Bitcoin tax issues, accounting and bitcoin inheritance
Bitcoin is one of many “virtual currencies” out there. With its recent rise in popularity it is becoming increasingly more common, however, there are some tax issues that you should be aware of if you are considering purchasing or mining bitcoins:
What happens when I sell bitcoins or when I die and my children inherit my bitcoins?




Is bitcoin mining income?
Directly from the IRS:
Question: Is an individual who âminesâ virtual currency as a trade or business subject to self-employment tax on the income derived from those activities?
Answer: If a taxpayerâs âminingâ of virtual currency constitutes a trade or business, and the âminingâ activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self employment income and are subject to the self-employment tax. See Chapter 10 of Publication 334, Tax Guide for Small Business, for more information on selfemployment tax and Publication 535, Business Expenses, for more information on determining whether expenses are from a business activity carried on to make a profit.
(emphasis added by me, -J.D.)
Source:Â http://www.irs.gov/pub/irs-drop/n-14-21.pdf