Quote from: Tranz on March 25, 2014, 10:21:12 PM

Quote from: usabitcoinbuyer on March 25, 2014, 10:08:39 PM

Quote from: Tranz on March 25, 2014, 09:47:11 PM

Is this FIFO, do wash rules apply??

It is stupid to think you have to pay taxes on mining and then pay taxes again on use(assume btc is up) which you probably already paid taxes on the goods anyway.

So triple taxation for mining and using btc?

This is a shot directly at btc. Make is so unfriendly no one can possibly use it.

The triple taxation argument is a strawman. It's no different than 1) paying taxes on your salary, 2) using that salary to make money in the stock market and paying taxes on the gains, and 3) spending that money and paying sales tax on what you buy.

The idea that I generate a bit of tax bookkeeping every time I buy a bitcoin latte *is* rather annoying. What I would do personally in that situation, rather than keeping track of and reporting each individual transaction, is to total them up on a monthly, quarterly or annual basis, and report as an aggregate transaction: Spent a total of 2 BTC for 40 dinners worth a total of $1200. Cost basis of the 2 BTC was $900, so a net taxable gain of $300. A BTC wallet app could easily keep track of it.

Perhaps strawman, but unless I get do deduct the cost of mining from the equation, it is unfair to be sure. Not to mention quite difficult to track.

Also I don't think you can simply roll up your you liability into anything other then per transaction. The only way I know you can roll up stock transactions is if you have a broker license. Otherwise every sale must be meet with the purchase.

If you itemize deductions, I see no reason why you cannot deduct mining expenses as "miscellaneous investment expenses".

Note that strictly speaking, the IRS may not allow aggregating transactions, but from a practical standpoint, if it results in the right amount of tax paid and I can defend it should I be audited, I think it's fine.

There are some precedents in aggregated reporting, even if you aren't a broker. You are explicitly allowed to aggregate various purchases (see page 68, bottom of middle column: http://www.irs.gov/pub/irs-pdf/p550.pdf). For Section 1256 (futures) contracts, all the broker even reports is an aggregate net gain/loss (in part due to the high transaction volumes in trading these instruments). There are also specific exceptions listed in the Form 8949 instructions. Granted, none apply directly to bitcoin "sales" per se.

It's generally difficult to roll up stock transactions because they're reported individually by your broker on a 1099 and the IRS likes to see things match up. Assuming that retailers or payment processors aren't going to generate me a 1099 record for every bitcoin transaction, I believe it's immaterial whether I report separate transactions for my morning coffee, lunch, and dinner purchases versus a single transaction for "miscellaneous bitcoin transactions" containing the net total basis and proceeds (keeping long and short term transactions separately). The IRS isn't going to know without my telling them anyway. If called to task at an audit, I would hope that the common sense argument - "Did you really want 20 pages containing the 1000 or so $5 transactions I made? The end result is the same tax." - would settle the matter. Yeah. I know the IRS doesn't always work on common sense. I'll take my chances.

Note that IANAL. These are just my opinions and how I've decided I'd report the tax consequences of my bitcoining.