Quote from: JoelKatz on July 22, 2011, 12:28:22 AM

Quote from: SgtSpike on July 21, 2011, 08:14:00 PM

So, you should record taxable income when you mine or receive bitcoins for any purpose at the value of the bitcoins at that time. Then, at the time you sell or use said bitcoins, and they have increased or decreased in value, you would record a capital gain/loss in the extended amount of the difference between the value of the bitcoins at time of receipt, and the fair market value of the goods/services purchased with the same number of bitcoins.

Say I play World of Warcraft and I kill a boss and get an item worth 10 gold. If the fair market value of that 10 gold is $5, do I have a taxable gain of $5?

Playing WoW would probably be regarded as a hobby here and any income from it treated as hobby income. While you can sell WoW gold for real money, the purpose of the game isn't to generate something of real world value. Bitcoins, on the other hand, are intended to be a currency and there are no non-financial reasons for mining/buying them - whether people mine them or buy them, trade them or hoard them, they are doing so in expectation of a financial return - that's likely to influence how they are treated for tax purposes as opposed to WoW gold, frequent flyer points, or Facebook credits.

As far as I know the tax question hasn't been settled anywhere yet, but I do recall a Guardian article which suggested that in the UK and Australia, the tax offices would most likely treat Bitcoins as an asset.