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Anorak | The IRS Says It’s Going To Tax Bitcoin, Well, Just Like It Taxes Everything Else

The IRS Says It’s Going To Tax Bitcoin, Well, Just Like It Taxes Everything Else

by | 27th, March 2014

PA 19351947 The IRS Says Its Going To Tax Bitcoin, Well, Just Like It Taxes Everything Else

Christopher David uses a Robocoin kiosk to sell bitcoins outside of the 500 Startups’ Bitcoinferance in Mountain View, Calif., Thursday, March 20, 2014. The Robocoin kiosk is owned by Coinage and will be moved to a semi-permanent location after the conference. (AP Photo/Jeff Chiu)

 

THIS is perhaps a bit unkind of the IRS over in the US, issuing new tax guidance about Bitcoin in late March when everyone has to have their tax returns in by April 15th. But that’s what they’ve done and the ruling isn’t a surprise to anyone except those with the most absurd ideas of what Bitcoin actually is:

Twenty days: that’s how long American virtual currency users have to comply with newly released tax guidelines if they want to meet the April 15 filing deadline. The IRS today released an official statement declaring that virtual currencies – including, but not limited to bitcoin – will be treated as property.

In short, this means that bitcoin will be treated the same way shares of stock, real estate assets, and other investments and will be subject to capital gains taxes.

Bitcoin isn’t legal tender so it’s not going to get treated in the same way that dollar bills are. But it’s also obviously something of value and therefore will be taxed under the same rules as other things of value. And that’s really what they’ve announced. And whatever the enthusiasts for Bitcoin might think about how it’s going to change the world by being a deflationary non-governmental currency might desire us all to believe that’s pretty much the only way that the tax laws were ever going to work.

And we’ve other evidence to support the proposition as well. For the Germans made very much the same announcement not that long ago:

The German Finance Ministry ruled that Bitcoin is a “unit of account”, and therefore ‘mining’ them is a form of “money creation”.

This means that, like stocks or shares, any profit from them is subject to Germany’s capital gains tax, at 25pc – unless they are held for more than a year, according to German newspaper Frankfurter Allgemeine Zeitung.

And more recently our own dear HMRC made very much the same announcement:

As with any other activity, whether the treatment of income received from, and charges made in connection with, activities involving Bitcoin and other similar cryptocurrencies will be subject to Corporation Tax, Income Tax or Capital Gains Tax depends on the activities and the parties involved.

Whether any profit or gain is chargeable or any loss is allowable will be looked at on a case-by-case basis taking into account the specific facts. Each case will be considered on the basis of its own individual facts and circumstances. The relevant legislation and case law will be applied to determine the correct tax treatment. Therefore, depending on the facts, a transaction may be so highly speculative that it is not taxable or any losses relievable.. For example gambling or betting wins are not taxable and gambling losses cannot be offset against other taxable profits.

They’re all pretty much the same statement and that’s because the outcome of this was always pretty obvious. Bitcoin are valuable but not legal currency. Therefore they were always going to be taxed as something valuable and not as legal currency. For surely no one thought that Bitcoins weren’t going to be taxed at all, did they?



Posted: 27th, March 2014 | In: Money, News Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink