Asking for Virtual Currency Tax Guidance


CPA's Ask for Cryptocurrency Guidance from IRS

The American Institute of CPA's have asked the IRS, for a second time, for guidance on the tax treatment of cryptocurrencies.

In a May 30th letter to the Internal Revenue Service, Annette Nellen, chair of the AICPA Tax Executive Committee, asked that the agency provide a new list of questions and answers on issues that have emerged as a result of the evolution of virtual currencies in recent years. The list would supplement the FAQs the agency provided in Notice 2014-21—the sole piece of guidance from the IRS on the subject.

Below are topics that the AICPA has asked the IRS for clarification on proper tax treatment:

• the costs of acquiring virtual currency through “mining"—where computers compete to solve mathematical problems and win currency—or similar activities, and whether they can be expensed as incurred, similar to costs incurred for providing other service activities;

• acceptable methods for valuing and documenting virtual currencies;

• the computation of capital gains and losses and the availability of alternative accounting methods;

• a potential exclusion for taxpayers with transactions resulting in $200 or less of gain;

• confirmation that charitable contributions of virtual currencies greater than $5,000 are treated the same as contributions of publicly traded stock, which don't require a qualified appraisal;

• the tax treatment of different virtual currency events, including chain splits, which occur when transactions use blockchain in supply chain industry resulting in one blockchain splitting into separate virtual currencies;

• the character of virtual currencies bought and sold by a dealer.

• the availability of the mark-to-market election to qualified dealers and traders;

• the ability to defer taxes on transactions occurring before 2018, in which one virtual currency is swapped for another “like-kind” virtual currency;

• installment sales of virtual currencies;

• the ability to hold virtual currencies in a retirement account; and

• foreign reporting requirements for virtual currencies.

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