IRS Updates Guidance on Virtual Currency Transactions
The prior guidance, which was released in 2014, stated that virtual currencies are considered property for federal tax purposes, pursuant to the general principles of tax law. New Rev. Rul. 2019-24 and the FAQ address (i) when a cryptocurrency on a distributed ledger undergoes a protocol change that permanently divides the legacy from the existing distributed ledger (i.e., a "hard fork") and (ii) when units of a cryptocurrency are delivered to the distributed ledger addresses of multiple taxpayers (i.e., an "airdrop"), typically following a hard fork.
The IRS requested feedback on whether additional guidance is necessary.
The IRS noted that it is actively pursuing potential instances of noncompliance concerning virtual currency transactions through, among other things, taxpayer education initiatives, audits and criminal investigations.
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