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.