Quote from: datafish on April 01, 2014, 02:54:47 PM

Quote from: Dabs on April 01, 2014, 07:12:44 AM

@datafish, what kind of product or service would that be? Is it truly unique? I think I've seen everything you can possibly call a product or service, and nothing is unique in the sense that all of them are merely variations of something else.

I don't have anything specific in mind; I was just thinking out loud. What if you used BTC to buy early shares in Mastercoin or Ethereum? There is no clear valuation in a virtual startup on the first day of issuance, is there? Would you pay capital gains sometime later, once the startup becomes successful and you use the proceeds to buy some conventional product or service?

For the time being, I think the "answer" you'll receive is that the amount of BTC someone trades converted to $ at the time of the trade is the valuation. As bitcoin use grows, I think this answer will be seen as computationally ambiguous and will be rephrased to reflect reality.

There is already an area of ambiguity: what if you trade a bitcoin for a bitcoin? Clearly, if you sell a bitcoin for $ and immediately buy it back, this is a taxable event and if you realized a gain you are required to report it (you can't do this to realize losses however, as time limits apply). If you sell a bitcoin for litecoin and immediately buy it back, again you may have realized a gain. If you use a coin swap service to swap your coin for a completely unrelated coin (0% taint), then again you've engaged in trade at arm's length and if you realized a gain then the IRS will gladly accept payment.

But what would the current tax law say about a coinjoin transaction? If you use a coinjoin transaction to move your coins from A to B (you control both end points), is this a taxable event? You are engaging in trade with an arm's length party in a sense, but since you retain control (coinjoin is trustless) you never really trade your bitcoins (yet your taint profile changes). It's ambiguous--there is no physical analog to compare it to.

To conclude, I think bitcoin is working exactly as it should. It is showing the complexity and ambiguity of the current tax system and wakes people up to the fact that you cannot be 100% compliant. If everyone used bitcoin, however, the tax code could be overhauled into a few pages of C++ code.

I have ideas for how one could create a tax system that is unavoidable (no need to file anything) and completely voluntary at the same time. But that is the topic for a different thread.