Among the issues surrounding Bitcoin, the question of how it should be handled when it comes to taxes has been oft-asked with no answer in sight. That ends today, with the IRS passing an important ruling that -- for the purposes of taxation -- labels the cryptocurrency as property, not a currency.
Several questions and answers have also been published in regards to Bitcoin and how it should be paid when tax time comes around. Bitcoin transactions are treated the same as property transactions, with the basis of the currency being the US dollars fair market value on the date the Bitcoin was received in a transaction.
That fair market value is determined by the exchange rate, and as with other property transactions, gain and loss in value are applicable, meaning taxable gain is applied with the value of Bitcoin goes up following a transaction. Gross income includes the value of Bitcoin when mined, if a Bitcoin holder engages in mining.
There are several other details on the currency as it relates to federal taxation, among them being how it is handled if an employee is paid in Bitcoin, and all of it serves as a big step for the cryptocurrency. Until now, taxation has been a big question mark, leaving both individuals and entities unsure of how to proceed.
SOURCE: Business Insider