCII art such as ASCII Goatse.

Misleading (0)

Anonymous Coward | about 4 months ago | (#46577495)

Let's start with the fact that it's capital gains liability. This means that the $1 would be considered taxable income, and taxed at whatever your current rate is. The other problem is with any non-fiat currency. Non-fiat currencies have nothing to fix their rate of exchange, which means their value bounces around. If you want a consistent exchange rate, than you have to use a fiat currency. Non-fiat currencies come with distinct advantages and disadvantages, and you can't complain when a government doesn't give it the advantages of it's own fiat currency.

Now you've got me wondering (1)

Sloppy (14984) | about 4 months ago | (#46577657)

Purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of gross income for the coffee shop.

That seems very common-sensy, but it just raises questions/flames about what you're contrasting it to. Right away, you ought to be thinking, "If I did the same thing with Euros or Pesos, how would that differ?"

If Bitcoin were treated as a foreign currency, ordinary -- not capital gains -- tax rates would apply. Losses would be easier to deduct, however.

Oh.

I don't really know which (if either) of these policies is good (it's all so arbitrary) but I know at least one of them is stupid.

Re:Now you've got me wondering (0)

Anonymous Coward | about 4 months ago | (#46577773)

The reason you wouldn't do the same with dollars or eruos is that currencies across the world are designed and maintained to encourage gradual inflation. This is to mitigate potential swings in value, and to keep people from hoarding and trading currency in the way that they do stocks and bonds.

Essentially, currencies are designed to be spent, and thus aren't really very suitable for trading. BTC has essentially been a trading platform, and has not demonstrated that it has the necessary qualities (at the moment) to be a viable form of currency. The IRS is taxing BTC in the way that you would tax any asset that is more suitable for trading than it is for spending (especially since the vast majority of BTC owners are using it to try and make money).

Hopefully that made sense.

What about other crypto-coins? (4, Interesting)

ArcadeMan (2766669) | about 4 months ago | (#46577697)

Did they just write "Bitcoin" in the new law or something more general that can include anything? Otherwise, Bitcoin is now regulated but LiteCoin, DogeCoin and all the other coins are not.

Hey look....some more property. (0)

Anonymous Coward | about 4 months ago | (#46577785)

"01010101010101010101010111010101001010100101000101001"

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