As context for my question please see:
Q-8: Does a taxpayer who "mines" virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
A-8: Yes, when a taxpayer successfully "mines" virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.
So, as an example, if I were to successfully mine 1 ZEC, that would trigger a taxable event; and I'd owe short term capital gains tax on the value at the time the 1 ZEC was awarded.
What is the strategy to avoid a situation where someone has mined, say, 1,000 ZEC (and owes taxes on all of it, based on its value at the time it was awarded) and then there is a big market drop?
It seems like under the current rules miners would be forced to sell some portion of each coin they mine to cover the tax liability. (And then that selling creates another taxable event..)
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