Quote from: achillez on December 15, 2013, 07:53:26 AM

Quote from: mgio on December 12, 2013, 06:04:40 PM

Quote from: NorbyTheGeek on December 05, 2013, 03:17:32 PM

Okay, I get that buying Bitcoin and then selling for a profit probably falls under capital gains.

What about mining? Say I started with 0 bitcoin, bought some mining equipment with fiat, and mined 1 bitcoin. If I cash that out, is it capital gains? Other income?

With my situation, it gets even weirder. That bitcoin that I mined has never been exchanged for fiat, but instead has been invested into things like CEX and CryptoStocks. In addition I have a 2nd bitcoin that I bought for $200 that is also invested in these ventures.

I don't plan on cashing any of it out before the end of the year, in fact my mined coins all get reinvested into something. But I have no idea on how to treat this stuff with regards to U.S. taxes. Mining in particular is unique in that I'm "creating" either a commodity or a currency, (depending on how you view Bitcoin) as well as performing a service (collecting a fee for confirming transactions).

If you mine bitcoins it is counted as income based on the value of the bitcoins at the time you mine them. Yes, it's a huge pain to keep those kinds of records, but it is the legal way to do it.

It should be "0" when you mine it. At least this is certainly the case with speculative altcoins. After that it should just be treated as a commodity with capital gain applications, where you're initial cost was "0" and anything after that is pure profit.

A tax lawyer may tell you that the cost will include all the costs of the mining equipment (depreciated on a schedule) the monthly electricity, rent, and support costs.
Some people lose money mining. You don't pay tax on a loss.