[dangrossman]

It doesn't need to be any more sophisticated than the taxing of every other asset that gets traded. When you realize a gain or loss from buying or selling gold bars, train engines or copy machines you're expected to report that.

If you make a lot of money buying and selling Bitcoin, you're probably going through exchanges that are licensed and can be subpoenaed for records if your own are in question. If you are accepting Bitcoin as payment on a website, you're probably using something like Coinbase to facilitate it, which means there are 3rd party records of your income.

If you're trading drugs on Silk Road #3, maybe that won't be taxed, but neither are most cash transactions on Craigslist; the government doesn't attempt to put an auditor in every home to catch every transaction that's supposed to be reported.

[celticninja]

plenty of options to take BTC without the need for a 3rd party payment processor, that will ultimately require honest traders to report accurately, not much difference to how a cash business works now e.g pub, restaurant, builder etc.