Bitcoin Is Property Not Currency in Tax System: IRS

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March 25 (Bloomberg) -- The U.S. government will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions, the IRS said in its first substantive ruling on the issue. Matt Miller reports on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

Matt miller joins us.

Break this down for us.

It is a very interesting ruling and one that people using it going have been waiting for for over a year now.

Given the popularity of bitcoin -- and 2013 it went from 700 bitcoins are our 213,000 per hour and transaction.

The market of all bitcoins out there went from about $1 billion in july 2013 to 12 billion dollars in december 2013. a little bit of a drop in bitcoin this december 2013, but still important for people to know how to treat this asset for tax purposes.

What the irs is saying is you will be able to claim -- in the case that you bought it for much less than it is worth now, which is pretty much the case for anyone who bought it about six months ago, you will be able to treat it with capital gains tax rules.

That means if you hold it for over a year, the highest rate that will be taxed will be about 24%. if you hold it for less than a year, your tax rate will be about 44%. you will also be able to take capital losses on that, which is key for people who bought bitcoin near the end of 2013 when it ramps up to a peak of about $1200. it is currently trading for less than $600, depending on where you look to do a bitcoin transaction now.

It is very interesting stuff and it lays out the rules, which i have always wondered about, for bitcoin miners.

They have to pay the tax at the moment they mine it as regular income and any growth in those assets will be taxed to capital gains.

But not currency, but property?

As property, not currency, which is very interesting for people trading in bitcoin.

They will be able to use the lower capital gains tax rate rather than if they had it as regular income.

This does not mean bitcoin is not a currency or is a currency.

I spoke with the undersecretary of financial intelligence for the u.s. treasury last week, and he said, we do not consider the virtual currency a currency.

Now -- take from that what you will, but until people are using that going to buy milk and bacon, they consider it an asset.

This text has been automatically generated. It may not be 100% accurate.

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