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In 2014 the IRS issued Notice 2014-21 to provide guidance and some basic tax principles concerning virtual currency (i.e. Bitcoin, Litecoin, Monero, Dogecoin,NEM, etc.). The notice establishes that virtual currency is to be treated as property.

So as property, the tax treatment depends on the manner in which the holder uses the cybercurrency.

As property, cybercurrency which is held for personal purposes, pleasure, or investment is a capital asset. The taxpayer has a capital gain on cybercurrency if the fair market value (FMV) of the property or cash received exceeds the adjusted basis of the cybercurrency exchanged.

The taxpayer has a capital loss on cybercurrency if the basis of the cybercurrency exchanged is greater than the FMV of the property or cash received.

A loss from the sale or exchange of personal-use property is not deductible.

The fact that there are seemingly new cryptocurrencies coming out daily and that no government stands behind any of them, does not a good investment make.

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