IRS Says It Will Treat Bitcoins As Property, Not Currency - Polidicks

[URL="http://www.npr.org/blogs/thetwo-way/2014/03/25/294364892/irs-says-it-will-treat-bitcoins-as-property-not-currency"]NPR Link[/URL] [quote=NPR] The Wall Street Journal reports this means any profits made on the currency will be taxed at the capital-gains rate and that investors will have to keep extensive records. The Journal adds: [quote=WSJ]"The announcement in general was expected to be greeted favorably by the fledgling industry, and many had anticipated exactly this result. But the announcement also served as a reminder that new technologies often can't avoid being subject to the old rules for long. "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 top long-term capital-gains tax rate is 20%, while the top ordinary income-tax rate is 39.6%, although add-on taxes often make both rates somewhat higher. But as capital investments, loss deductions from bitcoin often would be limited, whereas currency losses can be easier to deduct up front." Bloomberg explains that this brings clarity to investors who have been buying bitcoins for years. The IRS, one tax law expert said, is trying to avoid the "creation of an electronic black market."[/quote] The news service explains the rule like this: "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."[/quote]

I mean the thought of a totally unregulated decentralized currency is nice in theory, but they really are going to have to have some way of taxing it if it's going to last in the real world. I'm OK with this.

They're going to have fun enforcing anything.

Doesn't taxing Bitcoins in any way ruin their purpose?

[QUOTE=matt000024;44353579]Doesn't taxing Bitcoins in any way ruin their purpose?[/QUOTE]Is the IRS or any other governmental agency supposed to care? People are profiting off it and therefore are supposed to be subject to taxation.

Watch libertarians freak the fuck out over these relatively low taxes. It could be worse. Capital gains tax ain't so bad.

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[QUOTE=person11;44353655]Watch libertarians freak the fuck out over these relatively low taxes. It could be worse. Capital gains tax ain't so bad.[/QUOTE] I know, the fact that it isn't int he income tax bracket makes me think some very wealthy people in the US own a substantial number of bitcoins, maybe even people in our government. Someone had to stick their head in and say "No, that'l fuck me, rework it"

[QUOTE=matt000024;44353579]Doesn't taxing Bitcoins in any way ruin their purpose?[/QUOTE] ye

[QUOTE=frozensoda;44353673]I know, the fact that it isn't int he income tax bracket makes me think some very wealthy people in the US own a substantial number of bitcoins, maybe even people in our government. Someone had to stick their head in and say "No, that'l fuck me, rework it"[/QUOTE] Well, rich people have been using Capital Gains taxes to avoid higher taxes way before Bitcoins

[QUOTE=person11;44356240]Well, rich people have been using Capital Gains taxes to avoid higher taxes way before Bitcoins[/QUOTE] Which is why I think there are rich in the US who hold a substantial amount of bitcoins, that's what I meant sorry.

[QUOTE=matt000024;44353579]Doesn't taxing Bitcoins in any way ruin their purpose?[/QUOTE] know what's the tax on one bitcoin? 2 bitcoins :P

[QUOTE=Sableye;44356892]know what's the tax on one bitcoin? 2 bitcoins :P[/QUOTE] haha :P

[QUOTE=anis;44353512]They're going to have fun enforcing anything.[/QUOTE] with the ease in which people tracked down the FBI's wallet, along with the FBI's ability to call up the NSA, do you really think the rich have a chance at hiding anything? the bitcoin is anonymous because its obvious, everything is out there, just not labled and since every bitcoin is unique, its easy to see where its gone and where its going

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Why is it a good thing?

[QUOTE=WhyNott;44358269]Why is it a good thing?[/QUOTE] The same way it's a good thing to apply capital gains tax to shares and real estate. If capital gains tax didn't exist, that would present a major loophole for earnings from employment (capital gains tax is calculated as a certain percentage of the profit from selling property at a higher price than what you acquisitioned it for). And given the fluctuating value of Bitcoin, especially it's deflationary tendencies, it only makes sense to treat it as property. It also doesn't fit the definition of fiat money, which is pretty much [i]the[/i] standard for money in the world today.

[QUOTE=matt000024;44353579]Doesn't taxing Bitcoins in any way ruin their purpose?[/QUOTE] No, the fundamental purpose of Bitcoin is removing the need for trust in institutions/authorities responsible for the supply and transfer of currency.