The Internal Revenue Service recently issued guidance on the way that it is going to treat bitcoin news, and another electronic challenger that was stateless. The brief answer: as property, not currency. Bitcoin, in addition to other virtual currencies which can be changed for legal tender, will now be treated as a capital asset in most cases, and in a few situations as stock. Bitcoin holders who are not dealers will undoubtedly be subject to capital gains tax on increases in value. Bitcoin “miners,” who unlock the currency’s algorithms, will have to report their finds as income, just as other miners do when extracting more conventional resources.
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