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Bitcoin Government United States

IRS: Bitcoin Is Property, Not Currency 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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IRS: Bitcoin Is Property, Not Currency

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  • by RightSaidFred99 ( 874576 ) on Tuesday March 25, 2014 @04:13PM (#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:At last (Score:2, Insightful)

    by RightSaidFred99 ( 874576 ) on Tuesday March 25, 2014 @04:14PM (#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.
  • by bobbied ( 2522392 ) on Tuesday March 25, 2014 @04:40PM (#46577451)

    Which I suggest you do ASAP..

  • by VortexCortex ( 1117377 ) <VortexCortex.project-retrograde@com> on Tuesday March 25, 2014 @04:41PM (#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!

  • 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.

  • by NicBenjamin ( 2124018 ) on Tuesday March 25, 2014 @07:07PM (#46578997)

    First off if you're in a state that actually spends only 8% of it's SDP you're in a minority. Most states are in 9% or 10% range. More people live in one state that's above 11% (Cali) then all sub-9% states combined.

    The Feds support a lot of state-level spending through indirect programs. Student aid like Pell Grants, Race to the Top money, and support for police allows a lot of libraries to be built.

    The NSA, billion-dollar-bombers, and campaign contributors only actually add up to a small fraction of the Federal budget. A huge chunk is transfer payments set up before most campaign contributors were born. Medicare and Social Security alone are a majority of Federal spending in the 2010-2019 period. Medicaid is another fairly large chunk, this year ObamaCare subsidies kick in, with Pell grants, Earned Income Credit, military retirements, the VA, etc. I'd estimate 2/3-3/4 of Federal spending is simply the Feds shuffling money from the accounts of some Americans into the accounts of American who American voters have decided deserve the money more.

    The "Billion-dollar-bombers" could be gotten rid of easily in theory. In practice those pesky American voters tend to look on defense cuts as encouraging Putin to be Hitler Mk. II, so it's unlikely they'll be cut. Whatever it's other crimes, the NSA budget is a rounding error (literally: $11 Billion is under 1/3 of a percent of the total) on the Federal total. "Handouts" to campaign contributors tend to be exaggerated. There's generally no quid-pro-quo. What happens is the company that would be a shoe-in if the government decided to study the effect of dung beetle blood on the flu virus finds a candidate who supports studying dung beetle blood and sends him a check. If Congressional votes could actually be easily bought then we wouldn't have a DRIC project, we'd have a second span to the Ambassador Bridge.

    Which means that when Federal spending cuts get talked about proposals tend to be both ambitious and vague (ie: every Paul Ryan "budget" ever) or specific and miniscule (like your proposal, which the NSA's 0.31% off Federal spending). The specific/miniscule cuts that could actually get passed would almost certainly include most support for states and cities because Congress doesn't get yelled at when Jindal has to expel scholarship students from Louisiana State.

A quarrel is quickly settled when deserted by one party; there is no battle unless there be two. -- Seneca