The most current guidance on IRS virtual currency is found in Internal Revenue Bulletin: 2014-16.
IRS Guidance on Virtual Currency:
Excerpts from Internal Revenue Bulletin: 2014-16
IRS knows that “virtual currency” can be used to acquire goods and services, or as an investment. Defines virtual currency as a digital representation of value used as a medium of exchange, or to store value and has some functions like “real” currency of the U.S. or many foreign jurisdictions. It can function like legal tender, but does not enjoy the legal status as “legal tender” in any jurisdiction.
Convertible virtual currency, BitCoin for example, has an equivalent value in real currency and functions as a substitute for real currency and can be digitally exchanged between buyers and sellers, purchased via or exchanged into, U.S. dollars and many other foreign currencies.
The purchase, sale or exchange or use of virtual currency to pay for goods or services has tax consequences that may result in tax being owed. The common U.S. federal tax consequences related to virtual currencies are described below.
Excerpts from IRS notice 2014 – 21
This notice describes how existing general tax principles apply to transactions using virtual currency. Bitcoin is one example of a convertible virtual currency. For a more comprehensive description of convertible virtual currencies FinCEN (FIN-2013-G001, March 18, 2013). https://www.fincen.gov/sites/default/files/shared/FIN-2013-G001.pdf
The current uncertainty when dealing with virtual currency is best illustrated by the following link to an AICPA request to the IRS for further guidance in this area: