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Gov't says bitcoin not a currency, but taxable

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Who Owns the World’s Biggest Bitcoin Wallet? The FBI

http://www.wired.com/wiredenterprise/2013/12/fbi_wallet/

FBI will get a bottom of this and many will be arrested.

0 ( +0 / -0 )

FadamorMar. 08, 2014 - 04:53AM JST True. With currency they can show you withdrew X amount of cash just about the same time a criminal received a similar amount, but they can't prove the cash removed by you was the cash they deposited unless serial numbers at both ends were recorded. A Bitcoin is nothing more than a serial number assigned to an individual, so transferring bitcoins requires an active transfer of "ownership" between previous owner and the exchange and the new owner and the exchange. The serial number is involved in each and every transaction. It was this aspect that made me wonder how bitcoins could "disappear".

Bitcoins are a lot like software licenses. Bear with me here and you'll see what I mean.

In the old days when we bought our copy of Microsoft Office we'd drive into town, buy a physical box with disks inside and a piece of paper that had the "secret code" (serial number). The software would check the serial number we used during installation and if it conformed to a certain pattern then it was accepted as valid and we could install it.

Now we just buy the serial number and download the software. When we install the software the serial number is subjected to two different checks, one is by the software to see if it conforms to the regular pattern, then it is checked against microsoft's database to ensure the serial number is one that they issued and that it hasn't been used yet.

Bitcoins work a lot like software licenses, except that there is no software, just the serial number. Anyone can validate that a Bitcoin is valid by checking the pattern, but that pattern can be faked. To effectively transfer ownership you'd need to check it against a master listing at the bitcoin operator and transfer it to a different wallet officially.

In other words, Bitcoins aren't anonymous. Contact with a third party, the bitcoin operator, is required for every single transaction. And this is where the potential for Bitcoins "disappearing" comes in. If the bitcoin operator makes a mistake or is crooked then, like a crooked bank (or is that tautological?), your money can disappear in seconds. They don't need to steal your money, they already have your money, the bitcoin is your license/serial number to claim money back from them... and they have the power to delete all trace. Unlike a bank, where you have a bank book and bank statements to prove that the bank owes you money... well, with a bitcoin all you have is a serial number and the only people who can validate that serial number conclusively, the bitcoin operators, claim it isn't valid.

In short, you're up xxxx creek without a paddle.

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True. With currency they can show you withdrew X amount of cash just about the same time a criminal received a similar amount, but they can't prove the cash removed by you was the cash they deposited unless serial numbers at both ends were recorded. A Bitcoin is nothing more than a serial number assigned to an individual, so transferring bitcoins requires an active transfer of "ownership" between previous owner and the exchange and the new owner and the exchange. The serial number is involved in each and every transaction. It was this aspect that made me wonder how bitcoins could "disappear".

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Jo DodMar. 08, 2014 - 01:21AM JST Haha people who think this can happen have no clue how bitcoins work. Sure, companies like former-mtgox can be taxed because they have records but individuals will not be able to be taxed because the money is sent to people like emails but not even through an email client, just a wallet distro with an anonymous address that only shows electronically where it should go, not physically. So good luck finding who just moved 247 bitcoins from wallet $28,!:"-($;8 to wallet &@"-.!?2729 because that's all the clues you get

And what about your initial transaction? The one you used your credit card for to buy those bitcoins? And how would you cash them out except by selling them to someone else, again using a credit card... there are only a dozen or so major credit card companies around the world, and they ALL co-operate with law enforcement. The credit card companies provide the beginning and end of the money trail, all that the IRS or other tax agency needs to do is subpoena the credit card records for all transactions to or from the major bitcoin operators and they'll have the beginning and end of the piece of string, then they just need to pull and the entire operation is revealed.

Sure, they probably won't care about people who bought a few bitcoins as a curiosity, but if your bitcoins ended up in the wallet that they track to a drug dealer then you're facing conspiracy charges in addition to tax evasion and whatever else they can dream up.

... and God help you if somehow bitcoins that can be traced back to your credit card ended up in a terrorist's wallet, because then you'll be in Gitmo or some similar gulag for a decade shouting your innocence while they waterboard you.

-2 ( +0 / -2 )

Haha people who think this can happen have no clue how bitcoins work. Sure, companies like former-mtgox can be taxed because they have records but individuals will not be able to be taxed because the money is sent to people like emails but not even through an email client, just a wallet distro with an anonymous address that only shows electronically where it should go, not physically. So good luck finding who just moved 247 bitcoins from wallet $28,!:"-($;8 to wallet &@"-.!?2729 because that's all the clues you get

-1 ( +0 / -1 )

If you own stocks you are suppose to own part of the company. Maybe opitions would be a closer analogy, but even that has "Time" as something tangible.

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Trading Bitcoin is no different than trading stocks on the stock market: You pay taxes (in your local currency) on any profit made between the purchase and sale of the stock/Bitcoin.

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This will end on a law suite, because there is no difference between a transfer of funds to a gift card than using Bitcoin.

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To all those struggling with the idea that you can tax something that isn't a currency, allow me to point out that gold is not a currency, however buying of selling gold is taxed. The bitcoin is a commodity. But, you will doutbless object, it isn't physical like gold.

Other non-physical commodities can be taxed, such as buying stock options or futures. Bitcoin is no different from a thousand other non-physical commodities.

Governments around the world aren't struggling with bitcoin, they're struggling with idiots who try to buy and sell stuff with what isn't a legally recognised currency. It would be like wandering into the post office and trying to buy stamps with a couple of chickens, or bringing in your stock certificates and asking the teller at the local grocery store to allow you to pay for your groceries with them. What governments are struggling with is the idiots who think that bitcoins are a commodity magically exempt from taxes and duties. Wake-up call, stocks, bonds and commodities traded on the internet are still subject to regular taxes and duties. Bitcoin is taxable.

Sure, there are some places that will accept Bitcoin as a currency, just like there are farmers markets where you can exchange you goat for a cartload of potatoes. It doesn't mean that everyone wants your goat though.

This bitcoin controversy is a triumph of stupidity and a basic lack of understanding of what constitutes a commodity. If you pay legal currency for it then it is a commodity and is taxable. If you pay in goats then it is largely up to how tight your local tax laws are, some will tax you on the market value of the goats, some will let it slide.

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Not too surprise to me. Sort of like stock investment, capital gain. That means, if you lose money on it, you should also put that in as capital lost.

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@ GOGOGO

How the hell you going to tax something that is not a currency?

The Govt can tax anything they deem people making money off of, believe it or not you are being taxes just to live.

0 ( +2 / -2 )

How the hell you going to tax something that is not a currency?

-3 ( +1 / -4 )

Because that would be as stupid as makinf drugs illegal.

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hell make it illegal for all I care.. punishable same as drugs

-2 ( +1 / -3 )

All I can say is GOOD LUCK WITH TAXING IT! Not going to happen until they figure out what it is.

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torosushi, they tax gains on stuff besides currencies. Gold bars for example.

SamuraiBlue, it'd be a capital gain if the bitcoins were sold for more than they were purchased, but I guess that's what you mean. I wonder if the folks who lost their bitcoins at MtGox will be able to offset their losses against the rest of their tax bill?

Scrote, you ask for too much of the tax man! It's the burden of the tax payer to pay in yen, so far as I know. Still I don't know how they are going to be able to tell who actually made taxable profits made through bitcoin in the first place.

2 ( +2 / -0 )

The government wants your cake, and eat it too.

8 ( +9 / -1 )

If it's in the ground mine it, if it' moves shoot it, if it swims catch it, if it grows chop it down, if it doesn't tax it.

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If Bitcoin is not a currency, but is taxable, the Japanese government will have to set up en exchange to allow people to pay the taxes they incur using Bitcoin in Yen.

3 ( +5 / -2 )

100% tax!

-5 ( +1 / -6 )

Bitcoin for governments in a nutshell: if you can't understand it but tax it, then tax it! If you can't understand it and it's a threat to your authoritan rulership then ban it!

2 ( +4 / -2 )

Transaction with bitcoin falls under the catagory of barter trading. An exchange of bit coin into actual currency would be capital gain so that can be taxed accordingly.

4 ( +5 / -1 )

"bitcoin is a currency, just not a legal tender currency" in the eyes of Japanese government.

How could one tax something not legal?

I guess they meant to say, tax on the transaction (ie. GST 8% ) and not tax on the bitcoin mode of payment.

-5 ( +0 / -5 )

This week, an alleged theft by hackers forced a Canada-based online business serving bitcoin traders and investors to shut down.

Hell hath no fury like a hacker scorned.

1 ( +1 / -0 )

Are people actually still doing transactions with this ghost currency?

"taxable"

200 years from now, there won't be any taxes, we'll just have the Federation Credit.

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