|The IRS has ruled on bitcoin |
–and some folks ain't gonna
like the rule.
So listen to me, Mr. Hotshot Wave Of The Future:
You think your stash of bitcoin is money?
You think that all us poor schnooks who stuff our wallets with paper greenbacks and plastic are relics of a rapidly dimming past, people who ought to toddle off to the old age home to suck on our false choppers and play bingo?
You think that by keeping bitcoin on a cloud that you access with your computer or your smartphone, that you’re outsmarting us?
Have another think on that, Mr. Smartypants.
I’ve been saying all along – well, if not all along, then at least since I began writing about it in late February – that bitcoin is bad economic mojo. I likened it to bubonic plague.
I was not so far off. Turns out, that swelling on your head is a bitcoin bubo in your brain, and that it’s going to give you one hell of a nasty headache.
That’s because the IRS has just ruled that bitcoin ain’t money. No sir, pal. It’s property, of the same variety that penny stocks are property. I suspect that conclusions was arrived at through astute observation by the IRS
At any rate, say you buy one bitcoin for a buck, watch it double in value, then buy a buck’s worth of chewing gum with it and get a dollar change. You now owe the IRS either a buck’s worth of capital gains taxes, or of ordinary income tax, depending on whether you can prove you owned your bitcoin for a at least year before you got your yen to chew on something.
Buy a bitcoin for $581.80, the current rate as I write this afternoon of March 25th, and if the exchange rate falls by $125, you’re also shafted. And I wouldn't be at all surprised if the shaft is getting sped to you on a high speed train. Bitcoin is as ripe for pump-and-dumpers as a mushy banana.
Now I admit that paper money loses value, too, over time. You can thank inflation for that. Currently, every dollar bill in my wallet loses me roughly three cents a year. So if I have a buck in my wallet, I know that by this time next year I’ll still have 97 cents, give or take maybe a penny.
But when you carry bitcoin around in your electronic cloud in the sky, what have you got? Well, probably either a stunning loss in value and its already limited purchasing power on this volatile, umm, property, or a capital gains tax bill and higher accountancy fees for figuring it all out.
True, even after taxes you could make a handsome profit. But given how volatile bitcoin can be, you could also make a handsome bankruptcy case.
Long live Ned Lud!