The American Institute of Certified Public Accountants – the world’s largest association of accounting professionals – yesterday asked the Internal Revenue Service to issue immediate, updated guidance regarding the tax treatment of cryptocurrency transactions. The AICPA call for tax guidance was prompted by “the rapid emergence of virtual currency [which] has generated several new questions on how the tax rules apply to various transactions involving virtual currency and activities and assets related to it.” The AICPA further noted that “the development in the number of types of virtual currencies and the value of these currencies make these questions both timely and relevant to a growing number of taxpayers and tax practitioners.”
Fours years ago, the IRS issued Notice 2014-21, its first and only guidance regarding the tax treatment of cryptocurrency transactions. The AICPA requests that the IRS issue immediate guidance to address issues from the original notice as well as new developments, such as chain splits, that have arisen since Notice 2014-21 was published.
The AICPA’s submission to the IRS includes suggested Frequently Asked Questions (FAQs) that address the following areas:
- Expenses of obtaining virtual currency;
- Acceptable valuation and documentation;
- Computation of gains and losses;
- Need for a de minimis election;
- Valuation for charitable contribution purposes;
- Virtual currency events;
- Virtual currency held and used by a dealer;
- Traders and dealers of virtual currency;
- Treatment under Sec. 1031;
- Treatment under Sec. 453;
- Holding virtual currency in a retirement account; and
- Foreign reporting requirements for virtual currency.
The AICPA notes that “[v]irtual currency transactions, in which taxpayers increasingly engage, add a new layer of complexity to the analysis of a client’s reporting requirements” and that “[t]he issuance of clear guidance in this area will provide confidence and clarity to preparers and taxpayers on application of the tax law to virtual currency transactions.”
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