One of my virtual currency investing clients strongly suggested that I become an expert is how the IRS handles the taxation aspect of virtual currencies. I agree with this advice.
Virtual currencies are out there and everyone seems to want to get in on the ground floor of the next Bitcoin.
Today at this moment, the IRS views e-currency or virtual currency as property, the same as any stock. You buy some and you have your basis, you sell and recognize gains or losses. Simple and straight forward.
But then you have a manufacturer buying some parts in Bitcoin and others in US$. This muddies the waters considerably. How about the sell several finished products in in Bitcoin but with huge fluctuations. The IRS likes to use a single rate for foreign transaction for the whole year. Now nothing is clear.
Then we have multiple sources of virtual currencies, China’s state virtual currency, and other home grown ones.
This is an area that will bear watching.