Updated IRS guidance on cryptocurrency taxation may be coming soon! The crypto space has significantly evolved since the IRS released its initial guidance in 2014. As such there are many unresolved nuances in applying U.S. income tax law to cryptocurrency.
BNA reports that at a recent New York State Bar Section of Taxation meeting, a U.S. Treasury official hinted that additional crypto tax guidance may come out this year, although it is not a priority given the 2017 tax reform act that is still being rolled out today.
Source: https://www.bna.com/treasury-may-answer-n73014476805/
Key unresolved issues that I personally hope the IRS will clarify include:
- Hard Forks - confirm whether this is a taxable event, and whether value should be $0 on day 1 due to no liquid exchange on day 1?
- Air Drops - same point as above?
- Basis Tracking – For many transactions, specific identification of basis may be difficult. Many exchanges providing detailed on a FIFO method however this is technically only allowable for securities.
- Initial Coin Offerings – While stock offerings are tax free to Company under IRC Section 1032, no such rule exists to offerings of Crypto.
- Confirm if like kind exchange did or did not apply prior to 2018, and hopefully an opportunity for individuals to amend.
- Potential Foreign Bank Account reporting (Unclear).
Summary
IRS guidance on crypto tax is coming hopefully at some time this year. I am eager for actual guidance to be released nevertheless. I will be racing to provide an update and break down the updated rules when released.
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Disclaimer: This series contains general discussion of U.S. taxes in a developing and unclear area of tax law. As always, you should consult your own tax advisor in your jurisdiction to determine your specific situation as this is not personal advice; and consider any future guidance by the Congress/IRS after the date of this article. Under Circular 230 to the extent it applies, this article cannot be used or relied on to avoid any tax or penalties in the U.S., its States or any other jurisdictions. This post does not create a client relationship between the author and the reader.
This post is being flagged by multiple bots for plagiarism. It's such a short post I don't really understand why. This post was derived from my own current/past work unless otherwise cited.
Greatly appreciate the update...I am on extension and hope for some guidance before October 15...
Good to hear from you!
The AICPA also addressed many of the points above (and a few more) as open issues in their May 30th letter to the IRS:
https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/20180530-aicpa-comment-letter-on-notice-2014-21-virtual-currency.pdf