IRS issues guidelines on taxation of Bitcoin

Regulations came out yesterday regarding taxation of Bitcoin. The short version is it’s to be taxed more or less like a capital asset, subject to the usual rules on capital gains. Reuters found a few Serious People who say this is going to put a damper on Bitcoin mining, but given the amount of processing power that currently goes into one block, that might be a good thing.

No actual users of Bitcoin were consulted.

EDIT: Here’s the actual guidance. (PDF)

OK, dumb question incoming:

I don’t know much about bitcoin or taxes, but is this just for situations like when they caught Capone? i.e. they catch you for something IRL and then seize your computer and prove you didn’t claim your bitcoins? I thought it was all anonymous? I suppose the IRS can’t officially say “hey, we know this is a useless gesture but we had to say something about bitcoin,” but isn’t that what this amounts to?

I suppose that taxation would apply to a legit business that accepts bitcoin, but as far as me having them, isn’t the whole point that it can’t be traced to me?

No, I don’t think so. It’s P2P, but that doesn’t mean anonymous. If Bitcoin was only used for black market transactions, it would be quickly outlawed - but then they could just dispense with the big prime numbers and make them out of bullets or something.

Most Bitcoin users want it to be accepted as real, legitimate currency. That’s only possible if you have things like accounting and taxation. Maybe some day we’ll even see somebody arrested for laundering it - but probably not soon.

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From what I read online, they also really, really don’t want to pay taxes on their holdings of said legitimate currency, so this is where it gets into the territory noahdjango mentioned.

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