Quote from: FrogBBQ on November 18, 2012, 06:13:46 AM

Maybe you should read this. Looks to me to be a big can of worm for IRS at present though.

Interesting article, but mostly reflects my original post, in terms of not really knowing how to approach the subject.

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The organization published its first memorandum, "Staying Between the Lines: A Survey of U.S. Income Taxation and its Ramifications on Cryptocurrencies," to provide some legal insight on the taxability of cryptocurrencies such as bitcoin. In the memo, the organization argued that crytocurrencies are compatible with tax regulation structures. It also stressed the importance for taxpayers to determine on their own whether taxes are due on a bitcoin-related transaction based on whether one has "experienced a realization event."

Such events would include selling goods, like BitBrew, or selling bitcoins themselves for cash. In instances where a taxpayer has provided a service in exchange for bitcoins, a realization event has probably occurred, and any gain or loss would likely be calculated using fair market values for the service provided, according to the memo.

"For users of bitcoin who may be concerned about being impacted by current tax policy, I would recommend that if you have any inkling that you may be under a tax jurisdiction, you should certainly do your best to abide by whatever rules you think you're impacted by and play it on the safe side," Elias said. "Just be cautious with it."

The taxpayer should determine on their own whether taxes are due, and abide by whatever rules you think you're impacted by, hmm.

Well, as to the moment it seems like my original guess is the safest, I was curious if anyone had come up with a workable rationale to alternate tax treatments other than simply declaring money taken from exchanges as income, which would I think stand up the best to any kind of scrutiny.

I don't think this is an entirely irrelevant question though, especially as I contemplate the jump into ASICs, if I were to plunk thousands of dollars into hardware that could potentially generate more (tens of) thousands of dollars, it becomes something that I expect the IRS would be quite interested in. And can of worms or no, when the IRS comes along auditing, I believe the burden lies on the taxpayer to defend their choices.