Bitcoin has been making major headlines recently. Starting with a year-end high price of $817.12 which would have returned 56X or 5,600% in 2013 to the over $500 million theft from the Japanese exchange Mt. Gox in February. Then Apple removes the Bitcoin app from its app store and finally the IRS announces its position on the taxability of virtual currencies on March 25, 2014. Which raises the question, is Bitcoin a passing fad or disruptive technology that we need to take seriously? This deck covers the background and latest information about Bitcoin and the IRS guidance on taxation and virtual currencies.

1. Photo: Flickr BTC Keychain
Bitcoin: Passing Fad, Disruptive
Technology? Either Way, It’s Now Taxable!

2. Tom Hood, CPA, CITP, CGMA
Tom Hood, CPA, CITP, CGMA
CEO
MACPA www.macpa.org
and
Business Learning Institute (BLI)
www.blionline.org
http://www.linkedin.com/in/tomhood/
If there is a conversation about the future of
the profession, you're bound to hear Hood's
name mentioned as one of the people
leading the way.
– Accounting Today Magazine
• Named the Second Most Influential in
Accounting by Accounting Today Magazine
2013
• Linked-In Top 150 Influencer
• Top 25 Influencers in Learning & HR by HR
Examiner
• Top 25 Thought Leaders in Public Accounting
by CPA Practice Adviser
• Working on Learning Management with
AICPA/CPA2Biz, Cloud
Curriculum, Performance Management

3. 4 Careers Bitcoin can Disrupt
• Bankers
• Cashiers
• Armored Car
Drivers
• Accountants

4. Is Bitcoin a bubble?
Source: CoinDesk
Closing Price $817.12 as of Dec 30, 2013

5. Bitcoin Theft Makes Headlines
Bitcoin hit new
low of $557.40
on news of Mt.
Gox (Japanese)
Bitcoin Exchange
theft of Bitcoins.

6. More Bad News:
Apple removes Block Chain from App Store

7. Bitcoin Price 3/30/14
Down 43% since
year-end
Source: CoinDesk

8. How a Bitcoin Transaction Works
Source: PC World – 7 Things You Need to Know About Bitcoin

9. How Bitcoins are Circulated & Used
Source: GAO Report

10. Bitcoin Transaction Documentation
Source: Bitcoin: A Peer-to-Peer Electronic Cash System
Could this
replace the
general ledger
for documenting
transactions?

11. Congress, GAO, FBI, and Treasury
Study Virtual Currencies
Congress started studying the economic and tax issues with a hearing by a Joint Economic
Task Force on April 1, 2008 to the GAO report on May 15, 2013. The FBI, Treasury and the
National Taxpayer Advocate all were investigating the fast growing economies of virtual
goods and virtual currencies that started with World of Warcraft & Second Life.

12. IRS Issues Virtual Currency Guidance
on March 25, 2014

13. Three Types of Virtual Currency Systems
Source: GAO Report
Generally not taxable Most likely taxableCould have taxable issues

14. Virtual Currency Tax Issues
1.Taxpayer lack of knowledge about tax
requirements
2.Uncertainty over how to characterize income
3.Uncertainty over how to calculate basis for
gains (capital gains / barter)
4.Challenges with third-party reporting (1099s)
5.Evasion
Source: GAO Report

15. 7 Things to Know About Bitcoin
1. Bitcoins are created, traded and
controlled by the people
2. We’re definitely in a Bitcoin bubble
3. You can mine Bitcoins but the gold
rush is over
4. Most major retailers don’t accept
Bitcoins
5. Bitcoins aren’t protected or insured
by anyone
6. Nobody knows who really created
Bitcoin
7. Bitcoins aren’t the first virtual
currency and won’t be the last
Source: PC World – 7 Things you need to know about Bitcoin by Alex Wawro