digital property

It'd be nice to know where you get this idea, since it's blatantly false.

I was blatantly wrong about the The Securities Exchange Act of 1934, inexusably so. However, from 1099-b must be filled when:

"A broker or barter exchange must file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for each person:

    For whom the broker has sold (including short sales) stocks, bonds, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, etc., for cash,

    Who received cash, stock, or other property from a corporation that the broker knows or has reason to know has had its stock acquired in an acquisition of control or had a substantial change in capital structure reportable on Form 8806, or

    Who exchanged property or services through a barter exchange"

http://www.irs.gov/instructions/i1099b/ar02.html

I still argue that Bitcoins fall under the scope of what IRS defines as "Internet-based Barter" and "Trade Dollars"

The exemption list is long for 1099-b, it reads as follows:

Exceptions.   Brokers are not required to file, but may file, Form 1099-B for the following.
Sales for exempt recipients, including corporations, charitable organizations, IRAs, Archer MSAs, health savings accounts (HSAs), the United States, a state, or political subdivisions.

Sales initiated by dealers in securities and financial institutions.

Sales by custodians and trustees, provided the sale is reported on a properly filed Form 1041, U.S. Income Tax Return for Estates and Trusts.

Sales at issue price of interests in certain regulated investment companies.

Obligor payments on:

Nontransferable obligations, such as savings bonds or CDs.

Obligations for which gross proceeds are reported on other Forms 1099, such as stripped coupons issued before 
July 1, 1982.

Retirement of short-term obligations with original issue discount that is reported on Form 1099-INT, Interest Income. However, Form 1099-B is required for the retirement of short-term state obligations having no original issue discount.

Callable demand obligations that have no premium or discount.

Sales of foreign currency unless under a forward or regulated futures contract that requires delivery of foreign currency.

Sales of fractional shares of stock if gross proceeds are less than $20.

Retirements of book-entry or registered form obligations if no interim transfers have occurred.

Sales for exempt foreign persons as defined in Regulations section 1.6045-1(g)(1).

Sales of Commodity Credit Corporation certificates.

Spot or forward sales of agricultural commodities. See below.

Some sales of precious metals. See Sales of precious metals below.

Grants or purchases of options, exercises of call options, or entering into contracts that require delivery of personal property or an interest therein.

Would you call a diamond exchange a barter or trade dollar exchange?  Diamonds can be used to barter with but if the exchange only deals in diamonds (reference the New York Diamond Dealers Club) no goods or services are being bartered.  By definition if either side of a transaction involves payment in the form of a fiat currency that is not a barter but a purchase.

Well the Queen Mother hasn't specially knighted anyone and blessed them with the sovereign authority to issue turds into their toilet bowls.  Yet, there they are.

Would you care to cite any of these laws, or are you just unlawfully issuing opinion from your nether regions?


Dollars still exist.  You can pay your tax in dollars, yes?  As far as I can tell, there's nothing preventing the US from printing up more dollars?

If a person bought $5 million worth of silver and sold it for $5 million within a short time-span, than I agree with you that a 1099-b would not be required. If instead they sold it for a profit of $5000 a form is required. The IRS would presumably have a lot of problems enforcing the law upon thousands of traders based in the U.S., which is why they are more than likely to enforce the law upon the exchange.


Again I am in agreement with you; however similar laws exist in the U.K., Australia, China taxes virtual money trading despite having outlawed the practice, in South Korea "a court ruled in September of last year that profits from the trading of "cyber money" should be subject to 10 percent value added tax (VAT)". So such laws are either global or definately globally expanding. Most of Bitcoin traders are located in advanced economies where the likelihood of such laws already being in existence is high.

http://www.koreatimes.co.kr/www/news/nation/2010/01/116_58775.html

CryptoCommodity; none of these exceptions are applicable to Bitcoins. The issue of "Internet Based Barter" and "Trade Dollars" is multifaceted as Bitcoins have several uses. It can be traded for USD, it can be traded for other goods and services. If you purchase 10 Bitcoins for $100 and sell them for $200 you earn $100. Is that to be considered as a strict capital gain, or do you "earn trade or barter dollars through a barter exchange"? You could be right that this is not considered a barter exchange, however I believe that it is. You could purchase 10 Bitcoins for $100 and after an aprreciation of value exchange them for goods or services valued, say, $200. In this case it is clear that the transaction is considered a barter, in which $100 has been earned which may or may not (due to specific circumstances) be subject to tax.

benjamindees What are you talking about - you cannot pay U.S. taxes with Dwolla, Pound Sterling or any other currency but USD.

A $5000 profit would not create a need for a 1099-b to be filed as it would be a private party sale.  1099-b filing requirements only apply if the sale is in the normal course of trade or business.

Your view that the purchase of bitcoins for fiat currency constitutes a barter exchange because you could possibly trade them for a product or service elsewhere after receiving them is not a valid argument.  First barter is defined as trading goods or services for goods or services.  If an exchange only deals in bitcoins for fiat currency no barter exists.  Any bartering done later by that individual with the bitcoins they purchased is outside the realm of the exchange.  If the person makes a profit it is their responsibility to report income to the proper taxing authority.

Having read a different topic, a person posted that he had spoken to a securities lawyer, and they had reached the conclusion that public trading on the "Global bitcoin stock exchange" (and hence any exchange in the US dealing with securities) would subject it to SEC and relevant laws. A security is defined as:

 "(3) the term “security” means—

(A) a note, stock certificate, treasury stock certificate, bond, treasury bond, debenture, certificate of deposit, interest coupon, bill, check, draft, warrant, debit instrument as defined in section 916(c) of the Electronic Fund Transfer Act, money order, traveler’s check, letter of credit, warehouse receipt, negotiable bill of lading, evidence of indebtedness, certificate of interest in or participation in any profit-sharing agreement, collateral-trust certificate, pre-reorganization certificate of subscription, transferable share, investment contract, voting trust certificate, or certificate of interest in tangible or intangible property;"

US Code Title 18 § 513. Securities of the States and private entities.

Considering the fact that a securities lawyer has a far superior legal comprehension than myself, I concur that Bitcoins are not considered Barter. Also, it cannot be considered both a barter and a security, which I fallaciously argued earlier. However, as Bitcoin is a "debit instrument as defined in section 916(c) of the Electronic Fund Transfer Act" ("As used in this section, the term "debit instrument" means a card, code, or other device, other than a check, draft, or similar paper instrument, by the use of which a person may initiate an electronic fund transfer.") any Bitcoin exchange based in the U.S. is subject to the SEC and relevant laws. And, of course, in the globalized financial business sphere, all stock exchanges in the world are subject to similar legal provisions and all defintions of "securities" are likewise or very similar, and due to "harmonization" the laws and definitions are being aligned continuously.

So all Bitcoin exchanges, wherever situated are subject to the exchange laws of the host nation, as Bitcoin is a kind of "security", I contend. Exactly which tax laws that are applicable is beyond my current knowledge; although the only point that we have agreed upon so far is that gains on Bitcoin trades are subject to some kind of tax.

I do not simply listen to any professional and go with what he/she thinks; the wording of section 916(c) of the Electronic Fund Transfer Act describes the functioning of Bitcoin. It is not Intellectual Property, I went through that many hours ago, when some poster suggested it would be Intellectual Property. I would not accept a usb with bitcoins stored on it, as the usb would only be a medium used to store the code. By that reasoning a cd containing Windows 7 would be a "goods" whereas it is "intellectual property".

The tax statement is broad - but in which jurisdiction do the tax authorities say - hey, make a quick buck by selling any random article for a higher sum than you just bought it for, and keep the dough - no probs!