It took five years, but the Internal Revenue Service (IRS) has finally released some guidance on the taxation of cryptocurrencies! On October 9, 2019, the IRS released Revenue Ruling 2019-24 and several “frequently asked questions” (and answers) which deal with some (but not all) of the federal income tax issues involved with cryptocurrencies.

Over the years, we have reported on the issues involved with cryptocurrencies, including the potential controversies that have ensued because of a lack of guidance.

The new guidance is welcomed by tax professionals and taxpayers. The guidance adopts traditional tax principles to deal with some of the unique aspects of cryptocurrencies. For example, the guidance addresses the tax treatment of so-called “hard forks” and whether the value of the “fork” which is “airdropped” into the taxpayer’s wallet constitutes taxable income.

Practice Point: Cryptocurrencies are a brave new world for most of us. Having thoughtful, current guidance is helpful to tax professionals and taxpayers, and will (hopefully) lead to better and more efficient administration of our tax system.