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Did you know that Bitcoins ARE taxable? Here’s how.
More and more individuals are using bitcoin as an acceptable form of payment for goods or services, particularly for the sale of goods and services online. The IRS tax code says that these bitcoins are taxable to the fair market value (in USD) of the day that the bitcoins were received in exchange for the goods or services.
On top of that, the taxpayer can have a gain or loss upon an exchange of the currency for other property. The way this works is similar to the stock market. For instance, people who own stocks consider them a capital asset. When bitcoins are recognized as capital assets they can recognize a capital gain or loss upon the exchange of bitcoins for property in relation to its adjusted basis.
Taxation-wise bitcoins are treated as property so you may want to have your CPA or local tax preparer familiar with these regulations prepare your return. That being said, if you haven’t already decided to let a tax professional handle your tax return, you may want to do so now.
Source: Keith A. Aqui. Notice 2014-21. Internal Revenue Service. <http://www.irs.gov/pub/irs-drop/N-14-21.pdf>