THE BURDEN IS ALWAYS ON THE TAXPAYER TO PROVE HER CASE.

the market lose as much as US$100 billion in value in a single day. Such volatility triggers substantial gains and losses, which have significant tax consequences.

For tax purposes, virtual currencies are considered “property,” rather than currency. Trading a Bitcoin for another digital coin would be taxable since it would be considered a sale of property for cash, which the taxpayer then uses to buy the other cryptocurrency. Income from creating Bitcoin through the mining process would also be taxable for the producer.

How would gains and losses on cryptocurrency trading be taxed? Realized gains and losses on the currencies may be on account of capital or income, which would trigger substantially different tax consequences when a person buys or sells cryptocurrency or uses it to purchase goods and services. Depending on how taxpayers report their gains and losses, the transactions would also have a significant impact on government revenue.

The distinction between capital gains and income is superficially simple. Capital gains derive from sale or realization of the investments. Income derives from trading, or the periodic yield of an investment. The distinction is often put in the form of an analogy. Capital is likened to the tree or the land, and income to the fruit or the crop. The tree is the