Income Tax Preparation & Small Business Accounting

Digital Assets / Virtual Currency / Crypto Currency

Virtual currency / digital assets are considered a capital asset. Using virtual currency to purchase an item is treated as a capital gain if the fair market value of the item purchased is greater than the cost basis of the virtual currency, or a capital loss if the fair market value of the item purchased is less than the cost basis of the virtual currency.

Under IRC section 6045, brokers are required to report the name and address of each customer and the gross proceeds of broker transactions received by each customer, along with other information required by IRS regulations. A broker is a dealer, a barter exchange, and any other person who (for consideration) regularly acts as a middleman with respect to property or services (other than managing a farm on behalf of another).

The new law adds the following to the definition of a broker: “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” A digital asset means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified under IRS regulations.

Under IRC section 6050I, any trade or business that receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions) is required to file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, with the IRS within 15 days after the cash is received. Effective for returns required to be filed after December 31, 2023, this $10,000 cash reporting requirement also applies to digital assets as defined under IRC section 6045. 














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