On the other hand, the day the IRS can tell me how much wealth I have in my (vastly larger quantity) brain wallet is the day I pay taxes on my true wealth.
Spoiler: This day will never come.
Spoiler: This day will never come.
Unless you mined those coins in your brain wallet yourself, the IRS doesn't really care what you have in it until you convert it back to fiat. That's when you calculate your capital gains.
Wrong.
Read the ruling.
My $.02.
http://www.forbes.com/sites/kellyphillipserb/2014/03/25/irs-says-bitcoin-other-convertible-virtual-currency-to-be-taxed-like-stock/
For those buying and selling Bitcoin as an investment, calculating gains and losses are figured the same as buying and selling stock. The basis, the holding period and even the triggering event (the sale of the asset) are all very clear.
I have stocks and I don't pay any tax on them until I sell those stocks. My understanding is that it works the same way with conversion of btc to fiat. This is what I assumed before this IRS guidance even. But maybe I'm misunderstanding.
"Q-
8: Does a taxpayer who mines virtual currency (for example, uses computer
resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities? A-8:
Yes, when a taxpayer successfully mines virtual currency, the fair market value
of the virtual currency as of the date of receipt is includible in gross income. See Publication 525,
Taxable and Nontaxable Income
, for more information on taxable income."
Not me, THEM!
Have a nice day!
My $.02.
You're right when mining things are different. Maybe I didn't specify that clearly. I was only speaking to people that purchased BTC as an investment.