Forbes has published an article, “Stolen $600M Crypto Is Returned, Can IRS Tax It?”, which discusses whether the IRS has the right to tax cryptocurrency. The article begins as follows:
It’s no secret that the IRS is after crypto in a big way, with warnings, a series of cryptocurrency John Doe Summonses served on exchanges and even a crypto question on every tax return. Selling crypto can obviously trigger taxes, but even buying something with crypto can trigger taxes. In fact, even paying taxes in crypto can trigger more taxes. This tax paradox started when the IRS ruled that cryptocurrency is property in Notice 2014-21. That classification has some big tax consequences, accentuated by wild price swings. If you pay off a $5,000 debt with crypto, as long as the crypto is worth $5,000 when you pay, you’re home free, right? Not really. You need to consider the sale you just made. The transfer of the crypto to pay your debt is a sale, and that could mean more taxes for the year of the payment. If you bought the crypto for $5,000 the day you pay the debt, there’s no gain. But if you aren’t paying a debt but buying something, it’s even worse.
Click here to see the full article: “Stolen $600M Crypto Is Returned, Can IRS Tax It?”
Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.