Frost & Associates, LLC
Call Today 202-618-1873

One problem with cryptocurrency transactions: Property or money?

One of the key issues when it comes to taxation of cryptocurrency is its basic definition. Is cryptocurrency property or money? It may not seem like an important distinction, but the answer directly impacts the application of federal tax laws on this form of currency.

What is the difference between property and money? The Internal Revenue Service (IRS) generally considers money as income. This means a gain on currency is generally subject to a 39.6 percent taxation rate. In contrast, a gain on the sale of property is generally subject to a 23.8 percent taxation rate. 

Has the Internal Revenue Service (IRS) clarified the issue? The IRS did provide some guidance with Notice 2014-21. In this publication, the agency states that virtual currency, like Bitcoins, are treated as property for tax purposes.

Is it really that simple? Unfortunately not. Tax issues may be present depending on the purpose of the cryptocurrency. A distinction due to the purpose of the digital currency may also apply. Intended use as an investment or as inventory may impact tax obligations.

Navigating this distinction is complex and the IRS notes that penalties will apply in the event that a taxpayer fails to comply with his or her tax obligations. However, it is also important to note that remedies are available in the event a taxpayer is accused of failing to meet these obligations. Penalties may not apply in the event the taxpayer can establish that he or he has reasonable cause for the error. Putting together a case to satisfy the IRS is not an easy task. As such, it is wise to reach out to an experienced attorney for aid in this matter. 

No Comments

Leave a comment
Comment Information
Every Tax Problem Has A Solution

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Contact us today!

Frost & Associates, Attorneys at Law
1629 K Street NW, Suite 300
Washington, D.C. 20006

Phone: 202-618-1873
Phone: 202-505-6959
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 202-505-6959
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
888 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 202-505-6959
Fax: 888-235-8405
Map & Directions

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 240-599-5009
Phone: 202-505-6959
Fax: 888-235-8405
Map & Directions

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 703-621-7169
Phone: 202-505-6959
Fax: 888-235-8405
Map & Directions

Google+
Find us on...
  • Facebook
  • Twitter
  • Linked In