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Tax regulations for Bitcoin transactions are being clarified as the tax authorities seek to understand the ecosystem and potential tax implications of Bitcoin investments. With large businesses are taking a serious interest in the technology and many ordinary citizens spending more time online, the tax authorities are looking to understand the potential tax implications of Bitcoin.

Most taxation is paid on the basis of the value of income, or the expenditure. The IRS takes a similar approach to any investment vehicle by applying the same policy – a gain or loss is either recognized as a capital gain or a capital loss. Cointracking There is no asset allocation process involved. The assets simply accumulate to form a tax liability.

In relation to Bitcoin, the Internal Revenue Service’s Deputy Commissioner for Exempt Organizations and Regional Offices, David J. Lipton, has said that it is “not clear to us how the market would work in the future”. He further stated that the IRS does not recognize the Bitcoin as currency. While the IRS is not actively considering changing its policy, Lipton added that the IRS is keeping a close eye on developments in this emerging area of innovation.

Meanwhile, Ron Haskins, Senior Fellow at the Brookings Institution, penned an article for Forbes, entitled “Virtual Currency Tax Guidance”, in which he argued that the government will likely be considering implementing some form of Bitcoin tax guidance, or regulation, before the end of the year. While the tax regulations may vary in different jurisdictions, the IRS may have the authority to limit taxable gains or deductions from Bitcoin.

Caithlin Ziegler, CEO of Greenfield Advisory LLC, wrote an article for the Boston Globe, in which he discussed the different policy options, such as limiting the investment growth options for Bitcoin or limiting the deduction for the expense of Bitcoin transactions. He also noted that the most common strategy will be for the IRS to continue to classify Bitcoins as a “property” rather than a “currency”.

Since tax laws are very complex, you should consult with an expert who understands the legal issues associated with virtual currencies. Tax is a major factor in any business, but any technological advances should be carefully analyzed before becoming a reality.

Ron Haskins, a former assistant to the President, Federal Chief Financial Officer, and co-author of the most recent white paper on virtual currencies, The Benefits of Virtual Currencies and Other Distributed Ledgers, said that the IRS has yet to articulate how to regulate virtual currencies, although he noted that Bitcoin is now the currency of choice. “The basic point is that there is no concept of currency,” Haskins said.

Haskins continued by stating that the FTC, Consumer Financial Protection Bureau, Commodity Futures Trading Commission, and Securities and Exchange Commission have issued statements outlining their views on Virtual Currencies. The IRS is providing guidance, but as the Bitcoin market matures, there may be policies that require the use of KYC (Know Your Customer) or AML (Anti Money Laundering) standards to be followed by the virtual currency market.

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