CHAPTER 27Cryptocurrency
§ 27.1 What Is Cryptocurrency?
Cryptocurrency is a digital medium of exchange that is bought, sold, and used on Internet exchanges to acquire goods and services and also as a speculative investment. Cryptocurrency is one category of digital asset. It is a “fungible token.” Another category of digital asset donor and nonprofits may encounter are nonfungible tokens or NFTs. Some differences between fungible and nonfungible tokens include:
- NFTs are unique and not interchangeable. A fungible token, although traceable by unique identifiers, is considered interchangeable;
- NFTs are not ordinarily used as an alternative for fiat currency. Fungible tokens are commonly referred to as cryptocurrency precisely because they are used as a substitute for currency issued by a recognized government.
- Fungible tokens can be divided into smaller units that add up to the same value. An NFT cannot be divided although it can be co‐owned.
- The IRS issued a Notice 2023‐36 providing guidance on the treatment of NFT associated with collectibles under IRC section 408(m) and requesting comments. Taxpayers may rely on this notice to treat such NFT as the same type of property as the underlying collectibles.
Digital cryptocurrency “coins” or “tokens” serve as proxies for ordinary ...
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