ARTICLE · 07 APRIL 2014

IRS: Bitcoin Not A Currency For Tax Purposes

Dentons Canada LLP

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As expected, the U.S. Internal Revenue Service has provided some guidance on the U.S. tax treatment of Bitcoin.

CanadaTax

Christopher Payne

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As expected, the U.S. Internal Revenue Service has provided some guidance on the U.S. tax treatment of Bitcoin.

In Notice 2014-21 (March 25, 2014), the IRS stated that Bitcoin is property and not currency for tax purposes. According to the Notice, "general tax principles applicable to property transactions apply to transactions using virtual currency." Some of the U.S. tax implications of Bitcoin include the following: (1) taxpayers receiving Bitcoins as payment for goods or services must include in their gross income the fair market value of the Bitcoins; (2) taxpayers will have a gain or loss upon the exchange of Bitcoins for other property; and (3) taxpayers who "mine" Bitcoins must include the fair market value of the Bitcoins in their gross incomes. The IRS also confirmed in its statement that employment wages paid in Bitcoins are taxable.

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