IRS Rules on Bitcoin

bitcoinAccording to the Internal Revenue Services’ (IRS) first ruling on the issue, the U.S. government will treat Bitcoin as property for tax purposes. The decision will provide certainty for investors, along with potential income-tax liability. Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop.

Zintro expert Amit Vujic is a CTO and Systems Architect at ePlus Systems Ltd. He shares his thoughts about the announcement. “First of all, we can consider the IRS move as a signal that a democratization process related to currencies has been started,” says Vujic.  “Time will confirm whether it is successful or not, but it looks to me as if it is an irreversible process. The IRS’ decision to consider a $2 coffee transaction as $1.00 in customer capital gain is problematic, because of the anonymous nature of Bitcoin. It’s not like payment card, so you can’t have access to owner info nor trace down every single Bitcoin.

“Perhaps it can work if the merchant has the opportunity to identify the customer, but it appears that it would only work for big transactions like buying a car or house, where the customer must be identified. But the magic of Bitcoin and other cryptocurrencies is in the anonymous usage in a free ‘Internet Wild West’ world.”

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