In spring 2014, the IRS issued Notice 2014-21, initial guidance on the tax treatment of virtual currency such as Bitcoin, from mining to its general use. The IRS explained convertible virtual currency is to be treated as property.
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There are tax consequences of mining Bitcoin, investing in it or using it to buy or sell goods or services. Prior to the Internal Revenue Service’s release of Notice 2014-21 this week (3/25/14), we didn’t know whether the IRS would treat a virtual currency as currency or property. The IRS has now said – treat it as property. [IRS Information Release IR-2014-36 and Notice 2014-21]
I think that is a good answer. After all, Bitcoin and other virtual currencies are not used as the currency of any government and generally, are convertible to a currency of a government. For example, you can buy Bitcoin with U.S. dollars and convert it back to U.S. dollars. Read More
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