"General tax principles that apply to property transactions apply to transactions using virtual currency," the IRS said in a statement, meaning that bitcoins would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the circumstance.
The IRS supplied that in its statement, which dealt a blow to bitcoin "miners," who unlock new bitcoins online. The IRS said miners must include the fair market value of the virtual currency as gross income on the date of receipt.
This change "is a disincentive to start looking for bitcoins," said John Barrie, a partner with law firm Bryan Cave LLP, who advises charities that receive bitcoins as donations.
NOT LEGAL TENDER
The IRS also said that virtual currency is not to be treated as legal-tender currency to determine if a transaction causes a foreign currency gain or loss under U.S. tax law.
MINERS HURT
New bitcoins come from a process called mining. Computer programmers around the world compete to crack an automatically generated code and the first to do so is rewarded with a small stash. This happens about every 10 minutes.
Some online retailers will accept bitcoins as payment. The maximum potential number of bitcoins in circulation is 21 million, compared with around 12 million currently.
Bitcoins are property, not currency, IRS says regarding taxes | Reuters
The IRS supplied that in its statement, which dealt a blow to bitcoin "miners," who unlock new bitcoins online. The IRS said miners must include the fair market value of the virtual currency as gross income on the date of receipt.
This change "is a disincentive to start looking for bitcoins," said John Barrie, a partner with law firm Bryan Cave LLP, who advises charities that receive bitcoins as donations.
NOT LEGAL TENDER
The IRS also said that virtual currency is not to be treated as legal-tender currency to determine if a transaction causes a foreign currency gain or loss under U.S. tax law.
MINERS HURT
New bitcoins come from a process called mining. Computer programmers around the world compete to crack an automatically generated code and the first to do so is rewarded with a small stash. This happens about every 10 minutes.
Some online retailers will accept bitcoins as payment. The maximum potential number of bitcoins in circulation is 21 million, compared with around 12 million currently.
Bitcoins are property, not currency, IRS says regarding taxes | Reuters
