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Bitcoin Loans and Other Cryptocurrency Tax Problems  

Author:  Dashiell C. Shapiro.

Source: Volume 35, Number 02, Winter 2018 , pp.33-44(12)

Journal of Taxation of Investments

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This article considers the U.S. federal income tax treatment of loans and prepaid forward contracts denominated in cryptocurrencies. There is substantial uncertainty as to how the IRS will treat these products. The author examines traditional authorities regarding loans and prepaid forward contracts, as well as particular problems that arise in designing financial products referencing cryptocurrencies, and provides general principles that, if followed, can improve the possibility that these products will be taxed as intended.

Keywords: bitcoin, cryptocurrency, virtual currency, IRS Notice 2014-21, fungible currency vs. property, loans, prepaid forwards, transaction documentation

Affiliations:  1: Wood LLP.

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