Blue J Folios are workspaces that serve as targeted starting points for your tax law research. Our tax experts have collected and annotated relevant IRS laws, regulations, cases and guidelines. Where applicable, they have also created diagrams illustrating the ownership structure or transaction subject to the law, regulation, case law or tax guidelines, all giving you a substantial head start. Get inspired to use this workspace to pool your knowledge on this topic and expand it using Blue J’s tools (e.g. diagrams, status analysis, decision research).
Our latest Blue J Folio examines the tax consequences of cryptocurrency transactions. We have collected the most relevant IRC sections along with available IRS guidelines on how they apply to cryptocurrency tax. Key definitions and a brief introduction to relevant technology are included to provide as much clarity regarding the tax consequences of cryptocurrency transactions as possible on this emerging topic. You will also find links to major tax forms and selected commentaries from, for example, the ABA and AICPA. Here’s what you can expect to find in this Folio.
The Most Relevant IRC Sections for Cryptocurrency Tax
We have identified 12 sections of the IRC that will often apply in the context of cryptocurrency transactions, while they do not refer to the cryptocurrency itself. These include § 61 – Definition of Gross Income, §§ 1011, 1012, 1016 – Adjusted Cost Basis, § 1221(a) – Definition of Capital Assets, § 1222 – Definitions of Short and Short Capital Gains and Losses, long-term, and sections on donations, legacies and charitable contributions. Most of the provisions do not explicitly refer to cryptocurrency, but the IRS has indicated that they are nonetheless applicable to the taxation of cryptocurrency. We also include a proposal for legislation specifically tailored to the taxation of cryptocurrency.
Laws regarding the tax treatment of cryptocurrencies
The Folio provides an overview of relevant laws and regulations that may apply to cryptocurrency transactions. In some cases, you will find that there are no explicit guidelines from the IRS on how a specific type of cryptocurrency transaction should be treated for tax purposes. Nevertheless, since penalties may apply despite a lack of clear guidance, it is essential to be aware of the possible consequences of cryptocurrency transactions, so that the necessary steps can be taken to mitigate any risk of exposure to penalties and provide for tax liability and explore deferral. possibilities.
Forms Needed to Report Cryptocurrency Tax
There are three main forms that a taxpayer who has engaged in cryptocurrency transactions may need to complete. Although crypto transactions are still a new concept to some, the IRS is keen to track transactions and ensure that the correct information is reported.
The Blue J Folio is an easy-to-navigate resource. In addition to the relevant and annotated Code provisions, we are compiling available IRS guidance that relates to the section. This way, you have everything you need at your fingertips, which is a great starting point for diving into the research your particular case requires. Equipped with a Blue J Folio, you are able to best advise your clients, which saves you hours of research and a lot of money for your client.
Check out our Blue J Folio sample: Tax consequences of cryptocurrency transactions and get a head start on your research.
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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.