Question if I buy a bitcoin @$103.89 USD as of today’s prices where does the USD payment go? Do the funds paid in any world currency go into a pool to back the bitcoin or into the developers of bitcoin clients? What are the IRS requirements as to the value of ones account? The Norfed dollars where backed or made of precious metals and taken down by the federal coinage act. The $20.00 coin is now worth about 30% more than face value, go figure. Thanks any info would be appreciated.
When you buy an ounce of silver bullion at the coin store, who gets the money?
The person who held the coin before you did.
All bitcoins are first issued to miners. From there, miners use those coins for trade or exchange. So when you buy a bitcoin with cash, you are buying it from someone who owned it but initially it was obtained from a miner.
If you are asking about trading on an exchange, then the exchange software matches up buyers and sellers. Since you are a buyer, it matches you up with someone that wants to sell (or potentially several sellers that add up to what you want to buy). The sellers get the money (and usually a small part of it goes to the exchange itself)
Bitcoin is neither a commodity or a fiat currency, but has characters of both. The value is derived from the scarcity (since there will only ever be a finite amount of bitcoins, and before then there can only be so many at any given time, with no possibility of finding a new resource of them). The value is also derived from the liquidity perks that commodities and currencies have failed to offer, especially person to person, and over the internet.
If you bought a bitcoin with usd, the person you bought it from no longer has a bitcoin and would have usd instead.
For the IRS you would most likely have to report your cost basis in US Dollars, and at reporting time report a gain or a loss if you sold them for cash. In the absence of specific regulations (recognized foreign currency trading profits have a max tax rate subject to the 60/40 rule), you will use the short-term or long-term capital gains tax code. Short-term capital gains are treated as normal income and taxed in whatever bracket you are in. Long-Term Capital gains are treated in a lower max different tax bracket. Unless explicitly prohibited you can hold anything in an IRA or Roth account.......