Just when you thought the government of the United States of America had forgotten about you, the Internal Revenue Service sends you a love letter telling you how the cow shall consume the cabbage as it relates to taxes on the use of cryptocurrency.
They had previously opined on the subject last back in 2014 with IRS Notice 2014-21. Five long years and, finally, our pals from the IRS are back with an additional dose of wisdom.
I know what you’re saying, “Wow, this is really going to be great. Oh boy!”
[Pro tip: Hold onto that enthusiasm and, maybe, redeploy it at some future date.]
The guidance (on the specific issue of forks and airdrops) has come in the form of Revenue Ruling 2019-24 which you can find right here.
The real assistance is in the form of a series of Frequently Asked Questions on Virtual Currency Transactions. You can find that gem of wisdom right here.
I will not bore you with the details other to say the following:
1. The IRS did not and will not recognize a transaction as “deminimus.” You will have to account for every stick of gum you buy with cryptocurrency.
2. On each and every transaction, you will have to establish your basis in the crypto you are using (you can use FIFO or attribute it to specific coins, your choice), the value at the time of transaction, and whether you gained or lost value.
Every single use will be a taxable event. Now, that is really going to be easy, no?
So, dear reader, there you have it. One more example of how government regulation streamlines your life.
“I’m from the government and I’m here to help.”
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Be well and start calculating your basis on your crypto. What could possibly go wrong?