Law & Disorder / Civilization & Discontents

IRS: Bitcoin is property, like a stock or bond, and not a currency

If you sell Bitcoin and make money, you have to pay taxes on it.

Just in time for tax day (April 15 in the United States), the Internal Revenue Service has issued six pages of guidelines (PDF) detailing how it considers the legality of Bitcoin and other “virtual currencies.”

Specifically, the document, which was published on Tuesday, designates that Bitcoin will be treated for tax purposes as a property and not as a currency.

That would make it roughly analogous to a stock, bond, or piece of real estate whose value fluctuates over time and would be subject to a capital gains tax when that property (Bitcoin, or another similar altcoin) were to be sold at a profit or loss.

The IRS also notes that “a taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in US dollars, as of the date that the virtual currency was received.”

Further, the agency adds, a person who mines bitcoins should include that as part of their gross income “at the fair market value of the virtual currency as of the date of receipt.”

Last year, a federal judge in the United States declared Bitcoin a currency as pertaining to an ongoing lawsuit, and not for tax purposes. More recently, two financial watchdogs issued warnings about Bitcoin, noting that it is “not legal tender.”

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