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Virtual currency transactions are taxable by law just like transactions in any other property. Taxpayers transacting in virtual currency may have to report those transactions on their tax returns.
What is Virtual Currency?
Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. In some environments, it operates like “real” currency (i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance), but it does not have legal tender status in the U.S. Cryptocurrency is a type of virtual currency that utilizes cryptography to validate and secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.
Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as “convertible” virtual currency. Bitcoin is one example of a convertible virtual currency. Bitcoin can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies.
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Sounds like they are defining “money”!
We don’t tax when “dollars” (i.e., Federal Reserve Note fiat greenbacks) are converted to Euros or visa versa. So why are we taxed on “Virtual Currencies”? For that matter, why are we taxed when buying gold or silver? Doesn’t the Constitution define a “dollar” as an amount of gold or silver?
Guess the IRS is going have a hard time finding all the non-custodial crypto wallets!!!
If they can keep drugs out their prisons, how will the keep crypto out of a free society?