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Is this FIFO, do wash rules apply??
It is stupid to think you have to pay taxes on mining and then pay taxes again on use(assume btc is up) which you probably already paid taxes on the goods anyway.
So triple taxation for mining and using btc?
This is a shot directly at btc. Make is so unfriendly no one can possibly use it.
It is stupid to think you have to pay taxes on mining and then pay taxes again on use(assume btc is up) which you probably already paid taxes on the goods anyway.
So triple taxation for mining and using btc?
This is a shot directly at btc. Make is so unfriendly no one can possibly use it.
The triple taxation argument is a strawman. It's no different than 1) paying taxes on your salary, 2) using that salary to make money in the stock market and paying taxes on the gains, and 3) spending that money and paying sales tax on what you buy.
The idea that I generate a bit of tax bookkeeping every time I buy a bitcoin latte *is* rather annoying. What I would do personally in that situation, rather than keeping track of and reporting each individual transaction, is to total them up on a monthly, quarterly or annual basis, and report as an aggregate transaction: Spent a total of 2 BTC for 40 dinners worth a total of $1200. Cost basis of the 2 BTC was $900, so a net taxable gain of $300. A BTC wallet app could easily keep track of it.
Perhaps strawman, but unless I get do deduct the cost of mining from the equation, it is unfair to be sure. Not to mention quite difficult to track.
Also I don't think you can simply roll up your you liability into anything other then per transaction. The only way I know you can roll up stock transactions is if you have a broker license. Otherwise every sale must be meet with the purchase.
Note that strictly speaking, the IRS may not allow aggregating transactions, but from a practical standpoint, if it results in the right amount of tax paid and I can defend it should I be audited, I think it's fine.
There are some precedents in aggregated reporting, even if you aren't a broker. You are explicitly allowed to aggregate various purchases (see page 68, bottom of middle column: http://www.irs.gov/pub/irs-pdf/p550.pdf). For Section 1256 (futures) contracts, all the broker even reports is an aggregate net gain/loss (in part due to the high transaction volumes in trading these instruments). There are also specific exceptions listed in the Form 8949 instructions. Granted, none apply directly to bitcoin "sales" per se.
It's generally difficult to roll up stock transactions because they're reported individually by your broker on a 1099 and the IRS likes to see things match up. Assuming that retailers or payment processors aren't going to generate me a 1099 record for every bitcoin transaction, I believe it's immaterial whether I report separate transactions for my morning coffee, lunch, and dinner purchases versus a single transaction for "miscellaneous bitcoin transactions" containing the net total basis and proceeds (keeping long and short term transactions separately). The IRS isn't going to know without my telling them anyway. If called to task at an audit, I would hope that the common sense argument - "Did you really want 20 pages containing the 1000 or so $5 transactions I made? The end result is the same tax." - would settle the matter. Yeah. I know the IRS doesn't always work on common sense. I'll take my chances.
Note that IANAL. These are just my opinions and how I've decided I'd report the tax consequences of my bitcoining.
I wanted to clarify when the $600 rule applies. An example would be if you operated a gold-4-bitcoin shop and used BitPay as your payment processor.
If you only sold $400 of gold via BitPay that year, nothing would happen. However, if you sold $100,000 of gold via BitPay that year, BitPay would be required to report this amount. In no case does BitPay care who your customers are, they just need to keep track of the total funds they transfer to you. Your customers are your business, not BitPay's.
These are the same reporting requirements as for PayPal or Visa.
If you only sold $400 of gold via BitPay that year, nothing would happen. However, if you sold $100,000 of gold via BitPay that year, BitPay would be required to report this amount. In no case does BitPay care who your customers are, they just need to keep track of the total funds they transfer to you. Your customers are your business, not BitPay's.
These are the same reporting requirements as for PayPal or Visa.
Thanks for the clarification. I picked up on that when I looked up the details on 1099-K reporting, which I suspect BitPay is likely already doing.
Is this FIFO, do wash rules apply??
It is stupid to think you have to pay taxes on mining and then pay taxes again on use(assume btc is up) which you probably already paid taxes on the goods anyway.
So triple taxation for mining and using btc?
This is a shot directly at btc. Make is so unfriendly no one can possibly use it.
It is stupid to think you have to pay taxes on mining and then pay taxes again on use(assume btc is up) which you probably already paid taxes on the goods anyway.
So triple taxation for mining and using btc?
This is a shot directly at btc. Make is so unfriendly no one can possibly use it.
The triple taxation argument is a strawman. It's no different than 1) paying taxes on your salary, 2) using that salary to make money in the stock market and paying taxes on the gains, and 3) spending that money and paying sales tax on what you buy.
Let's make this clear. If BTC is worth $500 when you mine it and $600 when you spend it, you pay taxes on the $500 of mined value when you mine it. You pay taxes on the $100 increase in value when you spend it. The total $600 essentially only gets taxed once.
The idea that I generate a bit of tax bookkeeping every time I buy a bitcoin latte *is* rather annoying. What I would do personally in that situation, rather than keeping track of and reporting each individual transaction, is to total them up on a monthly, quarterly or annual basis, and report as an aggregate transaction: Spent a total of 2 BTC for 40 dinners worth a total of $1200. Cost basis of the 2 BTC was $900, so a net taxable gain of $300. A BTC wallet app could easily keep track of it.
Edit: On second thought, wash sale rule probably doesn't apply to bitcoin as it's not a "security".
Oh my. What does this mean for bitcoin payment processors like BitPay?
Say I use BTC to buy $1000 in gold from someone who uses BitPay. This exceeds the $600 reporting threshold. As BitPay is doing the BTC->USD conversion, the gold dealer gets paid in cash and has no reporting responsibility. However, in this scenario, I believe BitPay would have a reporting responsibility. Ugh.
Edit: It turns out the IRS Q&A addresses this in Q-15 (below). Form 1099-K is filed by the payment processor for funds paid to the merchant. It's not immediately clear that there's any reporting by the payment processor that would pertain to the bitcoin spender :
===
Q-15: Are there IRS information reporting requirements for a person who settles payments made in virtual currency on behalf of merchants that accept virtual currency from their customers?
A-15: Yes, if certain requirements are met. In general, a third party that contracts with a substantial number of unrelated merchants to settle payments between the merchants and their customers is a third party settlement organization (TPSO). A TPSO is required to report payments made to a merchant on a Form 1099-K, Payment Card and Third Party Network Transactions, if, for the calendar year, both (1) the number of transactions settled for the merchant exceeds 200, and (2) the gross amount of payments made to the merchant exceeds $20,000. When completing Boxes 1, 3, and 5a-1 on the Form 1099-K, transactions where the TPSO settles payments made with virtual currency are aggregated with transactions where the TPSO settles payments made with real currency to determine the total amounts to be reported in those boxes. When determining whether the transactions are reportable, the value of the virtual currency is the fair market value of the virtual currency in U.S. dollars on the date of payment.
See The Third Party Information Reporting Center, http://www.irs.gov/Tax-Professionals/Third-Party-Reporting-Information-Center, for more information on reporting transactions on Form 1099-K.
===
Say I use BTC to buy $1000 in gold from someone who uses BitPay. This exceeds the $600 reporting threshold. As BitPay is doing the BTC->USD conversion, the gold dealer gets paid in cash and has no reporting responsibility. However, in this scenario, I believe BitPay would have a reporting responsibility. Ugh.
Edit: It turns out the IRS Q&A addresses this in Q-15 (below). Form 1099-K is filed by the payment processor for funds paid to the merchant. It's not immediately clear that there's any reporting by the payment processor that would pertain to the bitcoin spender :
===
Q-15: Are there IRS information reporting requirements for a person who settles payments made in virtual currency on behalf of merchants that accept virtual currency from their customers?
A-15: Yes, if certain requirements are met. In general, a third party that contracts with a substantial number of unrelated merchants to settle payments between the merchants and their customers is a third party settlement organization (TPSO). A TPSO is required to report payments made to a merchant on a Form 1099-K, Payment Card and Third Party Network Transactions, if, for the calendar year, both (1) the number of transactions settled for the merchant exceeds 200, and (2) the gross amount of payments made to the merchant exceeds $20,000. When completing Boxes 1, 3, and 5a-1 on the Form 1099-K, transactions where the TPSO settles payments made with virtual currency are aggregated with transactions where the TPSO settles payments made with real currency to determine the total amounts to be reported in those boxes. When determining whether the transactions are reportable, the value of the virtual currency is the fair market value of the virtual currency in U.S. dollars on the date of payment.
See The Third Party Information Reporting Center, http://www.irs.gov/Tax-Professionals/Third-Party-Reporting-Information-Center, for more information on reporting transactions on Form 1099-K.
===
Re: Hackers steal data from MtGox server and release it with Mark's reddit account.
Most of the 16 accounts with negative BTC balances have no corresponding BTC deposit/withdrawal history. I was hoping to find some evidence of the transaction malleability exploit there.
There are no transaction logs after Nov 2013. It is possible the transactions you are looking for are the redacted ones.
I was looking at the btc_xfer_report, which as I previously mentioned, has transactions dating all the way up to Feb 19.
The btc_xfer_report shows withdrawals occurring well after the Feb 7 BTC withdrawal suspension. There are 1360 withdrawals dated Feb 10 or later, involving 315 wallet ids, totaling 15541 BTC.
Many of these are paired with deposits to other wallet ids, so this suggests that the xfers document internal non-blockchain transfers as well.
Many of these are paired with deposits to other wallet ids, so this suggests that the xfers document internal non-blockchain transfers as well.
I pursued this line of investigation a bit further: All withdrawals after Feb 8 are paired with a deposit to another wallet id, so they all appear to be internal transfers. In other words, if there were external BTC withdrawals allowed for "special" users, they aren't in the btc_xfer_report list.
There were a net 1295 BTC deposited on or after Feb 8, in 2666 transactions. Most were for fractional amounts, but as an example, there were 32 1 BTC deposits, and 3 10 BTC deposits... and the largest was a deposit of 420.
Re: Hackers steal data from MtGox server and release it with Mark's reddit account.
One more installment of random stats...
Most of the 16 accounts with negative BTC balances have no corresponding BTC deposit/withdrawal history. I was hoping to find some evidence of the transaction malleability exploit there. It looks like most of the negative balance accounts date back to 2011, so they could represent fallout from the database reset. The negative balances "only" total about 300 BTC.
If you're keeping score on relative magnitude of goxxage, here's a CDF of the BTC balances:
Most of the 16 accounts with negative BTC balances have no corresponding BTC deposit/withdrawal history. I was hoping to find some evidence of the transaction malleability exploit there. It looks like most of the negative balance accounts date back to 2011, so they could represent fallout from the database reset. The negative balances "only" total about 300 BTC.
If you're keeping score on relative magnitude of goxxage, here's a CDF of the BTC balances:
Code:
Total = 88267
Accounts greater than or equal to (BTC/satoshi)
10000 B = 5 (0.006%)
1000 B = 101 (0.114%)
100 B = 1367 (1.549%)
10 B = 8658 (9.809%)
1 B = 26470 (29.99%)
0.1 B = 42766 (48.45%)
0.01 B = 55324 (62.68%)
0.001B = 69266 (78.47%)
10000 s = 79420 (89.98%)
1000 s = 84957 (96.25%)
100 s = 86350 (97.83%)
10 s = 87069 (98.64%)
1 s = 88251 (99.98%)
Accounts greater than or equal to (BTC/satoshi)
10000 B = 5 (0.006%)
1000 B = 101 (0.114%)
100 B = 1367 (1.549%)
10 B = 8658 (9.809%)
1 B = 26470 (29.99%)
0.1 B = 42766 (48.45%)
0.01 B = 55324 (62.68%)
0.001B = 69266 (78.47%)
10000 s = 79420 (89.98%)
1000 s = 84957 (96.25%)
100 s = 86350 (97.83%)
10 s = 87069 (98.64%)
1 s = 88251 (99.98%)
Re: Hackers steal data from MtGox server and release it with Mark's reddit account.
Some more interesting info...
The btc_xfer_report shows withdrawals occurring well after the Feb 7 BTC withdrawal suspension. There are 1360 withdrawals dated Feb 10 or later, involving 315 wallet ids, totaling 15541 BTC.
Many of these are paired with deposits to other wallet ids, so this suggests that the xfers document internal non-blockchain transfers as well.
There is a screenshot.png in the bin folder which shows some withdrawals in an admin interface. For whatever reason, they are all associated with wallet id 023e30c1-9c0d-41be-a471-6ac6992f62f1. I wonder if there's something significant about that wallet vs. the others, or it was just a random example. In any case, if this was intended to show that there were "special" external withdrawals after the freeze, that wasn't the case. It looks like all of the withdraws from this account went to wallet id a6acd802-bb4f-412b-be6d-b0bf3f2bb055.
The btc_xfer_report shows withdrawals occurring well after the Feb 7 BTC withdrawal suspension. There are 1360 withdrawals dated Feb 10 or later, involving 315 wallet ids, totaling 15541 BTC.
Many of these are paired with deposits to other wallet ids, so this suggests that the xfers document internal non-blockchain transfers as well.
There is a screenshot.png in the bin folder which shows some withdrawals in an admin interface. For whatever reason, they are all associated with wallet id 023e30c1-9c0d-41be-a471-6ac6992f62f1. I wonder if there's something significant about that wallet vs. the others, or it was just a random example. In any case, if this was intended to show that there were "special" external withdrawals after the freeze, that wasn't the case. It looks like all of the withdraws from this account went to wallet id a6acd802-bb4f-412b-be6d-b0bf3f2bb055.
Re: Hackers steal data from MtGox server and release it with Mark's reddit account.
It's possible that there were accounts without bitcoin balances.
Although, I still don't trust anything Gox says.
Right. I just realized that. Reference my edited post above...
But... then that would mean that 900,000 of the customers either 1) never deposited any BTC or 2) were smart enough to get it all out before the final goxxing. I wasn't that smart, and I'd find it hard to believe that 90% of users who ever had a balance actually got it out. On the other hand, I wouldn't be surprised that Gox would claim any registered account as a customer, even if it never had any deposit/trade activity.
Re: Hackers steal data from MtGox server and release it with Mark's reddit account.
I'm trying to do some datamining on the files. Here are some interesting initial observations:
- There are 88267 accounts with BTC balances; I was under the impression there should be more than that.
- There appear to be wallet ids in the transaction history that aren't in the mtgox_balances file. This would explain the above.
- Some accounts have negative BTC balances (-85 BTC!). Oops!
Edit: it looks like 0 balance accounts aren't in mtgox_balances, so you can't xref user ids with wallet ids for those.
Edit2: There are 39905 accounts with only fiat balances, for a total of 128172 unique user accounts in the mtgox_balances file. The btc_xfer_report has 147079 unique wallet ids that have either deposited or withdrawn bitcoin. That implies at least 18907 users who have shown BTC deposit/withdrawal activity got all their funds out. I haven't yet gone through the trade history logs, so this is just a lower bound.
- There are 88267 accounts with BTC balances; I was under the impression there should be more than that.
- There appear to be wallet ids in the transaction history that aren't in the mtgox_balances file. This would explain the above.
- Some accounts have negative BTC balances (-85 BTC!). Oops!
Edit: it looks like 0 balance accounts aren't in mtgox_balances, so you can't xref user ids with wallet ids for those.
Edit2: There are 39905 accounts with only fiat balances, for a total of 128172 unique user accounts in the mtgox_balances file. The btc_xfer_report has 147079 unique wallet ids that have either deposited or withdrawn bitcoin. That implies at least 18907 users who have shown BTC deposit/withdrawal activity got all their funds out. I haven't yet gone through the trade history logs, so this is just a lower bound.
Re: Satoshi Nakamoto's P2P foundation profile makes a reply
Still waiting for Ning to confirm or deny any suspicious activity on that account... They sure are taking their sweet time. 
If this satoshi impostor is to be believed, the ning post was faked. https://bitcointalk.org/index.php?topic=506692.0
So, apart from F1) My birth name is not Satoshi Nakamoto, circumstantial evidence might suggest that *I* am the real Satoshi.
Yeah, if your birth name were Satoshi Nakamoto, you would be a possible match. But your birth name is not. And that is the one-in-a-ten-million circumstance.
Because if I were the real Satoshi, I would have used my birth name on the design paper? Perhaps I would have used the name of a random young gentleman I met once at the Crown & Anchor, who very clearly was not involved with Bitcoin, because I thought the name had a certain mystique.
Let's have a look at the circumstancial evidence for and against Dorian S Nakamoto being the Bitcoin founder.
For:
1) His birth name is Satoshi Nakamoto.
2) He appears to have education and skills required for inventing and programming the first version of Bitcoin.
3) He appears to hold libertan views in line with the Bitcoin ideology.
4) His time zone is consistent with the analysis of Satoshi Nakamoto's postings.
The matching names is the most (perhaps the only) compelling piece of the circumstancial evidence. Without the name match, it would not have been possible to locate him without somebody who knew him directly during the Bitcoin development (if there were any who knew him directly).
Against:
1) Some of his on-line writings show lack of mastering English adequately. However, there are examples of other on-line writings of his where he clearly masters English. If Dorian is indeed the Bitcoin founder, he either enjoys trolling or those poorly written excerpts are decoys to divert any on-line researchers seeking Satoshi Nakamoto off track.
I really can't find any other circumstancial evidence that would be against him being the Bitcoin founder.
For:
1) His birth name is Satoshi Nakamoto.
2) He appears to have education and skills required for inventing and programming the first version of Bitcoin.
3) He appears to hold libertan views in line with the Bitcoin ideology.
4) His time zone is consistent with the analysis of Satoshi Nakamoto's postings.
The matching names is the most (perhaps the only) compelling piece of the circumstancial evidence. Without the name match, it would not have been possible to locate him without somebody who knew him directly during the Bitcoin development (if there were any who knew him directly).
Against:
1) Some of his on-line writings show lack of mastering English adequately. However, there are examples of other on-line writings of his where he clearly masters English. If Dorian is indeed the Bitcoin founder, he either enjoys trolling or those poorly written excerpts are decoys to divert any on-line researchers seeking Satoshi Nakamoto off track.
I really can't find any other circumstancial evidence that would be against him being the Bitcoin founder.
F2) I have education and skills required for inventing and programming the first version of Bitcoin (Degree in physics, same as Dorian; Career C/C++ programmer)
F3) I hold libertarian views in line with the Bitcoin ideology
F4) My time zone is consistent with Satoshi's postings.
A1) My on-line writings should demonstrate mastery of English, though perhaps not as concise nor eloquent as Satoshi.
So, apart from F1) My birth name is not Satoshi Nakamoto, circumstantial evidence might suggest that *I* am the real Satoshi.
Newsweek says it's him. AP says it isn't. All of a sudden, the apparently "real" Satoshi wakes up from a 3 year slumber. I can't profess to know the truth, so I'll go down a different path: Does Dorian have a solid alibi at the time the P2P foundation post was made?
It seems pretty clear that he was still at the AP offices at 3:15PM: https://twitter.com/JoeBelBruno/status/441713742955307008
This tweet indicates Dorian had left the AP building by 4:11 PM: https://twitter.com/byandreachang/status/441727789629067264
The P2P foundation post showed up a bit before 5:27PM Pacific Time. The Reddit thread was posted at 5:27PM: http://www.reddit.com/r/Bitcoin/comments/1zrshb/real_satoshi_nakamoto_denies_being_dorian_nakamoto/
Driving time from AP's downtown offices to Temple City is around 20 minutes without traffic; At around 4PM, it's possible the trip would have taken a while longer with traffic. Even so, there's enough time for him to have gotten home and make the P2P foundation post.
I'm digging for more timestamped data points to establish how early he could have left the AP offices, and when he might have arrived back at home. I'll update accordingly.
Edit:
http://imgur.com/6E1zPs4 posted 5:31, image says "9 minutes ago" so pushes post time back to before 5:22.
It seems pretty clear that he was still at the AP offices at 3:15PM: https://twitter.com/JoeBelBruno/status/441713742955307008
This tweet indicates Dorian had left the AP building by 4:11 PM: https://twitter.com/byandreachang/status/441727789629067264
The P2P foundation post showed up a bit before 5:27PM Pacific Time. The Reddit thread was posted at 5:27PM: http://www.reddit.com/r/Bitcoin/comments/1zrshb/real_satoshi_nakamoto_denies_being_dorian_nakamoto/
Driving time from AP's downtown offices to Temple City is around 20 minutes without traffic; At around 4PM, it's possible the trip would have taken a while longer with traffic. Even so, there's enough time for him to have gotten home and make the P2P foundation post.
I'm digging for more timestamped data points to establish how early he could have left the AP offices, and when he might have arrived back at home. I'll update accordingly.
Edit:
http://imgur.com/6E1zPs4 posted 5:31, image says "9 minutes ago" so pushes post time back to before 5:22.
Re: Fatso Mark Karpeles can't answer this simple question from a customer
"No one recognizes them as a real currency, he told reporters. I expected such a thing to collapse."
wat?
To be clear, that was a quote from the article attributed to Japanese Finance Minister Taro Aso , not Karpeles.wat?
It shouldn't, if done right. Withdrawing from a cold wallet should take some kind of conscious manual intervention.
If we assume that the wording in the crisis draft isn't literally accurate, then the following thread and article suggest one of the more believable theories I've seen about what might have happened:
https://bitcointalk.org/index.php?topic=489813.0
http://letstalkbitcoin.com/somethings-not-right-at-gox/
The TL;DR version:
A successful Transaction Malleability exploit emptied their withdrawal hot wallet for the first time in a long time. Gox goes to refill the wallet during the initial BTC withdrawal freeze and ... uh oh... the cold wallet private key is lost/corrupted/not working. It might have gone undetected because deposits and watching the wallet balance wouldn't evidence the broken private key.
(Edited for clarification)
If we assume that the wording in the crisis draft isn't literally accurate, then the following thread and article suggest one of the more believable theories I've seen about what might have happened:
https://bitcointalk.org/index.php?topic=489813.0
http://letstalkbitcoin.com/somethings-not-right-at-gox/
The TL;DR version:
A successful Transaction Malleability exploit emptied their withdrawal hot wallet for the first time in a long time. Gox goes to refill the wallet during the initial BTC withdrawal freeze and ... uh oh... the cold wallet private key is lost/corrupted/not working. It might have gone undetected because deposits and watching the wallet balance wouldn't evidence the broken private key.
(Edited for clarification)
I traced one of my Gox deposits to this address
https://blockchain.info/address/1Nznb9Szo3Vx9njDUU5eVgqEe8YqiV5Uwx
Interesting pattern of activity - deposits of ~10-50BTC in round number amounts, lots of withdrawals of various small amounts. Perhaps coincidentally, activity stops on Feb 7 when Gox froze withdrawals. I'm guessing this could be one of their hot wallet address.
P.S. Is there some way to get blockchain.info to just show freakin' BTC and not mBTC? It's driving me nuts!
https://blockchain.info/address/1Nznb9Szo3Vx9njDUU5eVgqEe8YqiV5Uwx
Interesting pattern of activity - deposits of ~10-50BTC in round number amounts, lots of withdrawals of various small amounts. Perhaps coincidentally, activity stops on Feb 7 when Gox froze withdrawals. I'm guessing this could be one of their hot wallet address.
P.S. Is there some way to get blockchain.info to just show freakin' BTC and not mBTC? It's driving me nuts!
Re: [Misleading title]URGENT NEWS - MtGox has shut down!
What's misleading about the title?
OP either had inside info or guessed right. The OP was made 20 hours before the trading halt, and title was edited/tagged by the mods before Gox actually shut down.
Like if I needed protection 
Thanks Gox, very helpful.
Thanks Gox, very helpful.
They're getting magnanimous - it's to protect us from them!
Its the users that have value,.
On a more sinister note... how much do you think all that ID information for the verified users is worth?
When they locked BTC withdrawals for unverified users, I adamantly refused to verify because I'd rather lose the few BTC I had there than give them the ID info. Went back and forth with support for weeks arguing that it couldn't possibly help prove I owned the account. Suggested that for KYC, it should be sufficient to let me transfer ("gift") my BTC to another (verified) account if they needed to know where the BTC went. Every response boiled down to please verify (i.e. send us a big pile of personal info)