My point was - if US government will make hard or impossible converting bitcoin into usd, they can't claim you owe them any taxes if sole income you get is in bitcoins. Or they have to accept it in bitcoins.
As an analogy - let's say you made business where whole income is produced via bartering and in goods, not currencies. Let's imagine that us government made some law which prevents you from exchanging these goods to USD which is the only tax payment option. How you can pay taxes and from what amount?
They can make you pay because they're the government. They would make you pay taxes on the fair market value of the goods. http://www.irs.gov/taxtopics/tc420.html The prohibition of exchange most likely would not enter into it, because that would be a completely separate law from the tax code..
There was a recent case involving the imposition of inheritance taxes on artwork that, because it contains bald eagle feathers, cannot be sold to pay the taxes. So theoretically the result of that case could give us some idea of how the courts would treat a situation where someone solely had bitcoin income but no way to exchange it. Plus, there is a certain amount of US-centric moaning in this thread (and I am not criticizing eurleif). Just because the US says "no" doesn't mean that another country won't say "yes." And in that case bitcoin can be converted to that country's currency and then back to USD.
Of course there's a way to give the item value - pass it to someone who is willing to pay for it with dollars. Likewise, the value of your bartered goods can be calculated on a dollar basis by examining what other people for the same goods. Really, how dumb do people think the IRS are? These are like middle school pranks for getting out of doing your homework.
I am sure this isn't their first time round the block either when it comes to pulling appart schemes to transfer wealth in something other than dollars.
> Of course there's a way to give the item value - pass it to someone who is willing to pay for it with dollars.
The previous posts said there would be no possible way to transfer the item into dollars. By definition, that makes the value equal to zero dollars. There is no transaction that can possibly made to demonstrate the fair market value being any greater. Of course the IRS will find some loophole to fabricate some value above zero, but that doesn't change the real market value.
It's a false premise. If the goods are worth accumulating then they're fungible. Bnning teh exchange of something as a means of sidestepping currency transaction rules does not destroy inherent value.
Suppose, for example, you have a scheme where people use goats as currency. The goats are all kept on a big farm somewhere, and when one person wants to transfer money to someone else who is a member of the scheme the farm operator updates the notional total of goats owned by each party. If there are enough members in the pool to provide a variety of goods and services to each other, it could be a tax avoidance scheme. You could proscribe that trade, while estimating liability by looking at the number of goats owned by the individual members and/or the $ value of goods and services exchanged, even if it were impractical to realize that money by selling the goats (because they all had a disease or because the nominal value had become wildly inflated compared to the going rate in agricultural markets).
That's your problem, under current law. Just like it's your problem if you don't declare illegally obtained income and pay taxes on that: that means you can be tried for tax evasion on that income.
No one ever claimed tax law is fair or sane (though in fact levying taxes on all income no matter what form is in fact somewhat sane as a starting point if you're going to tax income at all).
That, my friend, is your problem, and I don't mean that facetiously. You owe U.S. taxes (sales, income, property) in U.S. dollars, regardless of what medium you choose to accept payment in. They don't have to accept the payment in BTC, the law is very specific that the only currency that they must accept is USD.
And, to be very clear, the government is not, in any way, saying thst you can't trade your BTC for dollars. What they ARE saying is that you might have to disclose your identity in return to make that exchange ...
> You owe U.S. taxes (sales, income, property) in U.S. dollars
To pick a nit, sales and property taxes aren't, strictly speaking, U.S. taxes, and the actual taxing authorities - usually municipal governments - could theoretically accept payment via some alternate means.
Of course they are - simply if you can prove the deals, then usually you can convict them of harsher crimes and ignore the tax issue.
However, if their defense proves that the stuff they sold was legal (as some new party drugs might be temporarily), then they can still be prosecuted for tax evasion. And, of course, there is the historical case of Al Capone.
"if US government will make hard or impossible converting bitcoin into usd, they can't claim you owe them any taxes if sole income you get is in bitcoins"
This is as brilliant an idea as the bank robber who thought covering himself in lemon juice made him invisible to security cameras.
