About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

19 Fla. Tax Rev. 365 (2016)
Bitcoin and the Definition of Foreign Currency

handle is hein.journals/ftaxr19 and id is 403 raw text is: FLORIDA TAX REVIEW Volume 19 2016 Number 6 BITCOIN AND THE DEFINITION OF FOREIGN CURRENCY by Adam Chodorow* ABSTRACT The IRS recently dealt a blow to Bitcoin enthusiasts by ruling that Bitcoin and other similar currencies should be treated as property-and not foreign currency-for income tax purposes. As a result, those who use bitcoins to purchase goods or services must report gain or loss on each transaction if the bitcoins have changed value between the time they were acquired and spent. Treating Bitcoin as a foreign currency would have permitted individuals to take advantage of the $200 personal-use exemption and required taxpayers to adopt a formulaic system for tracking the basis of commingled bitcoins. The IRS's decision seems correct as a matter of positive law, but laws can always be changed. In this Article I consider whether Bitcoin should be treated as a foreign currency for income tax purposes. I conclude that tax authorities should adopt a foreign currency definition that excludes bitcoin and similar currencies because (1) a broad definition could create significant administrative and line-drawing problems, and (2) the government has little interest in promoting alternate currencies. Nor should authorities extend the personal-use exemption to virtual currencies. In contrast, authorities should extend the basis rules applicable to foreign currency to virtual currencies to prevent taxpayers from using the basis rules to improperly reduce their tax obligations. I. INTRODUCTION .......................................... 367 II. How Is FOREIGN CURRENCY TREATED FOR TAX PURPOSES ................................... ......... 369 A. US. Dollar as the Functional Currency ............... 370 Professor of Law and Willard H. Pedrick Distinguished Research Scholar at the Sandra Day O'Connor College of Law at Arizona State University, Tempe, Arizona. I would like to thank Omri Marian, Sam Brunson, David Elkins, Erin Scharff, and the participants of the Pepperdine Tax Policy Colloquium for comments on earlier drafts. I would also like to thank Brittany Neal for her help as a research assistant.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most