U.S. Congressman Steve Stockman for the 36th District of Texas has been passionate about Bitcoin for some time. Last year, he accepted bitcoins as part of his Senate campaign. Recently, he showed up to the New York City Bitcoin Center with a draft bill in hand titled: “To change the tax status of virtual currencies from property to currency”. The act may be cited as the “Virtual Currency Tax Reform Act”.
The document was fairly simple and concise: for the purpose of capital gains, treat virtual currency as currency and not as property. The act should take effect at the start of the fiscal year immediately following enactment.
Texas has become one of the hotspots for digital currency in the U.S. It has played host to Bitcoin conferences, MtGox’s bankruptcy filing and now this Senator.
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Last month, the IRS finally issued some guidance on how virtual currencies are to be taxed, just in time for tax season. Reaction among the crypto community was mixed.
“This is a nascent industry. Along with 3-D printers and nanotubes, cryptocurrency is the future…We need to encourage it, not discourage it. There is risk associated with every budding industry in America.”
Treating virtual currency like property isn’t necessarily such as bad thing. Many who have lost money in crytpo trading will actually benefit from the ruling. Their losses would be considered a capital loss and count against capital gains realized elsewhere, lowering the tax payable (although this may be more relevant for 2014 than 2013, depending on how the remainder of this year goes). Also, income from activities such as mining are technically taxable whether the coins are considered currency or property.
Still, those passionate about digital currency are more concerned about the ideological implications of the ruling than the technicalities of how it affects their taxes.