Folks, at this time the distinction between currency and investment is a grey area to me and both approaches have some support in tax law.  I'm repeating the court case citations I am aware of that lend some support to either approach.  There is no right and wrong here yet until the lawyers in congress, or the lawyers who are now judges give us stronger guidance on what to do with coins that are not associated with countries.  As described in my earlier post each approach has advantages and disadvantages.  Pick one or be consistent with previous years.  Consider seeking advice from a tax expert before changing approaches.

Supporting the currency approach:  In SEC vs. Trendon T. Shavers and BTCST  Judge Mazzant writes “It is clear that Bitcoin can be used as money,”  “It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses.”  Also see IRC 988(c )(1)(C )(ii) “Nonfunctional currency. For purposes of this section, the term "nonfunctional currency" includes coin or currency, and nonfunctional currency denominated demand or time deposits or similar instruments issued by a bank or other financial institution.”

Supporting the investment approach: In California Bankers Assn. v. Shulttz “‘Currency’ is defined in the Secretary’s regulations as the coin and currency of the United States or of any other country, which circulate in and are customarily used and accepted as money in the country in which issued.”  Some other jurisdictions may be taking this investment approach.

I am a USA CPA licensed in CA and IL, and I can be found on LinkedIn or by Google.
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