[fg_admin]

Chances are, your browser has been hijacked. We tried three different browsers and none of them have problems. Try multiple browsers on the same computer, and if that doesn’t work, try another computer. The problem is on your end.

[fg_admin]

EDITORIAL: Here is what Larry BeCraft says about the above referenced document.
________________

This last week, I received an e-book, The Matrix, alleged authored by a retired Judge Dale and read it. As is very common in this movement, research consisting of a collection of rumors and hearsay is presented
as factual, yet virtually all of it is erroneous. And the naive believe these arguments. I intend to expose these gross errors.

Attached, please find a page from this collection of falsities that concerns the 1783 Treaty of Peace which formally ended the Revolutionary War. The book claims to interpret provisions of that treaty. To prove the error of the claim made in Matrix regarding this treaty, I attach a copy of it; mere perusal clearly shows the claim to be a lie.

I also provide further explanations of that treaty and its legal consequence here:

http://home.hiwaay.net/~becraft/WeAintBrits.htm

[fg_admin]

Its in the following article, but you must be a Compliant Member to read or use it:

Getting a USA Passport as a “Non-citizen national”, Forms #09.007 and 10.012
FORMS PAGE: http://sedm.org/Forms/FormIndex.htm

Membership is free. It is a compliant member form because we don’t want people abusing it who haven’t done their homework. That would needlessly jeopardize and compromise otherwise good legal arguments.  Members were trying to use it who did not complete the mandatory Path to Freedom Process so it had to be moved to the Compliant Members Only area.  You can read about this at:
http://sedm.org/Membership/CompliantMembersOnly.htm

All future questions on this subject should be directed to the SEDM forums, because we aren’t responsible for any of the above.
http://sedm.org/forums/

There is deliberately no information on this site about how to obtain a passport as a non-citizen national. It was all removed and replaced with the above.

[fg_admin]

The state can turn anything into a crime, but they cannot turn the exercise of a right protected by the constitution into a crime.
 

“. . the assertion of federal rights, when plainly and reasonably made, is not to be defeated under the name of local practice.” [Davis v. Wechsler, 263 US 22, at 24 (1923)]

“Where rights secured by the Constitution are involved, there can be no rule making or legislation which would abrogate them.”
[Miranda v. Arizona, 384 US 436, 491 (1966)]

“The claim and exercise of a constitutional right cannot thus be converted into a crime.”
[Miller v. U.S., 230 F.2d 486, at 489 (1956)]

“. . .there can be no sanction or penalty imposed upon one because of his exercise of constitutional rights.”
[Sherar v. Cullen, 481 F.2d 946 (1973)]

Hence, a predicate for the crime is that the person engaging in the activity must be a public officer on official business. Public officers are not protected by the constitution and can exercise only those privileges granted by their EMPLOYER, which is Uncle. It can’t be a crime for PRIVATE people protected by the constitution because it isn’t even heard in a REAL court. Traffic court is NOT a constitutional court, has no jury box, and is actually an agency in the executive branch. If it were a REAL or common law crime, it would have to be heard in a REAL criminal court with a real jury of your peers, all of whom are NOT statutory “drivers” or public officers in the government, but rather PRIVATE people. Franchise courts are covered in:

Government Instituted Slavery Using Franchises, Form #05.030, Section 21
DIRECT LINK: http://sedm.org/Forms/05-MemLaw/Franchises.pdf
FORMS PAGE: http://sedm.org/Forms/FormIndex.htm
 
Travel is a RIGHT, but the ability to use the public roadways for hire or private gain is NOT. Using the public roadways for private gain is a revocable PRIVILEGE and NOT a RIGHT. Applying to receive and using public property called a “driver license” in connection with the use of the public roadways for hire causes the applicant to be treated AS IF he or she was a public officer on official business in charge of public property. A public officer is anyone in charge of the property of the public and the registration and license are said public property:
 
http://famguardian.org/Subjects/Freedom/Rights/Travel/RightToTravel.htm
 
Please resist further questions until you have done the due diligence we demanded of you. We aren’t a free legal reference service. We don’t want to have to keep rewriting the Defending Your Right to Travel book in these forums for people who are too lazy or too cheap to get it.
 
Please consider downloading, reading, and following the following, because you are asking a lot of needless questions.  The following free curriculum would allow you to find all your own answers.
 
Path to Freedom, Form #09.015
FORMS PAGE: http://sedm.org/Forms/FormIndex.htm
DIRECT LINK: http://sedm.org/Forms/09-Procs/PathToFreedom.pdf

That curriculum is designed to prevent cluttering the forums with needless questions that it answers and which you could answer if you followed it.

[fg_admin]

Welcome.

You said there were conflicting sources. Please identify SPECIFICALLY all the evidence you have uncovered so far that would answer your question. This is how you demonstrate that you are doing your due diligence. You can only deserve help if you at least try and demonstrate that you are trying to answer your own question before burdening people in these forums. No evidence, no help. We can’t reward people for being lazy and forcing us to do all their legal research for free. If we did, we wouldn’t have a life and would get nothing done. Whatever is free and requires no effort will always be overutilized. We don’t give people fish, but teach them how to fish.

If you have no research, then you should consider getting the book below so you at least know what to look for in trying to answer your own question before posting to these forums:

Defending Your Right to Travel, Form #06.010
DIRECT LINK: http://sedm.org/ItemInfo/Ebooks/DefYourRightToTravel/DefYourRightToTravel.htm
FORMS PAGE: http://sedm.org/Forms/FormIndex-SinglePg.htm

These forums are not a first resort but a last resort after you demonstrate your due diligence. This is explained in:

Guide to Asking Questions, Form #09.017
http://sedm.org/Membership/GuideToAskingQuestions.htm

If you need research tools to find the loopholes in your state, see:

State Legal Resources
http://sedm.org/Membership/GuideToAskingQuestions.htm

The Idaho page is at:
http://shome.tzo.com:8000/GIS/JurisdictionDB.aspx?state=ID

If you haven’t yet learned how to do legal research, then please read and learn:

Legal Research and Writing Techniques, Form #12.013
DIRECT LINK: http://sedm.org/LibertyU/LegalResearch.pdf

[fg_admin]

IRS Collection Methodology

Contains a summary of IRS collection methodology:

http://taxprof.typepad.com/files/135tn1633-1.pdf

[fg_admin]

EDITORIAL: Confirmation of the above.

_____________________
MAN ARRESTED FOR QUOTING CHURCHILL ON ISLAM

http://rt.com/news/155584-islam-weston-candidate-churchill/

Don’t forget to be politically correct today, cowardess is calling and the want of critical thinking demands it.

Storm Brooks

[fg_admin]

The following interviews discuss Christian anarchy:

Anarchast Ep.72 with Paul Rosenberg: Christians are Anarchists!
http://anarchast.com/front/2013/5/2/anarchast-ep72-with-paul-rosenberg-christians-are-anarchists.html

Anarchast Ep. 23 with Paul Rosenberg of the Freemans Perspective
http://anarchast.com/front/2012/4/25/anarchast-ep-23-with-paul-rosenberg-of-the-freemans-perspect.html

 

Notice in Ep. 72 above, Berwick admits he doesn’t know what paganism is.  That may be why he and most atheistic anarchists practice it.

[fg_admin]

rhonda9095,

If you are on this site, there is hope for you. If it is any consolation, we sometimes feel overwhelmed by the information on this site and the obstacles it presents to simply being LEFT ALONE. I’m sorry to say that:

1. We didn’t create all the complexity found in the legal profession.
2. The complexity is the main disguise for the truth that eludes so many people. It was deliberately created to hide your freedom as a needle in a huge hay stack.
3. We have tried very hard to simply the issues we deal with.
4. Even the founding father warned of this complexity and how it is abused to STEAL from people:
 

“It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?
“It has been frequently remarked, with great propriety, that a voluminous code of laws is one of the inconveniences necessarily connected with the advantages of a free government. To avoid an arbitrary discretion in the courts, it is indispensable that they should be bound down by strict rules [of statutory construction and interpretation] and precedents, which serve to define and point out their duty in every particular case that comes before them; and it will readily be conceived from the variety of controversies which grow out of the folly and wickedness of mankind, that the records of those precedents must unavoidably swell to a very considerable bulk, and must demand long and laborious study to acquire a competent knowledge of them.”
[Federalist Paper No. 78, Alexander Hamilton]
______________________________________________________________________________________________
“Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uniformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for [benefit of] the FEW, not for the MANY.”
[Federalist Paper No. 62, James Madison]

5. It overwhelms even attorneys, which is why they call their profession “practicing law” rather than simply DOING or ENFORCING law.

All we can say is, do your best. This subject is also covered in the following offsite link:

Path to Freedom, Form #09.015, Section 11
DIRECT LINK: http://sedm.org/Forms/09-Procs/PathToFreedom.pdf
FORMS PAGE: http://sedm.org/Forms/FormIndex.htm

The extensive studying and organizing that went into this site has taught us that:

1. The main product of education ought to be humility, not pride.
2. The more we learn, the less we realize that we really know.
3. Vanity is at the heart of everything man creates.
4. We all desperately need God because of the vast sin that this learning exposes.

[fg_admin]

Kokeshi,
 
Thanks for sharing your story.  The student loan trap you got yourself into is extensively talked about in the following dialog:
 
http://youtu.be/swNCLs0pzvg

When we were faced with trying to go to college, we elected NOT to go into debt to do it. We’re sorry you find yourself in that situation and it will be difficult to get out of.

[fg_admin]

Here is the last video he did:

http://youtu.be/aNVHbzlzUS8

[fg_admin]

Thanks for pointing out that inconsistency in our materials.  The instructions you are referring to are located at:

Sovereignty Forms and Instructions Online, Step 3.13
http://famguardian.org/TaxFreedom/Instructions/3.13ChangeUSCitizenshipStatus.htm 
 
The above text has been revised to remove the requirement to expatriate.  That original instruction was outdated.

Sorry for the needless confusion caused by this obvious conflict. It is very difficult and time consuming to keep everything on this site consistent with itself as the materials evolve.

[fg_admin]

Expatriation is unnecessary to regain sovereignty. It will also make you a stateless person with no right to travel ANYWHERE and no way to get a passport if you do not have citizenship in any other country before one does it. This is covered in:

Great IRS Hoax, Section 4.11.13
http://famguardian.org/Publications/GreatIRSHoax/GreatIRSHoax.htm

The problem is not CONSTITUTIONAL citizenship, but STATUTORY citizenship and its corresponding presumed domicile on federal territory not protected by the Constitution. See:

Why You are a “national”, “state national”, and Constitutional but not Statutory Citizen
http://famguardian.org/Publications/WhyANational/WhyANational.pdf

Because you are a newbie, you are likely to be confused about citizenship based on your question. To clear up such confusion as quick as possible, see:

Why the Fourteenth Amendment is NOT a Threat to Your Freedom, Form #08.015
DIRECT LINK: http://sedm.org/Forms/08-PolicyDocs/FourteenthAmendNotProb.pdf
FORMS PAGE: http://sedm.org/Forms/FormIndex.htm
 
The distinctions between CONSTITUTIONAL and STATUTORY citizenship are also summarized at:
 
Citizenship Status v. Tax Status
http://famguardian.org/Subjects/Taxes/Citizenship/CitizenshipVTaxStatus.htm 
 
You’re wasting your time.

[fg_admin]

Here website:

http://stopthecrime.net/

[fg_admin]

SOURCE: http://arstechnica.com/tech-policy/2014/03/op-ed-the-legality-of-virtual-currency/

________________________

Op-ed: The legality of virtual currency

Attorney and former IRS-man explains 3 major regulations facing Bitcoin.

by Judd J. Baroff, Esq. Mar 30 2014, 4:00pm PDT

We’ve all heard the news: Mt. Gox is down and has declared bankruptcy. This means Bitcoin is in trouble, and in fact, this could be the end.

A quick note

For the most part, I’m going to use “Bitcoin” as the stand-in for all peer-to-peer virtual currencies (what the Financial Crimes Enforcement Network [FinCEN] calls “De-Centralized Virtual Currencies”). But anything that follows Bitcoin’s pattern of peer-to-peer transfer with no central authority is included in this analysis, including dogecoins and litecoins.Except, like always, don’t believe the hype. This is not the first series of “the end of Bitcoin” articles sprayed about the Internet. Just patrolling the cyberspace of Forbes, there’s an article in June 2011, another from the end of that year, one from 2013, and, of course, one from the day after Mt. Gox went dark. So is this the end of Bitcoin? Almost certainly not. Will governments be looking a mite closer at it now, and, perhaps—to suffer a cliché for a moment—throw the baby out with the bathwater? Quite possibly.

The heightened attention is likely bad for Bitcoin, as regulators, scared of a new industry, overreact to the perceived dangers. This could mean more, faster, and messier regulations. Sadly, as anyone following Bitcoin’s legality with moderate determination can see, the laws governing bitcoins are already shockingly disordered. This chaos is partly due to the United States government not really knowing what bitcoins are or how they work. A greater part of the confusion stems from the bifurcated nature of our regulations and criminal laws.

Let’s attempt to summarize what we know about the three types of current regulation: federal, state, and taxation. While we’ll base any judgments on the law and my experience, it’s worth noting that given the dearth of institutional prescriptions, any analysis contains some guesswork.

Decentralized virtual currency

This is defined as a type of virtual currency “(1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.” If there was any doubt that “decentralized virtual currencies” referred to Bitcoin and its ilk, then a statment from Jennifer Shasky Calvery, director of FinCEN, puts that to rest. In it, she discusses the various new regulations as ways to avoid future Liberty Reserves and Silk Roads.First, the basics. Bitcoins are not “new”—they were first mined in 2009. They were “discovered” just over two years ago by a frantic media and, shortly thereafter, perturbed federal and state governments. Immediately, there was talk of regulation. There seemed to be three large-veined options: keep the nascent industry unregulated to see what happens, do what Finland has done and regulate bitcoins as commodities, or regulate bitcoins as currencies. For two years, the feds convulsed in exaggerated hand wringing until March of 2013, when a Federal bureau classified Bitcoin transactions as “currency transactions.”

Federal regulation

FinCEN, a bureau of the Department of the Treasury, regulates currency transactions. Its primary objective is to discover and prevent money launderers and the financiers of terrorism. As such, and simplifying for expediency what is a rather complicated mess of laws, those who “accept [peer-to-peer virtual currency] from one person and transmit it to another person” are called “exchangers,” who are classified as “money transmitters.” This definition captures those who run Bitcoin and other virtual currency exchanges but not those who mine the bitcoins or use them for personal transactions.

This means that even if you’re a college freshman running your exchange from your parents’ basement, you must register as a money services business (MS:cool: to run it legally. To operate an MSB, you must register with FinCEN and then re-register every two years or upon a material change (for example, change of address, change of name, etc.). Further, the MSB must then institute an anti-money laundering (AML) program, comply with fraud reporting requirements, and comply with requests from FinCEN or federal law enforcement if the men in dark suits come calling.

(Perhaps the above regulations seem over-burdensome to some, but the federal regulators actually covered these exchanges with a fairly light touch. New York, for example, does not seem to be so inviting.)

The exact AML requirements imposed by these regulations vary by the size and complexity of the MSB (and in general, the bigger you are, the more regulation you face). But basically, the company or person must retain records of every transaction. These records must be sufficient to verify customers’ identities “to the extent applicable” or, in other words, to the best of the MSB’s ability. This almost certainly requires recording the consumers’ user names and e-mail addresses, probably along with their IP addresses next to each transaction. However, given that FinCEN has not commented on the precise reporting requirements and no cases have yet arisen, we simply do not know exactly what records FinCEN demands an exchange to keep. Furthermore, FinCEN requires the MSB to designate a person responsible for the day-to-day compliance (including responding to any law enforcement request and filing fraud reports when applicable), plus a different person who occasionally monitors the adequacy of the AML program. Although both individuals may be employees of an MSB, the roles must be filled by at least two different people who must be “[p]rovide[d] education and/or training” on their duties and how to deliver upon them.

For a business of two or more people, this division of labor is straightforward. For exchanges operated by one person alone, hiring a lawyer or someone trained in regulatory schemes may be necessary. Happily, the monitoring portion of the requirement is not onerous, and assuming your exchange is moderately lucrative, it shouldn’t be too plunderous either. Still, I can see the programmers moonlighting as Milton Friedman cringe. To say that regulation is better than fraud feels removed to those who deal in Bitcoin honestly.

One part of the requirements demands having a system in place that either prevents frauds like money-laundering from happening or reports the possible money-laundering soon after it happens. This is what I call the “reporting requirement.” To fulfill it, the MSB must report any transaction of at least $2,000 that it “knows, suspects, or has reason to suspect” is entangled with illegality. This involves ferreting out such unusual occurrences as two people trading bitcoins for other money on the same day, perhaps at a lower than usual price, or perhaps in the exact same amounts again and again.

I’m going to try to preempt two objections that I often receive from my clients. First, I’m told that no user on my clients’ exchanges knows whom he’s exchanging money with. If not, the argument goes, then the chance for money-laundering trades would be next to, or in fact entirely, nil. If there is no way for users X and Y to know that they’re trading with each other, then the chances of X selling five batches of four bitcoins to Y in a 24-hour period are not worth considering.

Yet that’s not the only way money laundering works. User X might want to launder $100,000. He might therefore break the transaction into $5,000 batches and exchange them for bitcoins, dogecoins, and litecoins at different times throughout the same day. The MSB must report this, too. Happily, given that the MSB already tracks each transaction as part and parcel with its AML program, there will be only a little extra energy expended to search for such patterns within the behavior of the MSB’s customers. That’s the comfort I can offer MSBs or potential MSBs; these transactions are already recorded and easy to follow.

The second objection, brought up by those who run exchanges of virtual currencies alone, is rather trickier to handle. Those who run exchanges without physical currency strenuously argue that virtual currencies are a money system all on their own. They’re not measured in US dollars, so there’s no way to determine what a trade’s value is at the exact moment of its trade. This is true in any exchange of currency where the exchange rate alters throughout the day. But banks have complied with these laws (and other more stringent ones) for decades.

It’s all about the daily averages. For more mainstream currencies, like the Yen or the Euro, the average daily exchange rate-to-dollar is easy to find; the New York Stock Exchange keeps daily averages. For bitcoins, it’s a little more difficult. Checking out a site like bigterminal, it’s clear that the exchange rate between bitcoins (BTC) and US dollars (USD) depends on the exchange at which one trades them. So if an MSB’s exchange trades dollars with bitcoins, the answer is easy; the MSB will use its own daily average. If it only trades in virtual currencies, then we’re back into territory in which I have to shrug and say, “Well, no one really knows. Sorry.” Like always, there are guesses, and mine would be that the MSBs should compare the Bitcoin sold with sites that aggregate the BTC to USD average daily exchange rates of various popular exchanges. Alternatively, you could choose a single exchange on which you would base all of your transactions. Be warned, though, that changing your benchmark site once picked will cause regulators, alive or dead, to raise an eyebrow.

Happily, that covers the federal regulations, and from here the regulations become simpler, if much more uncertain.

State regulations

The problem with summaries of state regulations is that there is no way to capture all 50 states briefly. Summarizing all of the 50 states’ regulations is exactly like summarizing the regulations of 50 countries. Worse, most states haven’t even mentioned virtual currency specifically, so we’re working with regulations that are ill-designed for a new medium. Even before Mt. Gox disappeared or declared bankruptcy, the one state that has mentioned virtual currency, New York, said that it would prefer to squash the industry than suffer the slightest illegality. I’ll attempt to summarize only the different types of requirements set out by the states and give a handful of examples.

Most states impose four broad constraints before a person can even become a money transmitter: an application fee, fingerprint and other biographical information requirements, a pre-file meeting or call with a state agency that regulates money transmitters, and a surety bond (a set and reserved amount of money, usually secured by a bank, that guarantees a minimum payout against otherwise uncovered liabilities). Not all states demand each, and the exact nature of the requirements under these broad categories varies considerably among jurisdictions.

But most federal money transmitters will qualify as money transmitters for state purposes. New York is an exception; it has said that it will propagate rules specific to virtual currency transactions, and when those rules are promulgated, will provide exchangers with a roadmap. As far as we can tell, most other states apply their money transmitter statutes on Bitcoin in the meantime, as three men in Florida recently discovered. Florida’s statute prohibited exchanges of currency by non-licensed money transmitters of a value more than $300 but less than $20,000 in any 12-month period. It also prohibited the exchange of currency in the value of more than $10,000 in any single transaction or series of related transactions.

This is a good example of the variability of the different jurisdictions. Some other examples: in Delaware, you must have net worth of at least $100,000 to be a money transmitter. In Wyoming, you need a surety bond of at least two-and-a-half times the amount of any “outstanding payment,” though no less than $10,000 and no more than $500,000. California, too, has a surety bond requirement, although its minimum requirement is $250,000, and its maximum requirement is $7,000,000.

As for filing fees and biographical information, Colorado demands $7,600 in registration fees as well as in-depth biographical checks and fingerprinting. Meanwhile, Connecticut requests just under $2,000 in filing fees and considerably less biographical information, with no fingerprinting requirement.

But not all states are so stringent. Operating under much lower ceilings, Nevada requires a bond of $10,000 and about $700 in fees. Utah requires $50,000 for a surety bond but only $100 in fees and next to no background requirements. And while Arizona has a money transmitter statute, its definition of “money” excludes virtual currencies. So at least for now, the state seems to leave bitcoins unregulated.

This short section really comes down to: what will states do over the upcoming months and years? I refer to my recurring motto: no one knows. Hopefully, New York will set a precedent by minimizing the requirements for surety bonds and assets. Exactly how is a money transmitter supposed to proceed? Like always, ask an attorney for your specific situation.

Taxation

Business taxation is very confusing, and there are literally hundreds of sections that alter the basic “tax posture” (a technical term meaning the arrangement of tax liabilities, exemptions, and deductions) of a business. As with other regulations, taxation is bifurcated into federal and state. Unlike other regulations, state taxes can usually offset federal liabilities, so these regulatory spheres are closely tied. We’ll focus on the federal regime.

Until recently, the IRS had no decision on how to tax virtual currencies. Tax professionals debated over which type of assets the IRS would consider virtual currencies—capital assets (like stocks), collectible assets (like gold), or currencies (like dollars). On March 25, 2014, the IRS finally spoke up. “Convertible” virtual currencies are treated as capital assets for tax purposes.

We’ll get to what “convertible” means, but the first thing to say is that this is very good news. “Character” (the nature of an asset, which determines the rate at which income derived from that asset is taxed) is the most vital part of tax strategy. Lawyers around the world burn a lot of midnight oil trying to get deals structured to give their clients gains from capital assets. Here, the IRS has saved us all that work.

Character determines the rate at which all of your income will be taxed (to get mildly political, this is why Mitt Romney endured a lower tax rate than your uncle who works construction). And character for property is broken into two types: “long-term capital gains” (assets that were held for one year or longer before being sold), assessed at a maximum rate of 23.8 percent, and “short-term capital gains,” assessed at “ordinary income” rate (the percentage one pays on wages), which has a maximum rate of 39.6 percent.

To get concrete, let’s say that Mike buys a bitcoin for $500 and sells it a week later for $700. Simultaneously, he sells a bitcoin (for $700) that he bought back in 2011 for $30. He would have a taxable gain on both exchanges. For the bitcoin he just bought last week, he would have a $200 gain, which would be short-term capital gains. This would be simply added to his salary or any other ordinary income he recognized that year. The bitcoin he bought back in 2011, for $30, would give him a $670 gain that would be considered long-term capital gains. It would be taxed at (a maximum of) 23.8 percent.

It’s not just exchanges for cash that trigger tax liabilities when dealing with property, however. Exchanges of property for goods or services (for example, I trade you a book for painting my room or a movie for making me a sandwich) are taxable transfers. If there are no other pieces of property or cash in the transaction, anything exchanged is assumed to be of equal value. For example, if Mike buys a painting for $1,000 and later exchanges it for the painting of his house (which would normally cost him, say, $10,000), he has gained on the exchange of that property and owes taxes on $9,000. Likewise, if Mike bought a bitcoin for $200 and later uses it to pay his website designer (for a job normally costing $500), then he would receive a $300 gain.

This works both ways, of course. If Mike bought a bitcoin for $800 and later gave it in exchange for services normally costing $600, he would recognize a loss of $200. This illustrates the need to keep meticulous records so Mike knows his tax liability at the end of the year. It even includes (the IRS points out) someone who simply mines bitcoins for his or her own use.

Now we come back to the caveat about “convertible” virtual currency. These rules only apply to convertible virtual currencies (like Bitcoin) that “[have] an equivalent value in real currency or that act as a substitute for real currency.” Bitcoins, dogecoins, litecoins, and all of the proliferated virtual currencies you find on exchanges are likely to count among convertible virtual currencies. The test will be case by case, and it will turn on whether you can exchange them for “real” money or use them to purchase goods or services. On one end, we know it includes bitcoins, dogecoins, and litecoins. On the other end, it almost certainly excludes such virtual currencies as the internal money of Second Life (which, as far as I understand, cannot be moved outside the system to pay for real-world goods).

That’s the world as it now looks, and it’s a much clearer vision than even a week ago.

Conclusion

If any of this sounds disconcerting, take comfort in the fact that it disconcerts others, too (see here, here, and here). About a week ago, Jamie Dimon of J.P. Morgan Chase travelled to the New York State panel on bitcoins to voice his contempt for virtual currencies everywhere, saying they were useful only for illegality. And many more people worry that Bitcoin removes the middleman—oddly, these people usually are, like Dimon himself, the middlemen—whom they see as enforcers of safety and customer care.

This has regulators even more concerned and reluctant to promulgate regulation, fearing that if they’re too limp, they will support money laundering, another Silk Road, or a Mt. Gox. Until they act, however, they’re creating exactly the Wild West environment they fear and are further stoking those fears. So if you have any specific questions, ask an attorney. And in the meantime, let’s hope the regulators don’t, as Jamie Dimon and many banks hope, strangle this baby in its crib.