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More on the Virtual Currency yes / no question
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Originally posted by Uncle Sam View PostIn this instance the IRS assumes that everyone uses virtual currency for the same reason(s) - and not for the purpose for which my client used it.
Originally posted by Uncle Sam View PostMy main issue was that the IRS asks as question to be answered Yes/No but doesn't give any specific guidance after the question is answered.
At least with the Foreign bank account question - if you answer Yes - then you are asked to provide more details.
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My main issue was that the IRS asks as question to be answered Yes/No but doesn't give any specific guidance after the question is answered.
At least with the Foreign bank account question - if you answer Yes - then you are asked to provide more details.
In this instance the IRS assumes that everyone uses virtual currency for the same reason(s) - and not for the purpose for which my client used it.
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Is an IR authoritative? As a side note, why does the irs call a news release an "IR"? What does IR stand for?
IRS issued FAQs on virtual currency a while back. FAQ #5 states the same thing as IR-2021-89. Not only are FAQs not authoritative, the irs changes them on a regular basis, sometimes contradicting their previous stance on the issue.
The instruction for 1040 states, "If, in 2020, you engaged in any transaction involving virtual currency, check the “Yes” box next to the question on virtual currency on page 1 of Form 1040 or 1040-SR."
Which of those contradictory instructions should we follow? Probably doesn't matter, I'm sure the irs will never penalize a taxpayer due to a simple misunderstanding.
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Originally posted by RWG1950 View PostDoesn't one receive or acquire his or her financial interest in a virtual currency by means of a purchase ?
You can also acquire crypto via hard fork with an airdrop, see Rev. Rul. 2019-24 for more details.
It is because of the other ways to acquire crypto besides outright purchase that the IRS phrased the question in the way they did. Those other ways are all potentially taxable transactions.
note: I am using "crypto" as shorthand for "cryptocurrency", although it was previously used more commonly as an abbreviation for "cryptography".
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More on the Virtual Currency yes / no question
This morning IRS issue IR-2021-89 appeared in my e-mail on the correct way to answer the yes / no question.
"The 2020 form 1040 asks whether at any time in 2020 a person received, sold, sent, exchanged or otherwise
acquired any financial interest in any virtual currency. If a taxpayers only transactions involving virtual currency
during 2020 were purchases of virtual currency, they are not required to answer "yes" to the question."
This is clear as mud to me. Happy to be able to answer "no" though.
Doesn't one receive or acquire his or her financial interest in a virtual currency by means of a purchase ?
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