Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Will the Bitcoin Become a New Tax Evasion Tool?
Author: Scarinci Hollenbeck, LLC
Date: August 19, 2013
Key Contacts
Back
Bitcoins, a controversial but highly popular global digital currency, is being used by more consumers to make several types of transactions. Although no government has recognized the bitcoin as a legitimate currency or placed concrete value on its use, the anonymity afforded to bitcoin users, coupled with the growing trend of bartering them for assets that carry value, has drawn attention to the currency as a potential tax evasion tool.
A recent Yahoo analysis noted that “money” is not necessarily defined by production or recognition and distribution by a government agency. Instead, the article argued that money is typically defined as any tool that can enable financial transactions. Under this expanded definition, the ubiquitous bitcoin may qualify, namely because it has and continues to be used to transact real property, foreign currencies, barter, and financial instruments. Whether this argument will hold up in a legal atmosphere is still undetermined, but federal authorities – including the Internal Revenue Service – are weighing these arguments carefully.
Because bitcoins may be used to facilitate financial transactions, the IRS in particular is focusing on the currency and where it falls in line with federal tax laws. Forbes recently analyzed the use of bitcoins as a potential tax evasion tool, noting that anonymity is one of the key issues that may make avoiding taxes possible for users. In addition, the IRS relies heavily upon financial institutions and foreign governments to report details of account holders for tax purposes. As bitcoins are not recognized as a legitimate currency, users do not have to rely on financial intermediaries to move them or make transactions.
Further, there are several legal questions that remain. For example, if consumers exchange bitcoins for cash, the question of whether there is a “gain” may depend largely on whether bitcoins are viewed as a currency or commodity, Forbes explained. Until these questions are answered, speculation of whether the digital currency will emerge as a tool to avoid taxes – and how this issued will be resolved – may continue to grow.
- Practices: Tax and Trusts & Estates, Blockchain, Cryptocurrency Defense & Investigations, Sophisticated Estate Planning & Wealth Preservation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
What Every Real Estate Investor Should Know Before Buying a Rental Property
Before buying a New Jersey rental property, an investor should verify realistic operating numbers, the property’s legal and regulatory status, lead-based paint and flood compliance, the existing leases and tenant protections, and the right ownership structure. A rental property is more than a piece of real estate; it is an operating business subject to legal, […]
Author: Donald M. Pepe
Can You Change an Irrevocable Trust in New Jersey?
In New Jersey, an irrevocable trust can sometimes be modified even though its name suggests otherwise, and one of the primary tools for doing so is a process called decanting. Whether decanting is available depends on the specific terms of the trust and the discretion given to the trustee. Key takeaways: New Jersey has no […]
Author: Marc J. Comer
How Intellectual Property Valuation Will Impact Business Transactions
Intellectual property valuation determines the monetary value of a business’s IP assets, and it drives outcomes in licensing deals, joint ventures, mergers and acquisitions, financing, and ownership disputes. The most valuable assets of a business are often the things that cannot be seen or touched: a proprietary process, a copyrighted work, brand recognition, or the […]
Author: Jay McDaniel
Data Center, Dark Fiber, and Lit Services Agreements in New Jersey: Key Terms and Legal Pitfalls
For New Jersey data center owners and operators, a service agreement may look routine when it is signed. The network is functioning, the vendor is meeting its installation schedule, and the parties have agreed on pricing and performance specifications. The provisions that seem most important at that stage are often the technical ones. That changes […]
Author: George McGowan
Fort Monmouth Redevelopment and the Transformation of Monmouth County Real Estate
The Fort Monmouth redevelopment has entered its execution phase, and it is repositioning the broader Monmouth County real estate market. When Netflix and the Fort Monmouth Economic Revitalization Authority closed on the 292-acre Mega Parcel in December 2025, the transaction did more than hand over a deed. It marked the moment Fort Monmouth stopped being […]
Author: Donald M. Pepe
Local Zoning and Land Use Rules Every New Jersey Rental Property Owner Should Understand
Owning a residential rental property in New Jersey involves more than finding tenants and collecting rent. Property owners must comply with a combination of state laws, municipal ordinances, building and housing codes, and zoning and land use regulations. These requirements can affect everything from the number of dwelling units permitted at a property to whether […]
Author: Donald M. Pepe
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.