We recently published our new KROST Quarterly Magazine which is packed full of articles and insider knowledge focusing on tech topics. Here is an excerpt from the article “The Basics of Virtual Currency” by Tax Director Evelyn Fernandez, CPA and Tax Staff Justin Ha:
“On March 25, 2014, the IRS released Notice 24-21 detailing how existing general tax principles should apply to transactions involving virtual currency. The IRS defines virtual currency as a “digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.” Examples of virtual currency include, but are not limited to, Bitcoin, Ethereum, Litecoin, Zcash, and Monero.
Virtual currency that has an equivalent value in real currency, or that can be used as a substitute for real currency, is referred to as “convertible” virtual currency. Bitcoin is a prime example of convertible virtual currency. In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax implications. The tax liability is determined on how virtual currency is held and used.
Virtual Currency Held as Assets
For federal tax purposes, virtual currency is treated as property, and therefore, general tax principles applicable to property apply to transactions using virtual currency. This requires for gains and losses upon an exchange of virtual currency to be calculated. To stay in compliance with IRS regulations…” Continue here
About the Author
Evelyn Fernandez, CPA, MST, Principal
Tax, International Tax, Manufacturing & Distribution
Evelyn is a Tax Principal at KROST. She has been in the public accounting profession for over 15 years. Her areas of expertise include tax planning and compliance for high net worth individuals, international entities and individuals, multi-state taxation, partnerships, S corporations, trusts, nonprofit organizations, and entertainment businesses. » Full Bio