Tax and Accounting Aspects of Virtual Currency

Summary

This practice note discusses the major tax and accounting issues that virtual currencies and transactions in virtual currencies present. The key element in understanding the tax consequences of virtual currency transactions is that the IRS has determined that a virtual currency is generally property for all federal tax purposes. A virtual currency is not a foreign currency or even a true currency. This status of virtual currency as property holds true even though a virtual currency might function much like a real currency, including the use of a virtual currency to pay for goods and services, to pay wages, or to hold as an investment.