It still doesn't clearly address the question of how those who mine bitcoin should be taxed. I guess your cost basis is a prorated portion of what you've spent on bitcoin mining. Very hard to do the accounting.
If you're mining in a pool, you should have a record of when you got each fractional allocation of Bitcoins. You could then look up the Bitcoin/USD rate at that time from historical data at one of the exchanges. This is going to be one very large spreadsheet.
One benefit is that you can probably batch rounds together and only count the bitcoins as "realized" when they are sent from the pool to you (at payout). This way you won't have to figure out the rates for each shift.
Theoretically you could probably choose any arbitrary price on the day you "receive" the bitcoins.. which given the nature of bitcoin price fluctuations could be significant.
The coins received from mining are treated as income by calculating the dollar value at the time they were received by the miner.
If they are later sold, the change in value is treated as a capital gain (or loss). The mining expenses would probably be somewhat deductible (but this isn't the same thing as a cost basis).
The thing that is probably going to catch people out is they are going to not pay self employment taxes on the mining income (it's going to be hard to defend as a hobby).
