I understand you will need to pay taxes on BTC.
What I am saying is you wouldn't need to pay taxes twice.
So you are saying that if you don't convert to fiat, you don't have to pay any capital gains tax.
Could you provide some links which support this claim?
I highly doubt that there is a giant loophole which allows you to trade your bitcoin acquired at $1 each for some goods at the current exchange rate of $1k+ without paying capital gains on those bitcoins.
That's like saying if I bought gold at $250, I can go exchange it for a new car today at $1200 plus without worrying about capital gains on the gold. I just need to find a car dealership which will accept gold. I don't think that's how it works.
Hey sorry don't mean to be confusing.
Wouldn't the example go something like this for the 2 transactions outlined below? Correct me if I am wrong please and apologies for the confusion.
1) Bob sells 10 BTC = $10,000. It is a recognized gain thus being taxed 20% (unless held longer than a year and in first 2 tax brackets).
Bob also uses the $10,000 to purchase a brand new car. The total cost of the car is $11,000 after taxes (again i don't know tax rate on car, just an example)
In total, Bob will spend $2,000 on capital gains tax (assuming he sold less than 1 year) and he paid $1,000 on sales tax= $3,000 of total tax
2) Bob does not convert BTC to Fiat. Bob buys a brand new car for 10 BTC online from craigslist. Bob will still report the purchase.
Using the same percentage of 10%, Bob will then pay 1 BTC of sales tax to the IRS.
Bob in total paid in total 1 BTC (10%) sales tax or total taxes paid = $1,000
In scenario 2 he pays $1,000 instead of $3,000 because he did not sell his BTC. He bought it directly and paid with BTC and will only pay BTC sales tax. Does that make sense?
I understand what you are saying. What makes you think (other than wishful thinking) that you can skip the capital gains step just because you spend those coins directly?