That's it...whenever currencies are traded, the possibility of a K-1 form arises, and since we're dealing with the dollar and the bitcoin here, and some people just trade the two without using them for a "pay-pal" purchase,it seems like a reasonable question.

  • Regulation in the area of digital currencies is still emerging, the best way to approach the topic is probably to talk to a tax advisor or tax lawyer. – Murch Nov 21 '13 at 0:27

From what I understand, you must report a capital gain (or loss) when you convert the BTC back into dollars. But I am not an accountant so you should consult your own accountant and not rely on me.

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