Post
Topic
Board Legal
Re: Bitcoin Is Property Not Currency
by
bbeagle
on 26/03/2014, 13:05:21 UTC

So what happens when you sell? You have accumulated coins over the months, but how do you know which particular coins you are selling? Maybe you're selling 5% of the coins you mined at $600, 2% of the coins mined at $630, 6% of the coins you mined at $510

Do you see where I'm going with this?

Even though YOU might keep the coins you mined in different wallets, the IRS doesn't know any difference - or care. YOU are paying taxes, and they're all YOURS.

Example:
Mint 1 btc on April 1 - going rate $600 = $600
Mint 5 btc on May 1 - going rate $700 = $3500
Mint 5 btc on June 1 - going rate $500 = $2500

On August 1 you sell 20% of each.... the IRS doesn't care which 'wallet' they came from - they're ALL yours.
The IRS simply takes the August 1 selling rate, say $1000, and .2 + 1 + 1 = 2.2 x 1000 = $2,200 cashed in value.

The IRS uses a first-in-first-out to determine the profit you made. The IRS calculates that out of 2.2, the 1 came from April 1 btc, and 1.2 came from May 1 btc. Therefore the cashed in value of $2200 is subtracted from $600 and $700 x 1.2 = $840. $600 + $840 = $1440.

$2200 - $1440 = 760 - your profit.

Despite you keeping your coins in different wallets, you still have 11 - 2.2 = 8.8 btc left. That's all the IRS cares about.

Earnings = 600 + 3500 + 2500 = 6600
Profit = 760
Total Taxable = $7360

Accountants have been doing this for years. It's no different with bitcoins.