IRS Says Bitcoin Is Property, Not Currency, in U.S. Tax System

The U.S. government will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions, the Internal Revenue Service said in Notice 2014-21, its first substantive ruling on the issue.

The IRS guidance released March 25 will provide certainty for investors, along with potential income-tax liability. Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop.

The IRS, faced with a choice of treating Bitcoin like currency or property, chose property, ...