One of the most important decisions faced by an entrepreneur with a growing business is when to start hiring outside help. Carefully selected and trained employees can be an invaluable asset to the business, returning many times their own cost in sales or productivity gains. On the other hand, the wrong people (or the right…
If you have ever read a John Grisham book or seen a legal or police procedural drama on television, then you have likely heard of the attorney-client privilege. Attorneys need honest and open dialogue with clients in order to craft an effective legal defense. Attorney-client privilege encourages trust between attorneys and clients by protecting consultations…
Another new year brings another tax filing season. While digital currencies didn’t replicate the banner year that they enjoyed in 2013, I like to think that both the community and the supporting infrastructure matured enough in the last year that bitcoin might actually still be a thing five years from now. However, that also means…
What if you don’t report all of your bitcoin gains on your US tax return? You must have at least considered it by now. How would the IRS know? I get this question from clients at least as often as I see it in print. It is a tempting proposition: last year, US taxpayers had…
The IRS classification of bitcoin and other so-called “virtual currencies” as property under the US Internal Revenue Code earlier this year created a variety of unanticipated and potentially undesirable consequences. Since many states incorporate the US Internal Revenue Code by reference, bitcoin’s classification as property at the federal level trickles down to the state level….
The rise and persistence of bitcoin and other digital currencies has led many to wonder whether funds in tax deferred retirement accounts can be used to make investments in them. In fact, they can. There are a few different ways to incorporate digital currencies into a retirement portfolio, but also several very important restrictions. The…
Bitcoin and its cohorts have had a mixed year. The adoption rate is up, as is the number of places and ways that consumers can use cryptocurrencies, but the price is down. This combination of circumstances creates a few interesting tax planning opportunities. With one quarter left in the tax year, it is not too…
I originally wrote this post for another publication in the winter of 2014. Though the price has fallen since then (or perhaps because of this), charitable giving of bitcoin has picked up. Bitcoin offers a nearly free, secure, and simple way that small organizations on a tight budget can accept contributions from donors anywhere in…
Update: With the passage of the Tax Cut and Jobs Act in late 2017, IRC Section 1031 is no longer applicable to assets other than real property. For tax years 2018 and later, virtual currency users may not defer gain using the code section referenced in this post. One question that I frequently receive from…
A client asked me recently what the rules are for deducting bitcoin losses following an exchange failure. Specifically, he wanted to know whether the IRS would accept evidence that he attempted to liquidate his holdings at the exchange in question (a certain high profile Japan-based outfit that shall not be named) as justification to increase…
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