IRS Recognized Bitcoin as Property, Not Cash Added: Wednesday, April 2nd, 2014
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The taxman announced that Bitcoin is not a currency. The Internal Revenue Service confirmed that for tax purposes the controversial cryptocurrency and its rivals will be treated as property, not currency.
The IRS ruling was not a surprise and marked another step in the wider attempt to make Bitcoin mainstream. The Internal Revenue Service said Bitcoin would be treated more as stock or other intangible property. In other words, general tax principles that apply to property transactions also apply to transactions using cyber currency.
According to the ruling, gains in value will be treated as capital gains and therefore could be subject to lower tax rates than income, as the top long-term capital gains tax rate is only 20%, as compared to the top ordinary income tax rate of 39.6%.
However, this can make using Bitcoin as a currency more problematic. Everyone involved in transactions with cyber currencies will be subject to the same record-keeping rules and taxes as those who make stock transactions and other deals of this kind. As you can understand, now paying for a beer in Bitcoin would be taxable, and you will have to find out if you had made any capital gain on the asset you had just sold.
It is widely known that Bitcoin has been gaining some ground with the financial establishment of the United States. Back in 2013, outgoing Federal Reserve chairman told Congress that Bitcoin and its ilk may be very promising in the long-term perspective, especially when the innovations promote a faster, more secure and more efficient payment system.
For example, a superintendent of NY’s department of financial services claimed in February that he is going to introduce regulation for Bitcoins later in 2014, making New York the first state to do so. Now, the IRS announcement will cement Bitcoin’s legitimacy, but it looks like cyber currency has faced some of its biggest problems to date: last month the Bitcoin’s largest exchange collapsed and lost $450 million worth of Bitcoin. MtGox declared bankruptcy after a series of hacks and allegations of incompetence among its management.
Bitcoin has also been at the forefront of investigations into online black market known as Silk Road. A few months ago, a 29-year-old investment entrepreneur was arrested by the American authorities and accused of being the site’s creator, but he keeps denying the charges.
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Wednesday, April 2nd, 2014
|posted by (2014-04-03 00:08:32)|
|posted by (2014-04-03 01:22:27)|
|It doesn't really matter. What matters is that these are legal pieces of property. And like any kind of property you can, if you want to, and someone is willing to, turn them into liquid (ie. cash). And in Canada, at least, there is nothing illegal about them, but if you do turn them liquid you would have to pay taxes on the transaction. That would also require you to self report the transaction, which is unlikely if there is no middle man. Bitcoin is here to STAY.|
|this only applies to the US or banks that have hidden contracts with the IRS, now that they have done this, what you do is form a federal contract trust, become the trustee to the property.|
|posted by (2014-04-04 06:57:21)|
|This will affect your income taxes if you deal in Bitcoins. Make sure you either understand the tax laws on such issues or seek out a professional.||
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