Quote from: don giovanni on March 27, 2014, 10:37:06 PM

No one pointed out the big purple elephant thats staring down its big trunk at bitcoin taxation, how can any of us including the IRS prove one way or another that the owner of an address that transacted years ago for a sum of bitcoin was in fact you? Perhaps if you were on an exchange in which you identified yourself, they would report this and it would be tied to you, but for all the other exchange methods that do not require or have no way of proving ones identity, what proof could any of us offer?

Now lets say instead of wanting to be taxed at the 25%-40% short-term capital gains rates you wanted to be taxed at the 15% long-term capital gains rates, instead of pointing to the addresses holding the coins you bought 6 months ago you could point way back in the blockchain (provided the purported gains did not offset the tax savings) and claim those were your bitcoins you bought from a guy on a forum. They demand proof, what proof? There is no proof, no way of proving that those coins were owned by you, does that mean they will then tax you at whatever rate they wish because there is no way to prove something? I dont know, do we all face maximum taxation unless we register our identities on an exchange?

I really don't think the IRS is going to care about the addresses where you store your bitcoins. What they will be looking at is large reported purchases made with bitcoin, or large amounts of cash coming into your bank account (a bank following KYC/AML laws) from an exchange. If you can't prove the source, then it will all get taxed. There's no innocent til proven guilty in tax court.

Think of it like cash. If you have sizable unexplained deposits to your bank account, or you buy a house with a duffel bag full of cash, the tax man will want to know what is going on.