The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, or holding virtual currencies as an investment, generally has tax consequences that could result in tax liability.
The IRS issued IRS Notice 2014-21, IRB 2014-16, as guidance for individuals and businesses on the tax treatment of transactions using virtual currencies.
More Information
For more information regarding the general tax principles that apply to virtual currencies, you can also refer to the following IRS Publications:
- Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services,
- Publication 526, Charitable Contributions, for more information on charitable contribution deductions,
- Publication 544, Sales and Other Dispositions of Assets, for more information about capital assets and the character of gain or loss,
- Publication 551, Basis of Assets, for more information on computation of basis, and
- Publication 561, Determining the Value of Donated Property, for more information on the appraisal of donated property worth more than $5,000.
