As far as I understand, if you tip a street musician using Bitcoin, it's also a taxable event in the USA: you have to pay capital gains taxes on the difference between the price you paid for that amount of Bitcoin, and the market price that Bitcoin has now. My understanding is that it's as if, on every Bitcoin transaction, you virtually converted it to dollars and back; that is, from a tax perspective, it's as if you had converted the Bitcoin into cash, tipped the street musician using that cash, and the street musician converted that cash back into Bitcoin, all in a single atomic transaction.
