Quote from: charliemaggot on October 03, 2014, 10:42:20 PM

Quote from: countryfree on October 03, 2014, 03:54:00 PM

Capital gains tax is due on your gain, so that's one BTC in your case.

No it isn't.

Quote from: becapital on October 03, 2014, 12:01:32 PM

Okay so i understand that all bitcoin i receive is taxed as income and then taxed for capital gain once i sell but say this happens- I loan 10 bitcoins out and then at the end of the month i get 11 bitcoins back with the 10 being my principal and the extra 1 as interest. would i only need to pay taxes for the 1 bitcoin since i payed taxes already on my other 10 or is there something wrong with my assumptions?

That extra 1 BTC is interest income. It's just like being paid cash interest. Find the daily price on the day you received it and report it as income, unless the borrower sends you a 1099-INT, in which case you should use that figure.

Just because the borrower sends you a tax form with a potentially incorrect amount does not mean you need to use that amount if it is not factual. I believe it to be very rare that the final version of tax forms are sent out with incorrect numbers however you are only liable to pay taxes on your actual income as per the law not what is reported that you earned.

I believe that you are correct regarding fair market value of the bitcoin paid as interest at the time it is received. This will be your cost basis for this bitcoin.

I think the much more complicated question is that of chargeoffs when a loan is determined to be noncollectable. The question is when you sell collateral and are only able to collect, say 90% of the amount lent, how would you handle this on your taxes? Also, generally speaking you must send a tax form (I believe it is a 1099-MISC) when you 'cancel' debt to allow your to take a tax deduction however you generally not collect a borrower's social security number when lending