Since Bitcoin came up recently in a GP thread, I thought I’d note that the IRS has just ruled it is property (not currency).

This means that, in the eyes of the IRS, every Bitcoin transaction is a property-for-property barter. If you’re paying Bitcoin, for example, then you must figure out its worth in dollars on the day you paid it, and pay the appropriate capital gains tax (if your Bitcoin had a gain, measured in dollars).

Bitcoin is NOT crashing on this news, but I believe that it will kill Bitcoin over time – to the extent that the IRS enforces it. The record-keeping alone will be an onerous burden for anyone who uses Bitcoin often. The main reason any alternative-currency scheme works is because it lets people escape painful tax burdens. When there’s no escape, then…