The IRS has issues a notice, Notice 2014-21, providing guidance on its position regarding how virtual currencies such as Bitcoins should be taxed. Under this new guidance notice, the IRS has taken the position that virtual currencies and crypto currencies, such as Bitcoins, are taxable as property, and transactions occurring using virtual currencies will be treated as property transactions for tax purposes.
While this Notice does not solve all of the concerns and issues inherent in the use of virtual currencies, it at least answers nagging questions regarding the U.S. federal tax treatment for the currencies and for transactions carried out using such virtual currencies.
“On Tuesday, Apple is set to report financial results for the second quarter. Analysts are expecting net income of $9.8 billion. But whatever figure Apple reports won’t reflect its true profit, because the company hides some of it with an unusual tax maneuver.
Apple Inc., already the world’s most valuable company, understates its profits compared with other multinationals. It’s building up an overlooked asset in the form of billions of dollars, tucked away for tax bills it may never pay.
Tax experts say the company could easily eliminate these phantom tax obligations. That would boost Apple’s profits for the past three years by as much $10.5 billion, according to calculations by The Associated Press.”
Again the age-old line between making clever use of existing tax laws and tax evasions, at least on the surface, appears vanishingly thin. Of course, it’s generally easier to avoid millions in taxes than it is thousands. Regardless of the somewhat distasteful appearance of such maneuvering, it points up the fact that competent counsel on the tax front can be a tremendous asset to business, as legitimate opportunities for real savings exist. The lesson being, having (and regularly consulting with) a good accountant is one of the most important things a business can do.
A recent study, published by James Bessen and Micahel Meurer of the Boston University School of Law examines the direct costs of patent litigation by “non-practicing entities” (NPEs), more commonly known as “patent trolls”. Their assessment is that the direct costs of patent litigation initiated by NPEs in the U.S. rose from $6.6B in 2005 (encompassing 1,401 claims) to $29B in 2011 (encompassing 5,842 claims). Earlier research from the same authors found that the the annual wealth lost by publicly traded companies in the U.S. was a staggering $80B in 2011.
The authors identify increasing patent litigation as “a significant tax on investment in innovation,” with the the direct result of organizations having less money to invest in their research with increasing resources being bled off into legal defense.
Bessen and Meurer reject the notion put forward by IP rights firms that asserting patents plays a socially valuable role in enabling inventors to realise greater profits from their innovations. Rather, the authors assert that patent lawsuits are a social loss and not a transfer of wealth as rights holders assert.