So you may think of it as money, but what you actually bought was a security (as far as the IRS is concerned). Let's say it was $833,333.33 per BTC when you bought it, and you spent $5000 so you got 0.006 BTC. I know that's not a realistic value, doesn't matter.
You think of it as "I took some out", but what actually happened was you sold $5000 worth of Bitcoin at the time (where it was now $1 million even per BTC), so $5000 worked out to 0.005 BTC. In the real world these numbers are a lot more uneven.
You still own 1/6 of your BTC, or 0.001 BTC in this example. You haven't sold that yet, so you're not taxed on it yet.
So... we look at the security that you did sell. 5/6 of your buy, which in this example is 0.005 BTC. We tell the IRS about that 0.005 BTC.
- What was the security? It is 0.005 BTC in this example.
- What did it sell for? (the 0.005 BTC)
- What did you pay for it? (the 0.005 BTC)
- Dates of buy and sell (so IRS can detect errors classifying it as a short or long term gain, detect wash sales, etc)
And there you have it, your tax gain was 833.33 USD.
Oh yeah, you get to do this paperwork for every sell. Isn't short-term trading FUN?