MORE INFO ON VIRTUAL CURRENCY
July 8, 2020 - Douglas Myser
More info on virtual currency. In 2019 the IRS issued further guidance with Notice 2019-24 which addressed the ever changing environment that surrounds cryptocurrency. The two issues covered in Notice 2019-24 were: Does a Taxpayer have gross income under Section 61 of the Internal Revenue Code as a result of the hard fork of a cryptocurrency the taxpayer owns if the taxpayer does not receive units of the new currency ? The short answer is no. Does a taxpayer have gross income under Section61 as a result of an airdrop of a new cryptocurrency following a hard fork if the taxpayer receives units of new cryptocurrency ? The short answer if yes. So, let's start with this new language involved that we are learning and how it applies to the tax professional. More info on virtual currency.
Cryptocurrency transactions are generally secured on a digitally (virtual) distributed ledger such as a blockchain. Distributed ledger technology uses independent digital systems to record, share, and synchronize transactions. The details of the transactions are recorded in multiple places at the same time with no central data administrative functionality. The user receives a unique identifier or key to access the transaction. A hard fork is unique to distributed ledger technology and occurs when a cryptocurrency technology undergoes a protocol change resulting in a permanent change from an existing distributed ledger--in other words it changes where the new transactions are stored digitally and changes the name or nature of the cryptocurrency.
An airdrop may follow the hard fork and is a means of distributing new units of cryptocurrency. However, a hard fork is not always followed by an airdrop. The taxpayer does not have receipt of the airdrop until they are able to exercise dominion and control of the cryptocurrency. Bitcoin was introduced in 2009 and still holds over 60% of the virtual currency market. About 10-12 virtual coins control over 80% of the market with small, regional virtual currency holding the rest of the transactions.
If you, due to the changing taxation rules for Crypto Currency, have a tax debt, our Tax Resolution Company can help. We are well known among the National Tax Resolution Companies. Our process for Tax Resolution is stress free for out clients. We pursue all options for reducing your IRS or State Tax Debt, including the IRS Fresh Start Program, and options not in that program. If you have a current Bank Levy or a IRS Wage Garnishment, relax, we can deal with that also. Free Tax Resolution Services consultations, Nationwide services. 1-888-689-7861