Publication Date

Spring 5-2025

School

School of Business

Major

Accounting

Keywords

Taxation, Cryptocurrency, Accounting

Disciplines

Accounting

Abstract

Disagreements exist surrounding the proper definition and tax treatment of cryptocurrency. The IRS views crypto assets as a type of intangible property, and most guidance regarding how to include income or loss from cryptocurrency on the relevant tax forms stems from this classification. Crypto asset transactions create either ordinary or capital income or loss, depending on the taxpayer’s reason for holding the assets. This requires keeping track of the cryptocurrency’s fair market value at the time of receipt and disposition. While researchers have not reached a unanimous conclusion, most identify problems with this treatment and instead propose alternative methods, such as allowing for a foreign currency treatment. Relevant issues include overly burdensome requirements for both taxpayers and the IRS, ambiguity surrounding the fair value of cryptocurrency at a given time, the lack of any distinction between different types of crypto assets, and an improper understanding of hard fork mechanics. Researchers also call for more robust instructions from the IRS, especially considering much of the primary guidance released has not been codified.

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