I have read through it and used Google the best I can to fully figure it out but it is slightly confusing to me and the way that I am understanding it doesn't seem to make sense to me.

The Link And The Wording

https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance

"IRS Virtual Currency Guidance : Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply
IR-2014-36, March. 25, 2014

WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.

• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.

• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.

• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
  Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted today on IRS.gov."

OK so this is my thought process. In my case, the first 2 bullet points don't seem to affect me since I am making no payments to anyone using bitcoin. I simply trade and invest.

That brings me to the 3rd bullet point. "The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer."

And Google says " A capital asset is defined to include property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating."

And the 4th bullet point. "virtual currency is subject to information reporting to the same extent as any other payment made in property."

THIS IS WHAT CONFUSES ME SO MUCH

So if it's taxed like a property.... like they keep repeating. "General tax principles that apply to property transactions apply to transactions using virtual currency." Then I can use a Wisconsin Property Tax Calculator to find out what my taxes would be..right? Well if I use a propterty tax calculator it says that I would owe 198$ for having $10,000 of bitcoin... no big deal. Because here in Wisconsin the average property tax is 1.98% of the assessed market value, AND AM I CRAZY OR ARE THESE FUCKERS NOT SAYING ITS TREATED AS PROPERTY?!?! Now in the 3rd bullet point they make it sound like its taxed differently if you hold it into the next year.

What The IRS Says About Taxes On Capital Assets

"Investment property. Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. This treatment does not apply to property used for the production of income. "

What They Also Say...

https://www.irs.gov/uac/ten-important-facts-about-capital-gains-and-losses

"Special types of net capital gain can be taxed at 25% or 28%. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately."

The Real Question

So is it treated as capital asset only if I hold it into the next year? If so, why the hell wouldn't I sell all my BTC in December and rebuy after the new year? Or is it taxed worse after you sell? If it's treated as capital gains from your profit, then does this apply?

http://www.nolo.com/legal-encyclopedia/avoid-capital-gains-tax-selling-home-29901.html

"You probably know that, if you sell your home, you may exclude up to $250,000 of your capital gain from tax. For married couples filing jointly, the exclusion is $500,000. Also, unmarried people who jointly own a home and separately meet the tests described below can each exclude up to $250,000."

I am confused, but the IRS seems to be contradicting itself and trying to treat this as many different things.... Can anyone explain? It seems the "professionals" at the IRS can't even explain and this is as clear as mud to me. I just want to figure out what I am supposed to do to not be screwed over later on. I mean, I am trying to be responsible and follow their rules and play their little game... but WTF!