Valuation of Cryptocurrencies and ICO Tokens for Tax Purposes

Cryptocurrency coins and ICO tokens are a new type of digital asset. Because they are also traded on new types of exchanges and there is little or uncertain regulation of trading and pricing activity, there is limited and inadequate guidance regarding their valuation for tax purposes. In most cases, it will be necessary to consider the issues by way of analogy to existing valuation guidance under federal estate tax law. Moreover, the value of their related private keys and the consequences of forks and drops on both valuation and taxation are significant. Laws and regulatory guidance are critically needed to provide certainty and consistency. The technological details must be understood by practitioners at some level of detail to understand the valuation challenges and likely results. Additionally, scams and other market developments that are adversely affecting the ability to obtain clear valuations must be considered. It is hoped that additional developments and guidance are forthcoming that will be relevant in determining the fair value of cryptocurrency coins and ICO tokens for tax purposes.