Quote from: "Default Trust" is Tyrannically Centralized! (goat) on January 05, 2014, 04:24:43 AM

Quote from: TechieCFO on January 05, 2014, 04:12:53 AM

Barter transactions (bitcoin for bicycles, etc) -- i Think it only matters if its not a one-off transaction.
The IRS really is not in the business of going after a $1000 here or there just not enough meat on the bone...

JD

Thanks for the above post.

But lets say hypothetically an American living in Thailand for years bought mining equipment using Thai Baht, then mined BTC in Thailand, held that BTC for 2 years and then used it to buy a car worth $220,000?

Capital gains taxes should be paid? If not what sort of taxes?

This is not what happened in real life, as my wife bought the car with her BTC. But I did not use mine becasue I have no idea how to pay taxes on it. She as not being an American does not have to pay US taxes as far as I understand it.

The following is free information for entertainment purposes solely, does not include any specific tax advise, and cannot be used to avoid penalties...

The first thing this hypothetical guy needs to do is get his wife an ITIN (individual tax identification number similar to a SSN but only for tax filing purposes), so that she can be included on his US income tax returns. All US citizens must file income tax returns, and if the US citizen is married, the spouse, even if she is not a US person, must be included in the return. The US citizen must file a return that has an accurate filing status (Married Filing Jointly or Married Filing Separately -- advantages and disadvantages to either) In either case, you must file married and declare your non-US person wife. To file, but to not include your spouse, is incorrect and illegal. Whether her income is included on your tax return depends a many details.

The second thing is, an American living overseas, running a business denominated in a foreign currency does not release the American from his legal obligations to file and pay taxes as a US citizen living and working abroad. You will file your income taxes and denominate your income in USD, converted from Thai Baht based on average annual FX conversion rate.

The third thing is, yes capital gains is the most advantageous method of paying taxes on your bitcoins, but will it hold up in court is another issue up for debate with no definitive answer at the moment.

Lastly, I assume, and I apologize if I am making an incorrect assumption, this hypothetical American has been living abroad for many years and has failed to file income tax returns either because he did not make much income, wanted to give a big F U to Uncle Sam which is probably why he moved abroad in the first place, or just was lazy and Uncle Sam wasn't there to make sure he did the right thing. Whatever the reason might be, not filing and not paying taxes while living abroad is the same as not filing and not paying taxes while living in 'merica, it's illegal. If you do have unfiled tax years, get that taken care of first. Then worry about the correct treatment of your bitcoin gains.