IRS Issues Updated Guidance on Cryptocurrency
The Internal Revenue Service recently issued Revenue Ruling 2019-24 (https://www.irs.gov/pub/irs-drop/rr-19-24.pdf), providing the first IRS guidance on tax issues relating to cryptocurrency since the March 2014 release of Notice 2014-21. Along with the release of Rev.Rul 2019-24, the IRS issued a number of “Frequently Asked Questions” pertaining to the tax treatment of certain cryptocurrency transactions, which are available on the IRS website.
The IRS treats cryptocurrencies as “virtual” currencies that constitute property, not cash, for tax purposes. Therefore, a disposition of virtual currency by a taxpayer, including the use of virtual currency to “pay” for goods or services, constitutes a disposition of property that may subject the taxpayer to gain or loss.
A review of the IRS guidance in the aggregate, suggests that the IRS is turning its focus toward the collection of tax revenue associated with cryptocurrency transactions as well as providing taxpayers with education about cryptocurrency transactions.
While a complete summary of Revenue Ruling 2019-24 is beyond the scope of this blog post, it would be prudent for individuals who possess and utilize cryptocurrency to discuss with their attorneys, accountants and financial advisors whether their dealings with cryptocurrency will cause them to be subjected to income taxation.
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