The Internal Revenue Service – Bitcoin

By: Hanjun Lu

The Internal Revenue Service (IRS) made an announcement on Tuesday virtual currencies like bitcoin will be taxed like property instead of currency in United States. The IRS released a number of questions and answers to clarify the tax issues related to virtual currencies like bitcoin. For example, if you receive wages in bitcoin, you have to pay taxes on it and at the market value of the bitcoin at that moment. This would be exactly same as got paid in dollars. Furthermore, the IRS said bitcoin is not legal tender, which could not used to pay taxes. On the other side, for the majority – investors, bitcoins will be treated like general commodities as mentioned by IRS. This means investors need to pay taxes for the capital gains after liquidity the assets if bitcoins appreciate in value. This could be recognized as capital loss and used to defer taxes as well if bitcoins depreciate in value. The situation is similar in Canada; bitcoins are also treated as investment assets and have to pay for the capital gain taxes as said by Canada Revenue Agency.