As Predicted, IRS Deems Bitcoin to be Property, Limiting Its Usefulness in Commercial Transactions

We told readers earlier this month that the IRS was well-nigh certain to deem Bitcoin to be property, not a currency, and that would deter its use in commerce. We got pushback from Bitcoin defenders, who tried several lines of argument, basically along the lines of “digital currencies are inevitable” and “the tax authorities are irrelevant”.

Today, the IRS has issued a release that states that it regards Bitcoin as tradeable property, which is what tax maven Lee Sheppard had predicted.

More important, the fact that Bitcoin is property means it can be taxed at short or long term capital gains rates, or as ordinary income, depending on the holding period of the Bitcoins in question and the status of the holder (investor v. trader v. Bitcoin miner v. business accepting Bitcoin as payment). The record-keeping burden of having to track Bitcon prices against the dollar at the time of acquisition versus the time of use will be a substantial deterrent to their use in commerce.

The IRS also stated that its view is retrospective, meaning that Bitcoin users, traders, and miners are expected to report income on their personal income filings due April 15 (I wonder if this also means the IRS is expecting Bitcoin-related businesses to amend the returns they filed on March 15, the due date for corporate returns). We are embedding its release at the end of this post.

We also noted that other advanced economies are moving in a similar direction, with Japan having designated Bitcoin as not being a currency and hence subject to capital gains and sales taxes.

Some extracts from media coverage. First, the Wall Street Journal:

In a notice, the IRS said that it generally would treat bitcoin held by investors much like stock or other intangible property. If the virtual currency is held for investment, any gains would be treated as capital gains, meaning they could be subject to lower tax rates….

The IRS notice also made clear that many people involved in handling virtual currencies—and many transactions involving them—would be subject to the same extensive record-keeping requirements, and taxes, as other people and other deals.

Notably, use of bitcoin in a retail transaction typically would be a taxable “event” for many buyers, requiring them to figure out the gain they had made on the virtual currency—and eventually pay tax on it. Tax experts say that could come as a surprise to some investors. It also could put a damper on use of bitcoin for many retail purchases.

The IRS also said that bitcoin “miners”–including people who use computers to validate bitcoin transactions or maintain transaction ledgers—also would be subject to tax on payments received in bitcoin. “Mining” that constitutes a trade or business would be subject to self-employment taxes, the IRS said.

Other people who receive bitcoin for performing services—including employees as well as independent contractors—also would be subject to tax on the fair market value of the virtual currency, the IRS said. Employers typically would have to report wages on a Form W-2, and the payments would be subject to withholding and payroll taxes, the IRS said.

Bloomberg:

The IRS, faced with a choice of treating Bitcoins like currency or property, chose property. That decision could reduce the volume of transactions conducted with the virtual currency, said Pamir Gelenbe, a venture partner at Hummingbird Ventures, which invests in technology businesses.

“It’s challenging if you have to think about capital gains before you buy a cup of coffee,” he said.

Charles Allen, chief executive officer of BitcoinShop Inc., an online marketplace, said he’d like to see the IRS reconsider its decision as virtual currencies develop.

“The implications this decision will have on the Bitcoin ecosystem are far reaching, and will be burdensome for both individual users of Bitcoins, Bitcoin-focused business and for the general adoption of virtual currencies,” he said, adding that Bitcoin users will adapt to the rules….

Bitcoin miners will have to report their earnings as taxable income with a value equal to the worth on the day it was mined. If they mine as part of a business, they would have to pay payroll taxes as well.

The IRS will require information reporting similar to how the tax agency receives notification of stock transactions and payments to independent contractors.

“The danger is the creation of an electronic black market, similar to the cash economy,” Joshua Blank, a tax law professor at New York University, said in a December interview. “That’s what the IRS wants to avoid.”

The ruling takes effect immediately and covers past and future transactions and tax returns. The IRS said in the notice that it may offer relief from penalties to people who engaged in transactions before today and can show “reasonable cause” for underpayments or failure to file.

At least one Bitcoin enthusiast recognized the implications. Reader Scott A, who had regularly been sending me links to stories on the potential for Bitcoin, sent this message right after the IRS notice hit the wires:

Subject: bad news for btc

[Link to Wall Street Journal article]

This will:

– open the way to applying UCC Article 9

– impose a tax burden on businesses accepting btc as payment

Below is the IRS notice.

IRS Notice on Digital Currencies 3/25/14

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56 comments

  1. allcoppedout

    Bitcoin always seemed a Hawala (or hundi) or chop system – http://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/FinCEN-Hawala-rpt.pdf – with an added burden that electronic network systems create all kinds of records requiring encryption compared to an ‘honour base’.

    In the end I suspect Bitcoin and about 80 other variants could prove the viability of a transparent world currency (Soddy’s ‘a couple of honest adding machines’). This may be a long while off as it would entail the end of finance as war by other means and as a theft system for the rich. This may seem odd given the origin of these crypto-currencies, but remember 98% of original commercial internet traffic was porn. Say I set up a Bitcoin mining business much as an offshore bank. How does any taxman propose to deal with me, given they generally fail with the Duke of Lichtenstein? If they are somehow going to monitor what I do, why can’t they do that on all financial or property transactions?

    1. Dan Kervick

      If Bitcoin ever proves stable and generally useful in exchange, many people would want to borrow them. Others would as a result have an increased incentive to save them and lend them at interest. Banks would develop.

      Capitalism caused the present crisis, and Bitcoin is just a further development of capitalism. So I don’t see why one would expect it to do any better.

      1. Jim Haygood

        State capitalism caused the present crisis, and Bitcoin is just a further antidote to state capitalism.

        1. skippy

          Huh? a bunch of mugs rich off WWII start a fan boy club with dodgy drugged up screenwriters, import some whack job from Austria, steal the branding of an internationally recognized scientific award, turn humanity into a 2D graph of intersecting lines, and last but not least engage in form of religious numerology never seen before on this orb.

          skippy… state capitalism lmmao… hint to self Jim… there is no other kind…. never has been nor will be… only question begging is – who]m benefits.

        2. Dan Kervick

          Nope, it was just plain vanilla capitalists doing what capitalist’s tend to do: greedy hustling, predatory hunting, scamming, skimming , flim-flamming, taking, hoarding, grifting, lying and cheating.

        3. Invy

          Ha, the state is merely a tool… Which economic ideology it imposes follows from the group which holds the most influence.

          State capitalism and state socialism are the same thing, a small group of the population using the state to increase their share of the pie. Sure, in history it has been more direct, but far easier to control the populace if done behind the veil of a republic. Money is now free speech, rendering the poor and middle class mutes.

          1. Yves Smith Post author

            No, you don’t get to have your own private definitions of words to muddy the debate. The Big Lie and bumper sticker blather does not go over well here.

            State socialism = government gives priority to ordinary people, so you get a liberal democracy like Sweden.

            State capitalism = the state cares only about the capitalists. Results are Mussolini-style corpocracy and increasing concentrations of wealth.

  2. Robert Dudek

    This is good news for those willing to set up anonymous offshore bitcoin accounts and set up a crypto only marketplace. If they need fiat, they will route to an exchange and only then have to deal with the taxman.

  3. Gerard Pierce

    Has anyone considered the introduction of Auroracoin:

    (http://www.theverge.com/2014/3/25/5546192/icelanders-can-now-each-claim-400-worth-of-auroracoin-cryptocurrency)

    So far, Auroracoin is just one more digital currency – introduced in Iceland. But it seems possible that it could be adopted by the government of Iceland as an actual currency due to the experience of the people of Iceland with the European banking system.

    If a government stands behind a digital currency, it would create a problem for the US banksters who were determined to make Bitcoin a commodity. Foreign currency is obviously not a commodity.

    Does anyone have any ideas how this might work in the real world.

    1. Invy

      It is based of litecoin, using the same code base… The Scrypt algorithm is supposed to be constrained by RAM making it difficult to use ASICs to mine which means anyone could join in while not being pushed to the side by purpose made hardware….

      I’ve read there is a problem with the implementation of Scrypt in the current coins which use it. I wouldn’t rely on it as a state currency, until that is fixed along its a litany of other problems I see with crypto currencies.

    2. Thisson

      It doesn’t really create a problem. The IRS decision was based upon the coin not being legal tender in any country. It would not be a problem to treat bitcoin as property and another coin varient such as auroracoin as a currency.

  4. allcoppedout

    Gerard – one obvious real world implication of a government-backed digital currency would be to raise a ton of questions for international finance and national governments.

    One assumes a decent government involvement would first of all remove the scam element of ‘losing Bitcoin and then finding them again in closed wallets’ or whatever this presumably delinquent scam was about: http://globalfinancialsecurity.com/?page_id=24
    The advent of credibility, reliability and presumably legal enforcement would be a game changer for honest individuals and traders.

    In principle, those of us who do internet banking may as well do it in ‘Icelandic Qubits’ or whatever. Lots of rules are, in fact, in the way, and lots of stuff like ‘who needs the USD’ rear very ugly heads. A digital currency is presumably any currency at the push of a conversion button at more or less no cost.

    There is almost no incentive to go down this honest route. Imagine such a digital currency that we could only pay lawful wages or welfare into and a retail network we could spend it in. What would other money then be? How would we pay our drug dealer or loot Africa? Sorry to be only speculative. I guess a genuine government backed digital currency might just be the great leveller and mean revolution. So the real world consequence is they won’t let it happen.

    1. Yves Smith Post author

      Foreign currency transactions are still subject to reporting of gains and losses for tax purposes. The IRS problems aren’t quite as bad but are still there.

      And the big issue is that this will subject any Bitcoin broker or exchange dealing with a US customer to US tax reporting.

      1. Jim Haygood

        Good point. Let’s compare the U.S. tax treatment of conventional foreign currencies, such as the euro:

        The general rule with regard to the U.S. tax treatment of gains or losses from exchanging U.S. currency for non-U.S. currency (and back) is that the gain or loss on the currency exchange will now be taxed the same as the underlying transaction.

        Where there are currency gains or losses in connection with a trade or business or with the management or administration of investment assets, the gain is treated as an ordinary gain (rather than as a capital gain) and any loss is generally treated as an expense.

        Where currency gains or losses are incurred in connection with the purchase of an investment, the gain or loss on the currency change on realization (usually from selling) is a capital gain or loss and is included as part of the total capital gain or loss on the investment.

        ————

        For those able to hold BTC for about a year, there’s an embedded option either to sell at 364 days (for an ordinary loss) or hold for 366 days (for favorable capital gain treatment), depending on its change in value since acquisition. Done on an industrial scale, this could be a substantial tax shelter.

        1. John Glover

          “Where currency gains or losses are incurred in connection with the purchase of an investment, the gain or loss on the currency change on realization (usually from selling) is a capital gain or loss and is included as part of the total capital gain or loss on the investment.”

          It depends on the kind of investment you are talking about. If the investment is a debt instrument, such as a foreign currency bond, foreign currency gain or loss is computed separately from the capital gain or loss on the bond. The foreign currency part is ordinary income or loss.

        2. Lyle

          But how is that different than buying a 30 year treasury bond? (all be it the variation in price may be less on the 30 year bond), but you can sell it at 364 or 367 days and potentially get a tax shelter. But it does raise a business opportunity, what real time currency exchange, where the bitcoins are converted to the local currency just when the transaction is done, so the currency gains or losses are minimal, or when will a financial master of the universe come up with bitcoin options, i.e. you can buy the right to convert bitcoins to currencies at some rate (which of course is taxable).

    1. Lyle

      I suspect other countries will do likewise, making bitcoin mining being just like any job as far as taxes are concerned. Interestingly bitcoin mining is now treated like most mining, where you take the price received and deduct the costs. One question is can a corporation engage in bitcoin mining or must it be an individual?

        1. allcoppedout

          Once corporations are involved I expect we will be at the stage of Bitcoin property exchanging banks.

  5. Jim A

    Well it SHOULD be possible to have a Bitcoin “wallet” that did the capital gains calculations transparently in the background… If only there were some techies with an interest in Bitcoin…

    ps. “Tax authorities are irrelevant” ?! somebody has never heard of IRS seizure operations.

    1. Dan Kervick

      But all of these things – the calculations, the reporting overhead, the tax deductions, the currency conversion fees – are all adding up now, aren’t they?

      1. Jim A

        And really, one of the big “selling points” of bitcoin has been the idea that by it’s nature it somehow freed you from government “interference” (inflation and taxation). Really, the idea that it could be ubiquitous enough to be used as a currency AND be ignored by the IRS was always a strange and unlikely kind of libertarian fantasy.

        1. John VanWert

          {quote}
          Really, the idea that it could be ubiquitous enough to be used as a currency AND be ignored by the IRS was always a strange and unlikely kind of libertarian fantasy.
          {quote}

          How much did government do wrt sharing pirate content using torrents? Not much – because it cannot short of turning into full blown police state. Bitcoin does the similar thing, it is anonymous distributed ledger and if bitcoin becomes widely accepted at some point (big if, I realize), so there is no need for converting it to dollars, IRS won’t be able to do much.

  6. John Glover

    The notice needs to provide more information regarding how you determine whether or not bitcoin is a capital asset. Under the Code, capital assets do not include stock in trade, inventory, receivables and “supplies of a type regularly used or consumed…in the ordinary course of a trade or business…” Seems to me that any person using bitcoin as a medium of exchange when buying and selling goods and services will have a hard time saying that it is a capital asset under this definition. Even if you don’t consider it to be inventory, it ought to be viewed as a “supply of a type regularly used” in the business.

    Of course, you can use bitcoin as both a medium of exchange and as an investment. When it comes to other tradable property – commodities, stocks, etc. – a dealer in those items ordinarily treats them as inventory, but there are ways to designate particular items as investments so that you can treat them as capital assets. Ultimately, it seems to me the same kind of mechanism would have to be used by people who use bitcoin as a medium of exchange in their businesses. Otherwise, they run the risk that none of the bitcoin they hold is entitled to capital gain treatment.

  7. BigRed

    I know that I keep harping about this: speculators, not “investors”. Can nobody tell me that buying bitcoin to sell it at a profit at a later date is productive.

    Language matters!

    (also: apology for another mangled post)

  8. Thisson

    This really is not a very big issue because the parties can contract around the UCC and agree that the bitcoins will be treated as excluded property (and there are already other exclusions to property secured by blanket liens under article 9).

    1. Yves Smith Post author

      Do you think someone is going to contract out of the UCC when they buy a cup of coffee? Puhleeze.

      And you seem to forget that real estate securitizations also contracted out of the UCC. Guess what? Judges have almost without exception ignored that.

      1. Thisson

        Do you seriously think that a judge is going to hold that the cup of coffee is subject to a blanket lien under UCC article 9? The entire premise of the article is ridiculous when applied to everyday transactions. UCC Article 9 will not be any problem whatsoever for those.

  9. impermanence

    No matter the incantation that transforms labor-value into an alternate form, you still have a method whereby wealth can [will] be stolen from its producers and stuffed into the pockets of those owning/designing/administering the ruse.

  10. phichibe

    bitcoin was a fantasy brought to you by the same pencil-necked geeks of silicon valley who at one point thought they could buy up derelict oil platforms in international waters and create untouchable tax havens. a bunch of mindless cyber-libertarians who resent paying taxes for anything now that they’ve got a pile of loot to protect from the demands of the ignorant masses. see larry page’s recent comments on charity to get a perfect insight into the mindset.

    i work in distributed algorithms and can appreciate technical elegance. whether bitcoin actually solved the byzantine generals problem is something i remain skeptical about but am willing to withhold judgment. however, where they completely lost me was the “mining” process whereby “entrepreneurs” were setting up massive compute farms to solve otherwise pointless cryptography problems and thus “mint” new bitcoins. only a cyber-retard could think this was a useful contribution to humanity. the yottaflops of wasted computation that have already done nothing except burn more carbon-based fuel staggers the imagination. if the problems had been something applied like sequencing cancer SNIPs or something, great. but all they did was a virtual reality circle jerk.

    i hope andreesen loses his shirt. it might make up for all those people who invested in netscape at its peak and watched it disappear before their eyes, like the cheshire cat except it was andreesen and jim clark who were left smiling.

    p

    1. phil

      “yottaflops”

      A quibble, only because it’s an amusing quirk of the algorithm; computing the hash requires only integer operations. So technically Bitcoin mining results in 0 flops!

      The correct measure of Bitcoin network energy expended is, as you imply with your “waste heat” comment, the calorie. :)

    2. milesc

      “whether bitcoin actually solved the byzantine generals problem is something i remain skeptical about but am willing to withhold judgment. however, where they completely lost me was the “mining” process whereby “entrepreneurs” were setting up massive compute farms to solve otherwise pointless cryptography problems and thus “mint” new bitcoins. only a cyber-retard could think this was a useful contribution to humanity.”

      I read: “they completely lost me [when they] actually solved the byzantine generals problem”.

      The contribution to humanity the “cyber-retards” had in mind was a secure, fully distributed, peer to peer value transfer protocol. Scoff all you want at the “otherwise pointless cryptography problems” — the blockchain protocol will fundamentally change the way we do certain things (whether Bitcoin succeeds as a currency or not). When you are done scoffing, perhaps you can provide us all enlightenment with your alternative means of operating and securing a fully distributed, peer to peer value transfer protocol?

      1. Yves Smith Post author

        Because…drumroll….there is no basis for anyone trusting it.

        Why should I trust these systems? You can tell me you’ve got this algo, you can tell me you’ve implemented it correctly, but why should I believe you? Ordinary people can’t validate it, and I doubt techies will do due diligence on the implementation either.

        And I really do not trust a system when I have no recourse to courts or regulators. You might as well trust Nigerian scammers.

        1. Yves Smith Post author

          You have proven my point. I don’t want to have to hire an expert to do verification to use something as a medium for payment or even an investment, particularly since: 1. I can’t judge if the expert is any good and 2. If the expert screws up (due to incompetence or inattention), I can’t readily recover (the cost and hassle of suing him are huge deterrents).

          Honestly, the more you Bitcoin advocates try to defend it, the deeper you dig your hole.

          1. milesc

            I agree — for US taxpayers who would look to report every taxable event, this looks like a giant chore. ZGL coins is an interesting idea but it does not solve the underlying issue.

            I expect there will be some sort of town hall meeting with the IRS and the IRS will adapt its approach. It is patently obvious that some people use Bitcoin as a currency and that number will only grow (not least because Bitcoin is used across the globe and some tax authorities have taken a much more pragmatic approach).

            In any event, the IRS needs to properly define “virtual currency”, because right now the guidance covers just about everything virtual, including air miles. They might also want to stop referring to it as “currency” (why not “virtual property”?).

          2. OpenThePodBayDoorsHAL

            Yves, lighten up a bit. They’re worth something just because people believe they are, just like your little slips of green paper or the Russell 2000 trading at 85x trailing earnings. And I don’t see why they won’t in the end be treated by the IRS like a foreign currency. When I buy a foreign currency in my brokerage account, it goes up, and I sell it, that’s a cap gain. I’ve used it as a capital asset. When I buy a euro to take on a trip to Europe, and I buy a coffee in Rome…does the IRS require me to verify that euro’s value at that moment in time against the USD, and then report and pay tax on any gain? No, because that is a “personal transaction”.
            If I have my facts wrong please correct me (someone who knows US tax law better than I).

        2. milesc

          Yves, why do you trust your laptop or a motor vehicle or medicine or electricity? It’s not because you have a complete understanding of exactly how everything works. It’s because … drumroll … people tell you it works and when you see it in action, lo and behold, it seems to work.

          Bitcoin is open source. It has been thoroughly audited and stress tested (to be clear: by people other than its creator(s) or people with a vested interest — think professional code auditors and cryptography scholars paid by the funds sinking millions of dollars into Bitcoin projects, or the countless number of hobbyists and hackers that have been poking at the code and the (~$10 billion) network for years).

          Trusting the protocol is simply not an issue. Bitcoins only ever go missing if (a) your wallet is compromised (e.g. someone manages to install nasty malware on your computer) or (b) you entrust your bitcoins to someone else and they take or lose them. In the case of (b), you have recourse via the existing civil and criminal legal systems – theft is theft. Bitcoin certainly encourages greater individual responsibility for one’s finances, but I don’t think that’s a bad thing. I wouldn’t send cash or bitcoins to a Nigerian scammer.

          1. skippy

            Unlike humans – code does go to court and testify e.g. the tech is not the issue, its always the human[s and humans squeal if the right pressure point is applied.

      2. Dan Kervick

        Why would I want to use a fully distributed, peer-to-peer transfer system instead of a well-regulated one? More importantly, why would I want my society to use such a system?

        Next thing people will be telling me is that I should embrace a peer-to-peer criminal justice system based on fully distributed electro-shock punishments inflicted by individuals from their own laptops or iphones. If somebody solves a tricky algorithmic challenge to create such a system, should I wet my techno-jammies over that one too?

        1. milesc

          You might not want to use Bitcoin. In which case, you can safely ignore it. No one will force the “currency” upon you and if the technology – the blockchain – is used, it will likely be in such a way that doesn’t affect you or you are none the wiser. Does that mean Bitcoin should go away and nobody should get to use it? No, I don’t thing so.

          Some people just don’t like change, which is fine. Fortunately, that didn’t stop other disruptive technologies succeeding — the Internet, email, the telephone, etc.

  11. indio007

    First I should say, the IRS website has a disclaimer not to rely on the information there in.
    If there isn’t a paper version of this notice then it’s ineffectual.

    Second.
    That notice is a bunch of mealy mouthed hogwash.
    What’s the tax status of gaining coins from mining? That’s how I got mine.
    They pretend the only way to acquire BTC is by purchase or trade.

    The dissimulation about legal tender is BS too.
    Legal Tender means “legal offer”. The US recognizes many forms of legal tender even for the payment of taxes. Consult the IRS manual for the forms of acceptable payment.
    They include checks and even Bills of Exchange!

    They point is the public at large knows barely anything about the law regarding money vs legal tender vs currency. That’s just the way they like it.

    Anyone that wants to further their legal education,

    http://goo.gl/6X87ya

    Anyhow, the way to avoid the extortionistas is to not convert into fiat currency and not to “value” items in fiat currency. Go BTC and treat the accounting as foreign.
    No intermingling!

    1. Yves Smith Post author

      If you want to risk paying the IRS penalties and interest, be my guess. I suggest you also read up on how the IRS operates. They can and do garnish wages, bank accounts, and seize property. And they like cracking down on small folks more than big companies because big companies can hire big ticket lawyers and put up a pig fight in court.

      And you ALSO forget that the US taxes people on worldwide income. There is no such thing as “going foreign” if you are a US citizen.

      1. indio007

        I’m aware of the IRS tactics.
        let’s analyze this for a second.
        BTC is now property. Now , I “sell” bitcoins for a cow. now that is a barter exchange & not a sale of goods. there is the taxable event, the barter exchange. only one party can potentially have a gain, so the relative fair market value needs to be determined. furthermore the coin is intangible. the best legal description of it would be a right of access and add data to the blockchain.

        The Supremes ruled on a case like this , an exchange of a right for stocks. The fair market value of the rights to not be determined.

        the result was the IRS wasn’t permitted to assess the tax because they could not determine the tax liability for that transaction. remember there can’t be a direct tax on property.

    2. Dan Kervick

      Good luck making due in the economic crypto-ghetto with its paucity of jobs paying wages in Bitcoin and retail outlets selling stuff for Bitcoins.

  12. allcoppedout

    If Bitcoin became open and above board it might offer a practical example of real costs in financial transactions and potentially lead to cash and debit-credit cards being more expensive .Current ‘bank taxes’ on simple purchases are massive, even if between 1 – 4% of the sale. Cash is similarly expensive for businesses to deal with.

    The current problem is ‘Nigerian’, but the Hawala/Chop systems are centuries old, so in a sense Bitcoin could survive on honour. It seems likely to me the banksters would want to keep it that way, in order not to have to compete with something more competitive. Governments won’t want it either.

    Once accountants start working on schemes as John Glover says above, Lord knows! Would Bitcoin accounts by subject to bail-in on the Cyprus model? Would a defence to such be ‘hang on mate, this is property not currency’? Techies tell me Bitcoin transactions are not as secret as claimed. http://anonymity-in-bitcoin.blogspot.co.uk/2011/07/bitcoin-is-not-anonymous.html

  13. Peter

    The IRS guidance was fair and what the bitcoin community expected. This provides much needed clarity to individuals and businesses.

    The community appears to have a simple method to streamline gain/loss accounting for small day-to-day purchases: ZGL coins (zero gain/loss coins). ZGL coins are fused from the linear combination of coins purchased both above and below the current market price in such a way that the capital gain or loss is exactly zero at the moment of purchase for each transaction.

    The ZGL technique does not avoid capital gains tax, it merely allows one to recognize the gain or loss with less-frequent taxable events (at exchanges), instead of on a day-to-day basis for small purchases. The process will be entirely automated, invisible to the user, and provide detailed proof that each day-to-day transaction resulted in a gain/loss of zero should the user ever be questioned. It will also ease the burden on the IRS, as reviewing 1,000 microtransactions resulting in a gain of $1.45 may result in a loss to their organization.

  14. Jack

    I won’t lose sleep with this since ZGL coins were already here for noting gains and losses in relation to when a bitcoin purchase was originally made. Also there are tools like ultracoin and soon ethereum which will allow one to hedge against movements in a particular currency. In this context, I suspect that use of bitcoin as a means of exchange will continue to grow. At the same time, it will all get very interesting in the middle term when the dollar and other fiat currencies blow up which will push even more individuals and organisations into bitcoin or other virtual courrencies. As well I suspect the powers that be are still scratching their heads because this ruling doesn’t stop the general trend that virtual currencies have brought forth, DISINTERMEDIATION! Which will mean the end of banks as they presently exist. You cannot stop an idea whose time has come.

  15. OpenThePodBayDoorsHAL

    And the comment by indio007 above is quite interesting. Bitcoin may not strictly fall under the definition of property, after all a Bitcoin doesn’t exist, what exists is a right to change a database. Per indio, the Suprmes ruled and the IRS couldn’t tax that, would love to see a source.

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