TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, August 26, 2017

Bitcoin And Taxes

Bitcoin IRSWall Street Journal, No One Knows How Much to Pay in Bitcoin Cash Taxes:

Before rejoicing over a Bitcoin Cash windfall, here’s a warning: You may owe taxes on it.

After years of discord over bitcoin’s future, the digital currency recently split into two competing versions: one called bitcoin and an alternate called Bitcoin Cash. As a result, each bitcoin owner received an equal amount of Bitcoin Cash, or the right to it.

But tax experts say there has been no guidance on how to treat the sudden receipt of Bitcoin Cash.

The Internal Revenue Service declined to comment on the issue. It hasn’t clarified many tax issues pertaining to digital currencies since it issued bare-bones guidance in 2014.

Jim Calvin, a buy-side tax specialist at Deloitte, thinks the receipt could be taxable this year for technical reasons. ... Then again, the IRS could say that the receipt of Bitcoin Cash isn’t taxable because it’s a “property division.” In this case, no tax would be due until the holder sells or transfers the Bitcoin Cash. But the cost basis of both bitcoin holdings would need to be adjusted to account for the split. ...

As tax experts debate how to classify the split, the IRS appears focused elsewhere when it comes to digital currencies. The top of its agenda is to root out those who use these currencies for tax evasion. ...

Forbes, IRS Hunts Bitcoin User Identities With Software In Tax Enforcement Push:

Is bitcoin in the IRS cross hairs? Users of bitcoin seem to be. In IRS Notice 2014-21, the IRS announced that bitcoin and other digital currency is actually property for tax purposes, not currency. That in itself has some big tax consequences.

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Comments

You have to wonder if the IRS's view of cyber currencies is a system that is designed to fail. Imagine having to report a gain or loss every time you brought some milk.

Posted by: Dale Spradling | Aug 28, 2017 3:31:20 AM