Digital assets have become an increasingly common part of business operations, investment portfolios, compensation arrangements, fundraising transactions, and charitable giving strategies. Although these assets may function like money in some commercial settings, the federal tax rules generally treat them differently.

For federal income tax purposes, IRS treats digital assets as property. As a result, general tax rules for property transactions apply. This means that businesses and investors should not assume that digital asset transactions are tax-free simply because no cash changes hands. A sale, exchange, payment, or other disposition of a digital asset generally can trigger gain or loss.

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