[CmdrSprinkles]

It is.

Not a lawyer, but my understanding is that it is handled as a capital gains tax. So you buy some bitcoin, it fluctuates wildly over the course of a week, and you convert back to fiat. You then pay taxes on any earnings from that.

So if you bought 1 flubbercoin for 900 USD and sold it a week later for 1200 USD, you are liable for that 300 USD in gained capital.

Here is a marginally more technical description https://en.wikipedia.org/wiki/Capital_gains_tax

[KlaudijLikon]

Not really related, but how about mining? What will happen once all the mining costs go down? What system will be put in place?

[CmdrSprinkles]

At that point: Theoretically nothing. At that point the currency is stable and its value adjusts to very small degrees (if any) and it is no different than dave and busters money. You're taxed on your income and all you are doing is adding an extra layer of indirection before spending. And if you were paid in bitcoin, you have the same capital gains to report when you effectively translate it to fiat while buying your new Gameboy. There may be added complications similar to how foreign currencies work, but they should theoretically be negligible.

In terms of making sure you report those gains: What we see right now. Getting involved in the infrastructure to cut down on black money/money laundering.

But don't worry. I am sure The Followers of Satoshi will find a way to keep that currency volatile.

[cr0sh]

> And if you were paid in bitcoin, you have the same capital gains to report when you effectively translate it to fiat while buying your new Gameboy.

But what if you never have to translate it to a "real currency"?

Granted - bitcoin isn't anon - but let's suppose it was (or there existed a e-currency that was). If every transaction in the entire supply chain was carried out using such a currency, how would any government ever know (without inserting a MITM into the supply chain)?

An alternative thought: If you conducted all aspects of your life cash-only, how would the g-man "get you"? I suppose Al Capone could be brought up as an explanation (whatever was the reasoning there) - but there were other factors involved (they wanted him for other reasons, but tax-evasion was the easiest way - at least, according to what we've been told).

But as long as you conducted your affairs completely off-the-books, and only worked with vetted (or anonymous) others who were doing the same (so you never transacted cash with a government official or someone working for them) - how would they know?

Another thought experiment: If you conducted everything using barter (let's suppose that were possible) - would you then owe the government so many chickens or pigs as "tax"?

[CmdrSprinkles]

If you buy anything that isn't doje coin or whatever, you are effectively converting to fiat, buying something, and obligated to pay capital gains.

As for how to avoid The Man: Take a look at India. They lived that dream and likely will again in a month or two.

[spaceheeder]

CmdrSprinkles is incorrect: at least in the United States, mining and other forms of receiving Bitcoins are no different in principle from receiving large quantities of other non-dollar goods or currencies that have an estimable dollar value.

The Bitcoin wiki article on this is incomplete, but informative[0].

[0]: https://en.bitcoin.it/wiki/Tax_compliance#Are_bitcoins_taxab...