Quote from: DebitMe on June 11, 2013, 06:47:05 PM

Of course, if the coins are used to buy gold or silver, which are not comoodities or stocks, then this complicates things further. What basis do we use now? My thoughts on this would be that the basis rolls over and you will still have to recognize gains on the liquidation of the gold or silver.

My thought is though, what if you buy gold or silver and then put it into an RIA? These grow nontaxable, and lead me to believe that by doing this you can grow your investment tax free and then only have to recognize the gains when you start drawing from it. This is just a thought that I had, not sure if it is possible or not or how it would be viewed.

Watch yourself with this one. The taxation of bitcoins is not as complicated as a lot of people want to make it (with the possible exception of mining).

Most countries have a barter provision in the tax code. For any country with such a provision, when you buy anything with bitcoins, you immediately owe taxes on either the value of that item (if you somehow acquired the BTC for nothing) or the capital gains embodied in the price less whatever you paid for the bitcoins at the time you bought them. These are facts. The additional fact is that it may be very challenging and largely unrewarding for tax authorities to ascertain the value of such items or the price you paid for a given group of bitcoins, which may make it appealing for some people to either fabricate values or forget to pay taxes entirely. The relative ease of tax avoidance with a given instrument does not equal the absence of tax oversight for them, however. Canada and the UK have already released specific guidance on this point, but I don't know whether other countries have explicitly addressed bitcoins with guidance. The general view of Canada Revenue Agency and of Her Majesty's Revenue and Customs was "We don't need to make changes to the tax code. It already provides for this stuff. Treat it as barter or as non-commodity investment assets."

So tax codes are not changing to account for Bitcoin currently, but that is because Bitcoin is viewed as falling within the scope of existing provisions. This view will vary from case to case and country to country, but it doesn't mean the tax authorities don't care, just that the overall market cap of Bitcoin is still low enough that they aren't trying specifically to get a piece of that particular pie with special regulations yet.

I'm not ignoring mining, but I'm not that worried about it for the moment - the easiest option for it is to still treat it like any commercially produced product with a given rate of input (hardware, percentage of mortgage if relevant, and electricity rates) but with a variable sale price, like any commodity. I'm not saying that bitcoin IS a commodity, only that there are plenty of businesses already producing commodities and that Bitcoin's price volatility is not unique from a tax standpoint. It's true that at the lower income levels, tax authorities generally *likely* won't care. Bear in mind that lack of official enforcement activity is not the same as permission though.

Anyway, hopefully this sheds some additional light. I haven't included specific references but can do later. I need to go catch a flight, but if anybody wants specific links just ask or PM me. Cheers!