Here is a somewhat more extensive discussion of the implications of the IRS’ recent guidance on the tax treatment of bitcoin, written by BCS associate attorney David Freda.
As you may have now heard, on March 25, 2014, the IRS declared that, at least for now, Bitcoin will be taxed as property, rather than as a currency. For those who view bitcoin as an investment vehicle similar to stocks, this ruling sets a clearer path with well known “rules of the game” for dealing with the tax implications of bitcoin.
But for those who are interested in bitcoin as a new currency, the path is now cluttered with administrative, legal, and financial complexities.
In order to better understand the implications of the IRS’ new stance, let’s take a quick look at the taxation of property. Generally speaking, if you purchase property and it appreciates in value, you must pay tax on the gain you realize above the original purchase price when you sell the property. This rule has traditionally applied to stocks and bonds in the same…
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