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                                    Cryptocurrency Taxation
It’s Important to Understand the Rules of this Intriguing Road
By Jonathan Cohen-Gorczyca, CPA, MSA and Tyler Pickunka
Cryptocurrency has become ever more popular over the past few years, so much so that there are athletes being paid in it,
sports arenas are changing names to crypto- currency exchanges and platforms, and even commercials are being aired during the big football game; it has transcended into every- day culture.
Now, cryptocurrency is more accessible than ever, and with so many new phone and comput- er applications, anyone can buy and sell the digi- tal currency at any time. As it has become more popular, government and regulatory agencies have taken notice and are dedicating more time and funds to changing laws, issuing notices for non-reporting and tax avoidance, and closing the gap in treating it like any other tradable security.
What follows are some basic, but frequently asked, questions to assist you with your crypto- currency, tax filings, and common treatment for taxation.
How do I obtain cryptocurrency?
Cryptocurrency can be purchased on numer- ous online platforms whether on your computer or phone. Some of these platforms are strictly cryptocurrency only, while others also allow the
JONATHAN COHEN-GORCZYCA
TYLER PICKUNKA
sidered capital gains or losses for tax purposes, mining virtual currency is considered ordinary income.
Mining virtual currency is the actual process where new cryptocurrency is created and enters into markets.
Can I gift cryptocurrency?
Yes, but cryptocurrency is not exempt from gift-tax filing requirements if you want to trans- fer holdings to someone else. The fair market value at the time of the gift, and not the basis, is the value used for gift tax purposes. Your exist- ing basis of the Cryptocurrency transfers to the giftee; this treatment is like stocks. The holding period is transferred as well when determining short- or long-term capital gains if the giftee is to sell or transfer the gift.
When do you check the box on the tax return?
In recent years, the Internal Revenue Service (IRS) has added a question to page 1 of the Form
Cryptocurrency
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  trading of publicly traded securities. Certain traditional investment companies have cre- ated funds to allow you to purchase, hold, and sell shares of cryptocurrency with your regular investments. This can remove some of the per- ceived risk of buying and selling on the online platforms.
How is cryptocurrency taxed?
Cryptocurrency is taxable when a taxpayer sells virtual currency for U.S. dollars, exchanges one type of virtual currency for another, receives virtual currency for services, and mines virtual currency. While trading, exchanging, receiving, or giving virtual currency for services are con-
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