Is This Money Spendable? Taxation of Digital Currencies

The key element in understanding the tax consequences of virtual currency transactions is that the IRS has determined that a virtual currency is generally property for all federal tax purposes. A virtual currency is not a foreign currency or even a true currency. This status of virtual currency as property holds true even though a virtual currency might function much like a real currency, including its use to pay for goods and services, to pay wages, or to hold as an investment.

READ MORE »

Related Content

• Understanding Bitcoin and Virtual Currency
  Discover how Bitcoin is the most well-known form of digital currency. It is not legal tender, but in most countries it can be used and accepted in commerce voluntarily by willing participants. The use of Bitcoin per se is not illegal, but activities performed using Bitcoin may be illegal (e.g., buying illegal drugs or running a Ponzi scheme) or subject to regulation (e.g., operating a Bitcoin exchange).
• Virtual Currency State Law Survey
  Review this survey for an overview of the treatment of virtual currency in all 50 states and the District of Columbia.

Practical Guidance Updates
Featuring the latest updates in Practical Guidance.  

• Take Our Short Survey and Earn a $5 Reward*
• Tax Key Legal Developments Tracker (Federal)
  Stay informed on new developments.
  • Individual Income Tax: IRS provides two procedures for individuals not otherwise required to file 2020 federal income tax returns to file returns to receive advance child tax credit payments, 2020 recovery rebate credit payments, additional 2020 recovery rebate credit payments, and third-round economic impact payments. Proc. 2021-24.
  • Compensation/Employee Benefits/Payroll: IRS provides guidance for employers, plan administrators, and health insurers regarding the new credit available to them for providing continuation health coverage to certain individuals under COBRA and COBRA subsidy guidance, supplementing earlier guidance by the Department of Labor. IRS Notice 2021-31; COBRA Subsidy Rules Under the American Rescue Plan Act: Client Alert Digest.
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
• New Practical Guidance Content
  • Taxation of Cloud and Digital Transactions
  • Tax Collection and Enforcement: IRS Third-Party Contacts
  • Oil and Gas Tax: Fracking Developments and Incentives State Law Survey
  • Tracking Federal COVID-19 Laws Affecting Employee Benefits/Jobs
  • Large Corporations and Wealthy Individuals Beware: The Tax Man Is Coming
• Recently Updated Practical Guidance Content
  • Understanding the Difference Between the IRC and GAAP
  • Moving a Domestic Corporation (Tax and Other Issues)

*Subject to terms and conditions available here.

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+