May 30, 2018
The American Institute of CPAs has sent a letter to the Internal Revenue Service asking for additional information in the form of questions of answers about the tax treatment of virtual currency, such as Bitcoin, to supplement the IRS’s existing guidance.
The additional FAQs would supplement the IRS’s guidance back in 2014 in Notice 2014-21.
The 27 FAQs proposed by the AICPA deal with a dozen different 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 section 1031 of the tax code
• Treatment under section 453
• Holding virtual currency in a retirement account
• Foreign reporting requirements for virtual currency
“The rapid emergence of virtual currency has generated several new questions on how the tax rules apply to various transactions involving virtual currency and activities and assets related to it,” wrote AICPA Tax Executive Committee chair Annette Nellen in a letter to the IRS Wednesday. “Moreover, 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.”
She noted that the additional guidance would address items from the IRS’s original Notice 2014-21, along with some new issues that are more relevant to the 2017 tax year, such as chain splits, that have arisen since the original notice was released.
“Virtual currency transactions, in which taxpayers increasingly engage, add a new layer of complexity to the analysis of a client’s reporting requirements,” Nellen added. “The 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.”