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IRS To Treat Bitcoin As Property, Not Currency

Mar 26, 2014
Originally published on March 26, 2014 5:39 am

DAVID GREENE, HOST:

It's been more than five years since the arrival of Bitcoin, a virtual currency you can use to buy stuff online. Enter Uncle Sam, who's finally decided how to tax digital currencies. The IRS announced yesterday that Bitcoin is property, not currency. This means it will be handled like stock rather than money. New Hampshire Public Radio's Emily Corwin reports.

EMILY CORWIN, BYLINE: Joshua Seer(ph) is a Bitcoin enthusiast, even evangelist. He's a Web developer and a landlord who accepts Bitcoin as payment. Before the IRS's ruling yesterday, it was unclear if, let alone how Bitcoin would be taxed. Seer says he hopes now more businesses will choose to accept Bitcoin.

JOSHUA SEER: There's a lot of businesses that didn't want to transact in Bitcoin, or weren't sure what to do with it, because they didn't know how they were going to be taxed and how the government was going to perceive it.

CORWIN: Bitcoin owners will now have to pay a capital gains tax, which could get complicated. For example, Seer says, let's say he bought one Bitcoin two years ago at $7.

SEER: The value of that Bitcoin two years ago, it might have been $7. Well, it's around $600 now. So, when I am spending that Bitcoin, I am realizing a capital gain on the difference.

CORWIN: However, if Seer bought another Bitcoin yesterday at $600 and he spends it today before it appreciates, he would not have to pay a tax on it.

SEER: And so I might want to be careful about which Bitcoins that I'm necessarily spending.

CORWIN: Seer says it's hard to grasp all the details of the IRS's ruling on day one. He does expect Bitcoin users to need tools to keep track of all their transactions. For NPR in New Hampshire, I'm Emily Corwin. Transcript provided by NPR, Copyright NPR.