IRS Urged To Reconsider Virtual Currency Guidance

In response to Notice 2014-21, a committee of the Texas Society of CPAs pressed the IRS to reassess guidance on the treatment of convertible virtual currencies, such as Bitcoin.  In the Notice, the IRS announced it would treat such currencies as intangible personal property, rather than as domestic or foreign currencies.

The Federal Tax Policy Committee of the TSCPA argued that virtual currencies ought to be treated as foreign currencies, for which there is already a body of settled law under Section 988 and supporting regulations.  The letter further noted, “there is no organized market to objectively determine the value of virtual currencies” and disinterested third parties do not operate existing exchanges.  The letter acknowledged there would have to be some method created for distinguishing tax reporting purposes between holding a virtual currency as an investment and using it in the ordinary course of business.  

See Texas CPAs Urge IRS to Reconsider Virtual Currency Guidance, Charitable Planning, Oct. 6, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.