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Finally the IRS Clarifies Its Position on Cryptocurrency

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. Call for Compliance: Cryptocurrency May Be Subject to US Tax Cryptocurrencies & State Tax: Transactions with Virtual Currency Digital Token Offerings and Sales under Regulation S Watch Your Mailbox: IRS Letters Warning of Cryptocurrency Non-Compliance on Their Way Governments Are Pulling Back the Crypto-Currency Curtain The IRS May Be Coming for Your Bitcoins IRS Criminal Investigation Division Expects Official “Stand up” of National Coordinated...

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Kovel Protections Upheld | Government Loses Aggressive Arguments for Waiver of Privilege for Controversy Advice

On October 27, the US District Court for the District of Minnesota issued an opinion in United States v. Adams, No. 0:17-cr-00064-DWF-KMM (D. Minn. Oct. 27, 2018), addressing attorney-client privilege issues relevant to accountants working alongside tax attorneys. The court adopted a narrow, nuanced view of the waiver that applies when the taxpayer discloses an accountant’s work to the Internal Revenue Service (IRS) by filing an amended return. In Adams, the taxpayer is facing a 17 count superseding indictment in which the government alleges he spearheaded a scheme to defraud investors in two companies and to embezzle corporate funds for his personal benefit. In late 2017, the government added three counts of tax evasion to the indictment, alleging that amended returns the taxpayer filed in late 2011 for the 2008, 2009 and 2010 tax years were willfully false under IRC § 7206(1). The addition of the tax evasion charges is significant for the government’s...

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The IRS May Be Coming for Your Bitcoins

If you have traded Bitcoin or other crypto-currencies, you probably know that their taxation may be as uncertain as your potential for reward or loss. Since 2014, the Internal Revenue Service (IRS) has publicized how it believes these investments should be treated for US federal income tax purposes. If you have failed to report your virtual currency transaction, the result in Coinbase, a recent IRS “John Doe” summons enforcement case, should convince you that it is time to ensure you are compliant with tax laws. The IRS may be coming for your Bitcoins! IRS Guidance – Bitcoins Are Property In IRS Notice 2014-21, 2014-16 IRB 938, the IRS explained that so-called “virtual currencies” that can be exchanged for traditional currency are “property” for federal income tax purposes. As such, a taxpayer must report gain or loss on its sale or exchange, measured against the taxpayer’s cost to purchase the virtual currency. In the notice, the IRS also made clear that...

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Former Tax Court Judge Diane L. Kroupa Sentenced in Connection with Tax Evasion Matter

We have previously blogged on the criminal tax proceedings related to former US Tax Court Judge Kroupa (see here and here). In October 2016, Judge Kroupa pleaded guilty to multiple tax criminal charges related to her tax returns and interactions with the Internal Revenue Service. Based on sentencing guidelines, the recommended sentence was between 30‒37 months. Judge Kroupa and the government submitted filings on the appropriate sentence, in which Judge Kroupa provided detailed reasons why she believed the court should impose a sentence of 20 months imprisonment. These filings can be found here and here. According to a report in today’s BNA Daily Tax Report, the court sentenced Judge Kroupa to 34 months in prison and ordered her to pay $457,000 in restitution, which is owed jointly with her former husband. She was also sentenced to three years of supervised release. Judge Kroupa’s former husband was sentenced to 24 months in prison and one year of supervised...

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Former Tax Court Judge Pleads Guilty to Tax Crimes

Following up on our prior coverage (see here), former US Tax Court Judge Diane L. Kroupa pleaded guilty on Friday to multiple tax criminal charges related to her tax returns and interactions with the Internal Revenue Service. The government stipulated during the hearing that all charges except defrauding the United States would be dropped if Kroupa agreed to be sentenced on the fraud charge. Based on sentencing guidelines, the recommended sentence is between 30-37 months, although the judge may ultimately sentence Kroupa to more or less time. A copy of the Change of Plea Hearing can be found here.

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Former Tax Court Judge Indicted for Tax Evasion

On April 4, 2016, the US Attorney for the District of Minnesota announced a federal grand jury indictment charging former US Tax Court Judge Diane L. Kroupa and her husband with conspiring to evade the assessment of taxes. In a multi-count indictment, both were charged with conspiracy, tax evasion, making and subscribing false tax returns and obstruction of an IRS audit. According to the indictment and documents filed in court, Kroupa and her husband fraudulently claimed personal expenses as business deductions, failed to report income from a land sale, and falsely claimed financial insolvency. They also allegedly concealed certain documents from their taxpayer preparer and an IRS agent during an audit, and caused misleading documents to be delivered to the IRS. The indictment alleges that between 2004 and 2010, Kroupa and her husband purposely understated their taxable income by approximately $1 million and the amount of tax owed by at least $400,000. Judge...

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