Hidden Cash Or Hidden Bitcoin Discovery Is Windfall To IRS Too

It is hard to resist a mystery man handing out no-strings Hidden Cash. It now appears that the benefactor is Jason Buzi, whole role as Mr. Hidden Cash was revealed by Inside Edition. Tweets from handle @HiddenCash give clues. The feel-good story started in San Francisco.

And whether it is the same benefactor branching out to other locales or copycats, it is a nice trend. He has spawned emulators in the US and the UK. Yes, @HiddenCash_UK has left envelopes filled with £50 or more in London, Sheffield, Manchester and other cities. The money-driven scavenger hunts should make everyone happy, especially if you dig up some green

But it’s worth considering whether you should post that photo or tell your friends all about your big find. After all, the IRS may be watching. These aren’t charitable contributions, not in the traditional sense. They are a kind of grassroots giveback but probably aren’t gifts either. After a small start, Hidden Cash, sparked a multi-city frenzy. The cash man has attracted more than 441,000 followers on his Twitter account where he gives clues to the location of the hidden money.

What if plain old cash isn’t hip enough for you? Then you can check out @SFHiddenBitcoin. The idea is similar, though it’s so far appropriately only in San Francisco, where Bitcoin might aspire to be a kind of local currency. And just like the Hidden Cash, the mystery Bitcoins are, well, mystery.

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Clues at @SFHiddenBitcoin provide tips where to find Bitcoin wallets looking like small sheets of aluminum. There’s a QR code, a Bitcoin address and the @SFHiddenBitcoin Twitter handle. If you figure out the clues, you might find a wallet containing 0.0333 bitcoin, about $20.

California Gov. Jerry Brown signed legislation legalizing Bitcoin, although Bitcoin probably didn’t lead California’s official stamp of approval. The IRS, on the other hand, isn’t so sure. In fact, in March of 2014, the IRS issued Notice 2014-21 ruling that Bitcoin is property (not currency) for tax purposes. That means:

  • Bitcoin payments to independent contractors are taxable and payers must issue Form 1099.
  • Gain or loss from the sale or exchange of Bitcoin depends on whether it is a capital asset in your hands.
  • Bitcoin payments are subject to Form 1099 reporting just like any other payment made in property.

If you find hidden cash, must you pay tax on it? Yes, it’s income, just like anything else. The same is true for Bitcoin, although there’s an extra wrinkle given that the Bitcoin has be valued. Although the IRS might not find you, remember, you file taxes under penalties of perjury. Explaining away congratulatory pictures with your winnings could be awkward or worse.

Isn’t there an exception that could make finding cash tax-free? Unless the cash or Bitcoin qualifies as a gift, not really. The IRS calls whatever you find “treasure trove.” When an anonymous couple found $10 million in rare gold coins buried on their California property, it was the biggest coin discovery in U.S. history. The face value of the coins was more than $28,000.

Their market value? Over $10 million. Most tax experts agreed that the IRS was entitled to tax the full $10 million, not the $28,000 face value. In fact, treasure trove is just one example of the astounding breadth of what is income for U.S. tax purposes.

Cash and valuables you find are taxed. So says Cesarini v. United States, involving cash found in a piano. Mr. Cesarini bought an old piano for $15 and found about $5,000 in cash inside. When the IRS said it was taxable income, Mr. Cesarini went to court.

But the IRS won at trial and won appeal. Of course, the IRS likes this case. It is often cited for the rule that the IRS gets a piece of just about everything. In fact, about the only way you can find something and not have to pay tax on it is if you’re recovering your own property.

In that case, your recovery generally shouldn’t be income. Stolen art later recovered? If you can prove it’s yours, it’s not taxed. You’re just getting it back. But even then, exceptions can trigger taxes.

Under the “tax benefit rule,” if you claimed a tax deduction for theft or loss of the property, you have to include the value of the recovered property in your income when you recover it. And if the property has gone up in value in the interim, you get stuck with tax on the increased value.

So if you find cash or Bitcoin, congratulations! Don’t let the inevitable tax bite rain on the excitement. The IRS gets a piece of almost everything.

What’s the world coming too ?

Things may be more incremental in terms of acceptance, but the bitcoin revolution continues apace.

Bad regulation involves hacking babies in two before considering the consequences. Good regulation appreciates that the world changes.

The last year/century was appreciably different to the current one, let alone the future age of whose technological marvels we are barely worthy to evaluate, as nanotechnology reshapes our world. Wise regulators act accordingly.

In the world of bitcoin, the first reaction of the government sector was largely one of fear and confusion. Then again it was ever thus with innovation. Early underground trains were mandated with frosted windows lest ladies fainted at the sight of tunnel walls speeding by. On both sides of the Atlantic, governments demanded somebody must wander with a red flag ahead of any self-propelled automobile.

The arrival of a popular electronic currency in the form of bitcoin was a huge step. With a paucity of private sector folks pondering electronic money a decade or more ago, the government nexus had not considered just what would happen when the kindling of alt money finally caught light. Thanks to the block chain, bitcoin has not merely lit the fuse, it has blazed a trail, creating a whole new currency infrastructure which is already being used for all manner of exciting processes.

Bitpesa, to name but one, threatens to transform payments to the emerging world – creating a vast saving for those who have until recently been slaves to the somewhat Dickensian western systems. Every dollar saved on transfers means more money reaching the relatives of migrant laborers in the emerging world, delivering a palpable boost to living standards where every cent counts.

Governments and central banks in Japan and Russia have been amongst those reappraising the crypto currency revolution in recent days. Their incremental opening up to alt money is a healthy sign that the future of money involves the fiat financing of government co-existing alongside their crypto currency cousins. Indeed a recent auction of bitcoin from the bankrupt Silk Road was bought entirely by a Silicon Valley VC Tim Draper, who intends to use the crypto currency to provide an alternative to smaller emerging market currencies.

Yes, there are still agents of reaction everywhere, with the mainstream Western media endlessly obsessed by silly scare stories of drugs and crime at the epicenter of bitcoin trade, when of course the entire value of all bitcoins ever mined is equivalent to a bare few days of the dollar-funded drugs trade.

Bitcoin mining rigs at work. Photo by Patrick Young

Bitcoin mining rigs at work. Photo by Patrick Young

Nobody ever seriously suggests closing the Fed and switching off the US dollar (well apart from one Paul family in the USA). Naturally as the likes of the Russian Central Bank points out, money laundering is something we all must remain vigilant about. Nevertheless, as the Japanese government has also made clear, the future of money involves digital stores of value and transaction agents. Moreover, while the US may have sent out mixed messages about digital money, the fact that citizens can now donate bitcoin to political campaigns tells us all we need to know about how the political classes value crypto currency.

Nobody accepts gummy bears as electoral currency, but in bitcoin Washington trusts for its own self-sustenance at the ballot box.

The bitcoin revolution is now approaching a fascinating post nerd point in its development. Competing currencies are at different stages of development but all have similar issues going forward. The nerd era needs to give way to the broader acceptance by the public and that means better interfaces and more popular means to access, store and use cryptocurrency.

The Fascinating AuroraCoin has stalled as the purchasing infrastructure is not yet properly advanced. Likewise with bitcoin, while small entrepreneurs like myself are in the vanguard of accepting its usage, new payment providers have borrowed too much from the old era of infrastructure when micropayments – wafer-thin charges and instant access to the proceeds – are the way forward for all intermediaries. However these are mere ‘teething troubles’ as the revolution continues and bitcoin becomes an established instrument of global commerce.

The competition for our wallets is developing incrementally as the revolution is building pace. Competition is good for every citizen and consumer. Governments are no longer at the center of the money chain via their Central Banker cousins and that means better government, as opposed to willful devaluation of citizens’ savings as practiced by the political classes of all hues for decades. In that sense, the Copernican revolution in cash is gaining pace as never before.

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Bitcoin and freedom !

Bitcoins.com Being Sold At Auction By Mt. Gox Founder Mark Karpeles, Some Proceeds To Go To Investors

Seen as “absolutely the best remaining, and available name” for this new market; selling in Heritage Auctions’ July 24 Domains & Intellectual Property auction

Bitcoins.com

DALLAS — The URL Bitcoins.com will hit the auction block on July 24, 2014, as Part of Heritage Auctions’ Domain Names & Intellectual Property Auction, sold by Mark Karpeles, the controversial founder of the failed Bitcoin exchange Mt. Gox, and is expected to bring more than $750,000.

“We are hoping, with the sale of Bitcoins.com, to provide some relief to the people impacted by the Mt. Gox bankruptcy,” said Karpeles, “and will be putting at least half of the sale amount toward that purpose.”

Bitcoins.com is absolutely the best remaining, and available name for this new market,” said Aron Meystedt, Founder and Director of the Domain Names & Intellectual Property category at Heritage Auctions. “Bitcoin.com, the singular version, is owned and used by Blockchain.info, the world’s most popular bitcoin wallet, and Bitcoinwallet.com itself is also already tied up. For the right investor this is a golden opportunity.” 

The bitcoin payment system, an open payment network aimed at eliminating currency exchange fees and removing the need for intermediary banks, was created in 2009. It is mostly in the last 12 months, however, that it has gained mainstream notoriety, largely with the failure of Mt.Gox.com and the seizure of the nebulous Silk Road website, along with the subsequent liquidation of its Bitcoin assets. Bitcoins (plural) are the actual unit of exchange that has monetary value. 

“The current market capitalization of all bitcoins in circulation is between $7 billion and $8 billion,” said Meystedt. “Daily, there are millions of dollars in transactions in Bitcoins. This auction offers the opportunity to capitalize on one of the most significant developments since the inception of the Internet.”

Bitcoins.com is being offered in the July 24, 2014 auction alongside more than 90 other premium domain names, including OklahomaCity.comDEC.com (the fifth oldest domain name on the Internet, circa 1985), Rides.comSEM.comDigital.comCute.com and SouthernCalifornia.com.

Former Credit Suisse banker becomes Coinfloor chairman

London-based bitcoin exchange Coinfloor has brought in Adam Knight, a former senior manager at Credit Suisse and Goldman Sachs, as executive chairman.

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Knight, who has been an angel investor since leaving Credit Suisse in 2011, has also taken a stake in Coinfloor, which is trying to build a market for high-frequency trading in bitcoin.At Credit Suisse, Knight led a global commodity derivatives trading business and a fixed income department. Before that he ran the global metals trading business at Goldman Sachs.The former banker says that he has been monitoring and buying bitcoin for the last year and has been impressed with how the currency has stood up during that time, despite shocks such as the Mt. Gox debacle.

Explaining the decision to take a punt on Coinfloor, he says: “Having spent my career trading commodity markets I understand the exchange, clearing house and storage models well and wanted to find a team building a platform in this area with the right skills and approach to build a robust global Bitcoin financial services business.”

Coinfloor has made much of its commitment to security and regulatory compliance in a bid to avoid repeating Mt. Gox’s mistakes. Traders are required to use two factor authentication, while all bitcoin are stored offline in secure storage systems to thwart cyber-thieves. The platform is fully compliant with ISO27001 and has registered with HMRC for anti-money laundering.

“It is measures such as these and new initiatives soon to be rolled out that will enable Coinfloor to service both Bitcoin experts and professional traders whilst providing simple to use and understand services to extend Bitcoin usage to a broader set of new users,” predicts Knight.