{"id":32722,"date":"2018-01-19T07:00:24","date_gmt":"2018-01-19T13:00:24","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/?p=32722"},"modified":"2021-08-09T12:32:32","modified_gmt":"2021-08-09T17:32:32","slug":"irs-bitcoin-law","status":"publish","type":"post","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/irs\/tax-law-and-policy\/irs-bitcoin-law\/","title":{"rendered":"The IRS, Bitcoin, and Other Virtual Currencies"},"content":{"rendered":"

The IRS and Bitcoin have become common topics within the Block community. IRS Notice 2014-21<\/a> will act as our primary guide for decoding tax law, Bitcoin, and all questions in-between.<\/p>\n

Let\u2019s dive into part three of our Bitcoin series addressing IRS-imposed taxes and Bitcoin.<\/p>\n

 <\/p>\n

Detangling the IRS and Bitcoin<\/h2>\n

According to IRS Notice 2014-21<\/a>, the IRS acknowledges the existence of \u201cvirtual currency\u201d used for purchasing goods, services, or investments.<\/p>\n

The notice continues stating that:<\/p>\n

 Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and\/or a store of value. In some environments, it operates like \u201creal\u201d currency \u2013 i.e., the coin and paper money of the United States or of any other county that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance \u2013 but it does not have legal tender status in any jurisdiction.<\/em><\/p>\n

In short, the Bitcoin and its rival currencies are each acknowledged as a unit of exchangeable value. This value can be exchanged for common expenses such as food, bills, services, and other exchangeable goods. For sake of establishing value, each unit of Bitcoin is referred to as property.<\/p>\n

 <\/p>\n

More from IRS Notice 2014-21<\/a>:<\/p>\n

Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as \u201cconvertible\u201d virtual currency. <\/em><\/p>\n

The IRS briefly mentions Bitcoin as a primary example because its become highly visible and increasingly exchanged for traditional currencies.  The ability to cross traditional lines illustrates how the value is highly driven by the supply-and-demand of foreign exchange.<\/p>\n

 <\/p>\n

Common Questions: Bitcoin and the Law<\/h2>\n

There are frequent questions included in IRS Notice 2014-21. Below, we have addressed variants of these questions from curious investors who gave us a shout via Twitter:<\/p>\n

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How is Bitcoin taxed?<\/p>\n

\u2014 Mark A. Angst (@angst01) November 29, 2017<\/a><\/p><\/blockquote>\n