There have been a lot of stories in the media recently about virtual currency and its increasing use and popularity. To no one’s surprise, the IRS has taken notice and is starting to allocate more resources and press releases to this topic. Recently, the IRS updated its Frequently Asked Questions (FAQs) relating to this.
Some of the topics addressed include recognizing a capital gain or loss when selling virtual currency, where to report income from virtual currency transactions, and whether there is income from virtual currency received as a bona-fide gift. Generally speaking, you must recognize a capital gain or loss from the sale of virtual currency similar to if you were selling a share of stock. This income would be reported on Form 1040. If you receive virtual currency as a bona-fide gift, you do not recognize income until you sell or otherwise dispose of it. Once again, this parallels the tax treatment of the sale of inherited stock.
These are just a few of the items that the IRS addresses but there is much more. To access all the FAQs, click here:
Have more questions about cryptocurrency? Reach out to your Henry+Horne tax advisor for more details.
Ron Greenfield, CPA