[ericmay]

It would be a transfer wouldn't it? I'd be transferring from my wallet to yours. Would that generally be taxed?

I was under the impression that for capital gains taxes it's more so buying, holding, then selling for a profit.

Could be mistaken here though.

[BitwiseFool]

The taxable event occurs because the IRS sees crypto as property rather than a currency. Let's say you buy $100 worth of Bitcoin in the past. Now the value of your coins is $120.

If you decide to send $5 worth of bitcoin as payment for something, they consider that a taxable event. You sold X amount of bitcoin, which appreciated 20% value from when you bought it. That X amount was worth $4, now it is worth $5, so you would owe a tiny amount in capital gains tax on $1 you gained.

Edit: This exact same scenario happens for Foreign Exchange, but the government excludes most transactions under a certain amount because it's too complicated for travelers. Also, the rate of USD to EURO doesn't fluctuate as wildly as crypto can, so the gains are minimal anyways.

[ignoramous]

Dollar-tethered cryptos are then a better deal for a "crypto card", I guess?

[hansvm]

They'd potentially reduce the tax burden but still require a ton of paperwork.

[dmurray]

> The taxable event occurs because the IRS sees crypto as property rather than a currency.

The IRS doesn't make the tax law. How cryptocurrency transactions get taxed is a matter for legislatures and the courts.

Obviously, not everyone has the resources to fight the IRS, and your life will go much easier if your interpretation of the tax code matches that of the IRS. But the way you explain it here puts the cart before the horse.

[BitwiseFool]

The IRS issues guidance on crypto currency, here's an example from 2014: https://www.irs.gov/pub/irs-drop/n-14-21.pdf

"In Notice 2014-21, the IRS applied general principles of tax law to determine that virtual currency is property for federal tax purposes"

Here's the current page about IRS policy on crypto: https://www.irs.gov/newsroom/virtual-currency-irs-issues-add...

IRS guidance aren't laws but they detail how the IRS is going to treat tax collection based on current law. At some point in the future Congress may classify crypto currencies as actual currencies such as the Yen, Euro, etc. at which point the tax laws about currency exchange would apply instead of capital gains on property.

[ska]

The IRS doesn't make the tax law, true, but they are behaving consistently with the relevant laws; putting "currency" in the name of something doesn't define it as a currency.

Legislative action could of course change this, but until then you are probably tilting at windmills.

[runako]

> rather than a currency

IANAL but tax is also levied on fiat currencies where similar profit/loss occurs. In that sense, the IRS is treating crypto like it treats other currencies.

Congress addressed this in 1986, the IRS is just administering duly enacted tax law:

http://www.law.cornell.edu/uscode/text/26/988

[JumpCrisscross]

> The IRS doesn't make the tax law

It very literally does. Agency rules are delegated law [1].

Congress delegates rule making authority to the agencies within certain boundaries. Those rules have the force of law.

[1] https://en.m.wikipedia.org/wiki/United_States_administrative...

[javert]

You have to pay capital gains on bitcoin if you spend it, even if you don't convert it to fiat first.

e.g. buy $10 of coins, use same coins to buy a meal later, if the value of the meal is $20 (whether denominated in fiat or the equivalent bitcoin), you have a $10 capital gain.