As expected, the U.S. Internal Revenue Service has provided some
guidance on the U.S. tax treatment of Bitcoin.
In Notice 2014-21 (March 25, 2014), the IRS stated that Bitcoin is property and not
currency for tax purposes. According to the Notice, "general
tax principles applicable to property transactions apply to
transactions using virtual currency." Some of the U.S. tax
implications of Bitcoin include the following: (1) taxpayers
receiving Bitcoins as payment for goods or services must include in
their gross income the fair market value of the Bitcoins; (2)
taxpayers will have a gain or loss upon the exchange of Bitcoins
for other property; and (3) taxpayers who "mine" Bitcoins
must include the fair market value of the Bitcoins in their gross
incomes. The IRS also confirmed in its statement that employment
wages paid in Bitcoins are taxable.
This guidance from the IRS accords with the positions taken by
tax authorities in other jurisdictions.
The Canadian government has taken the position that Bitcoin is
not legal tender. The Canada Revenue Agency has stated that, when
addressing the Canadian tax treatment of Bitcoin, taxpayers must
look to the rules surrounding barter transactions and must consider whether
income or capital treatment arises on Bitcoin trading
(i.e., speculating on the changes in the value of
While Bitcoin currency exchanges encounter uncertainty (or fail
entirely), and Bitcoin prices continue to fluctuate, the global
tax implications of Bitcoin are becoming clearer.
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