Bitcoin is stored in a “wallet.” The wallet is accessed through a “private key,” which accessed through a “private key,” which is a login and a password.
Fiduciaries and Cryptocurrency
- What a fiduciary’s role respecting cryptocurrency?
- How can a fiduciary avoid personal liability when administering cryptocurrency?
Accessing the Client’s Cryptocurrency
Fiduciaries must be able to access a bitcoin owner’s wallet. There are three problems: (1) Knowing that a person owns cryptocurrency, (2) knowing where the wallet is located, and (3) being able to access the wallet using a private key.
Income Tax: Cryptocurrency is Property
In Notice 2014-21, the IRS held that bitcoins are property, not currency. This means there will be gain or loss on the sale or transfer of bitcoins or other cryptocurrencies.
- Taxpayers must track the basis of their cryptocurrencies.
- Upon a sale or transfer of a cryptocurrency, taxpayers must report the gain or loss on their income tax return.
Robert D. Kaplow, Estate Planning with Bitcoin Explained, wealthmanagement.com, Jan. 25, 2019.