QIn 2014, the IRS issued Notice 2014-21, 2014-16 I.R.B. 938, explaining that virtual currency is treated as property for federal income tax purposes and providing examples of how longstanding tax principles applicable to transactions involving property apply to virtual currency.
Except as otherwise noted, these FAQs apply only to taxpayers who hold virtual currency as a capital asset., For more information on the definition of a capital asset, examples of what is and is not a capital asset, and the tax treatment of property transactions generally, see Publication 544, Sales and Other Dispositions of Assets.
How is virtual currency treated for federal income tax purposes?
Virtual currency is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency. For more information on the tax treatment of virtual currency, see Notice 2014-21.
We are not inheriting the world from our parents; we are simply borrowing it from our children.
Jim Henson
If you held the virtual currency for one year or less before selling or exchanging the virtual currency, then you will have a short-term capital gain or loss. If you held the virtual currency for more than one year before selling or exchanging it, then you will have a long-term capital gain or loss.
Digital Wallet Transfer
The period during which you held the virtual currency (known as the “holding period”) begins on the day after you acquired the virtual currency and ends on the day you sell or exchange the virtual currency.
If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, then the transfer is a non-taxable event, even if you receive an information return from an exchange or platform as a result of the transfer.