Hey Carl, thanks so much for your response. Could I ask some more follow up questions if you don't mind?
Let me try to paint a more realistic scenario to see if it still matches up.
- An online company offers graphic design services and only accepts Bitcoin.
- Throughout the year, they receive $50k worth of Bitcoin.
- The price of their Bitcoins stays constant
- They pay let's say $20k of their Bitcoin to employees who do the design work (so $30k left).
- Near the end of the year the price of Bitcoin drops heavily so that remaining $30k is now worth $10k.
- They decide to convert that $10k in Bitcoin to USD in order to have some cash in their bank.
My questions:
- What are the taxable events here?
- Is the receipt of those $50k in Bitcoin taxable as operating income?
- Is the $20k payment to employees taxed?
- I assume the $20k loss from $30k original amount would be considered a capital loss?
