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If bitcoin is 'digital gold,' it should be taxed like gold

Section: Daily Dispatches

By Chad Bayse
The Hill, Washington
Friday, November 19, 2021

As the U.S. government seeks ways to fund its swelling debt and deficits and seemingly ever increasing spending, a puzzling anomaly exists. 

Investors have flocked to bitcoin and other cryptocurrencies yet receive a preferred tax rate on long-term profits as compared to gold bullion. This makes no sense if, as its advocates like to say, bitcoin is "digital gold."

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In 2019 the Internal Revenue Service (IRS) published Notice 2014-21, which characterizes cryptocurrencies as "property" for tax purposes. Meanwhile, gold bullion and equivalent exchange-traded funds are treated as "collectibles," like coins, gems, jewelry, art, stamps, toys, comic books, sports cards, etc. 

Assets are generally not taxable until the point of sale, when an investor "realizes" a gain or loss. If either bitcoin or gold is bought and sold within a window of 12 months, the proceeds are taxed as ordinary income at a maximum of 28 percent.  

But if bitcoin is held for more than 12 months, any gains from a sale are taxed at the preferred long-term capital gains rate, up to a maximum of 20 percent. Gold bullion held for more than 12 months, however, is still taxed up to a maximum of 28 percent. ...

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