Taxation And Virtual Currency

I recently had an opportunity to be involved in tax planning with "virtual currency", or "cryptocurrency", for the first time. My client ended up making a gift of bitcoin (one of several forms of cryptocurrency, also including Ethereum, Ethereum Classic, Litecoin and Bitcoin Cash) to a charitable remainder trust to avoid income tax on a sale of a portion of a highly appreciated Bitcoin holding to diversity the investment portfolio. Investments in cryptocurrency by our clients (and perhaps you) is increasing at a rapid rate and the purpose of this Tax Tip is to provide a summary of the income tax rules and principles applicable to virtual currency. IRS Notice 2014-21 (IRS Virtual Currency Guidance) is the starting point and most important tax guidance on this topic. For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. Under current applicable law,