As expected, the IRS continues the battle to obtain records from Coinbase, the largest cryptocurrency exchange, in an attempt to check filed tax returns for proper capital gain tax treatment.
The IRS filed a “Notice of Narrowed Summons Request for Enforcement” with the court, seeking more specific types of information regarding accounts “with at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013—2015 period,”
A federal district court granted partial enforcement of an IRS summons seeking information regarding virtual currency transactions. It ruled the summons, as further narrowed by the court, serves the legitimate purpose of investigating account holders with the virtual currency exchange Coinbase who may have failed to pay federal taxes on their virtual currency profits, and that the information sought is relevant to that purpose.
Facts: Coinbase Inc. was America’s largest platform exchanging bitcoin into U.S. dollars by the end of 2015. It claimed to have served 5.9 million customers and exchanged $6 billion in bitcoin through its buy/sell trading functionality.
The IRS served a “John Doe” summons on Coinbase seeking information from a wide range of records and documents regarding U.S. persons conducting convertible virtual currency transactions at any time from 2013 through 2015. Coinbase refused to comply, resulting in an enforcement action.