CATEGORY: DISCUSSES cryptocurrency
RELEVANCE: extremely RELEVANT TO CRYPTOCURRENCY
TYPE: regulatory guidance
LOCATION: internal revenue service headquarters, washington, dc
published: april 14, 2014
Link to the notice: IRS Notice 2014-21
These United States – The United States of America
Cryptocurrency Owners – People that believe magic internet money has value.
How should cryptocurrency, or virtual currency as used in the public notice, be treated for tax purposes?
Relevance to Cryptocurrency
Extremely relevant. The short answer is that for tax purposes virtual currency, that includes cryptocurrency, will be treated as property. This means that realized gains and losses are taxable events subject to short term or long term capital gains tax.
The notice specifically states that it refers to convertible virtual currency, that is “[v]irtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency.” The notice was the first signal from the IRS that Bitcoin may be used as a currency.
The notice also provides a lengthy FAQ section that covers many issues related to taxes for cryptocurrency mining, paying employees with cryptocurrency, and much more.