RE: The IRS is data mining social media, Steemit is on the radar
Yet you cannot even spend Steem Power until it's powered down so how is it income? Steem Dollars if there were a reliable and instant way to convert it then maybe it will be treated as Bitcoin but even with that I'm not entirely sure. The problem with Steem Dollars is we don't have a reliable way to know how much 1 Steem Dollar is worth, but we know for sure it's not worth 1 USD. If somehow 1 Steem Dollar were always exactly 1 USD then it would be trivial to do the taxes and treat Steem Dollars as income.
Honestly I have no idea how much my Steem Dollars or Steem will ultimately be in terms of USD value until it reaches my bank account. When it's in my bank account or at least in Bitcoin in my Coinbase account then I know and Coinbase gives me all the tools to deal with income once it reaches there. Prior to that I have limited access to tools, limited clarity from the IRS, and no clear and reliable way to exchange Steem even into Bitcoin. For all we know, all of our Steem Dollars and Steem Power could end up being worthless tomorrow, yet you would say we still have to pay income taxes on it?
As far as converting between Steem to Steem, isn't that like kind? Even if it's not like kind, there is no confirmation that Steem or Steem Dollars are a currency. If it's a currency do we have capital gains taxes? So the SEC can't regulate it? Since we can't buy anything in the real world with Steem Dollars I find it hard to believe it's even a currency but this could change and perhaps it is.
This is why the IRS needs to either clarify or we will just have to pay what we think we owe and wait and see. Worst case is we get audited in which case the IRS can say we owe some additional amount which we didn't think we would owe, and in that case we pay up. I just hope they don't assume we owe based on what Steem Dollars say on the site because for the most part those dollar values are BS and what we actually cash out can be more than that or less than that.
For example at one point in time Steem Dollars were going for almost x2 the amount in USD on Poloniex. I'm guessing the IRS isn't going to mind if we pay some sort of capital gains on that, as if it's a security? At the same time are we supposed to pay income on what value exactly? On the value the instant we receive it? So what if we sent our Steem Dollars that instant and Poloniex goes down, and now what?
Just receiving it doesn't mean we have an ability to convert it immediately. Bitcoin because of Bitpay and similar actually did give companies the ability to instantly convert to fiat to make taxes easier. We don't have that ability. If we blogged and got paid in Bitcoin we could use Coinbase or Bitpay to track the taxes automatically and even instantly convert it to USD for us so we don't lose anything.
So many great observations.
The value of Steem Dollars is most likely taxable income when it reaches our wallet from rewards (at the trading value if there is even an exchange to cash it out at this point).
Trading Steem Dollars to STEEM may be a like-kind exchange, but there are many tricky exceptions such as "reason for holding the asset" For example, even trading gold for gold under certain circumstances doesn't qualify for a like kind.
Typically, one would report a gain when they receive the Steem Dollars based on the US exchange value on that day (and the gain is the new basis); then when one sells the Steem Dollar for USD (or USD value of bitcoin/altcoin), another gain/loss occurs.
I share frustration with the lack of guidance, and I am passionate about trying to help the crypto community at least have some food for thought on the issues. I'm thinking about creating an excel template for Steemit users, and then hopefully take it further with help from with someone who would be able to load data necessary from Steemit or Steemd. It's a high ambition I know, it's something for the future.