Bitcoin tax problem

**Norm** · 03-27-2014, 09:14 AM

As a few online and bricks & mortar casinos now accept bitcoins, I thought I’d mention a potential tax problem. The IRS has ruled that bitcoins are not a currency, but property. As property, I would imagine that transactions would have to be reported, which could result in a very long Schedule D and/or form 8949s. With stocks, your broker will send you most of the required info. But, with bitcoins, I expect you’d need to track this yourself. I expect you’d have to determine with each sale the cost basis of the bitcoin sold. And, you’d need to separate transactions into long-term and short-term. Sounds nightmarish.

Any accountants care to weight in on this?

**muckz** · 03-27-2014, 10:43 AM

On further research, I have no idea. Neither does anybody else thankfully, the only assumption I can make is that no company would consider Bitcoin as Short-term, unless they were immediately converting it.

**Norm** · 03-27-2014, 10:59 AM

What worries me is the possibility that buying chips with bitcoins is a bitcoin sale. Which might mean you would need to find the cost basis of the bitcoins sold and report the difference as a short- or long-term capital gain/loss.

**Bodarc** · 03-27-2014, 12:27 PM

I have never researched it and probably never will but here are some thoughts. Investing in a bit coin is the same as investing in a gold bar. Your basis is what you pay for it or if you generate it, your basis is zero. Your holding period begins on the date purchased or created. If you exchange a bit coin for a casino chip, you are exchanging (non like kind) property and therefore your sale price would be the fair market value of the property received (the casino chip, which since it is instantly convertible to cash would be its cash value). You have made a sale and whether it is long term or short term depends on whether or not you have held the bit coin for a year.

So, yes the record keeping could become almost as severe as the volatility. I wouldn't look to the IRS to be very tolerant when it comes to bit coin transactions.

**bigplayer** · 03-27-2014, 04:53 PM

I used them only 1x and the website I used them on was shut down by the FBI. (you know the one).

**mrw464** · 03-27-2014, 05:15 PM

Haha bigplayer it was quite a surprise when that day happened. Such places still exist, but that particular place was wonderful

**Adrianno** · 03-28-2014, 10:10 PM

IRS gets richer and faster than casinos. For example, a $0.30 bitcoin was traded for $1,100 on 19 of November, 2013. A schedule D would look like this:

Purchase Date: 6/30/2011
Cost: $0.30 (round off: Cost $0.00)

Date of sales: 11/19/2013
Sales: $1,100

A $1,100 long term taxable gain was realized per each bitcoin.

IRS could take in $220 at the capital gain tax bracket of 20% per each bitcoin.

!

**roliin** · 03-29-2014, 10:42 PM

My understanding is that you will have to report your transactions as capital gains. You will be taxed the same way you would if you paid for something with real money (gold) if your real money (gold) had gained in value. Ain't that special!

**SURFER** · 03-30-2014, 10:39 AM

I love bitcoins, Just bought 5 more at 447.00 use coinbase

**Blitzkrieg** · 03-30-2014, 02:27 PM

I think Bitcoins are a trend that will not gain much traction here in the U.S. amongst the populace. There not even physical, just a bunch of binary digits on a screen. I hope all Bitcoin users get the shaft, it seems that is already in the process lol.