IRS rules Bitcoin is property, not currency

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WASHINGTON — The US government will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions, the IRS said in its first substantive ruling on the issue.

Tuesday’s IRS guidance 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 Bitcoins like currency or property, chose property.

‘‘The danger is the creation of an electronic black market, similar to the cash economy,’’ Joshua Blank, a tax law professor at New York University, said in a December interview. ‘‘That’s what the IRS wants to avoid.’’

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