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TAX CLINIC

of the U.S. armed forces on active duty, The 4-cent mileage rate increase The discussion then focuses on how
moving pursuant to a military order announced in June represents a 6.8% administrative expenses connected
and permanent change of station, per higher rate for business travel and 22% to virtual currency grantor trusts are
Sec. 217(g)). increase in the moving and medical rate. taxed and how to make yearly basis
In 2008, the rate increased from The IRS noted in the news release computations to ensure taxpayers are
50.5 cents to 58.5 cents from July 1, accompanying the announcement, in full compliance with the reporting
2008, through the end of that year however, that other costs besides fuel requirements for these trusts.
(News Release IR-2008-82). In 2011, factor into the mileage rates, such as
the IRS increased the rate effective July depreciation and insurance and other Current virtual currency tax
1, 2011, from 51 cents to 55.5 cents fixed and variable costs. And it noted treatment
(Announcement 2011-40). that taxpayers always may instead use To date, the IRS defines “virtual
In all three midyear adjustments, the their actual allowable costs of operating currency” as a digital representation
IRS cited as its reason increases in the a vehicle. of value that functions as a medium
cost of fuel. From Paul Bonner of exchange, a unit of account, and/
This year’s increase also comes after or a store of value. This definition
two letters from members of Congress comes from Notice 2014-21, which
to IRS Commissioner Charles Rettig Gains & Losses along with separate guidance released
requesting it because of sharp fuel price five years later, Rev. Rul. 2019-24,
increases this year. Virtual currency grantor comprises almost the entirety of
The first, by Sens. Catherine Cortez trusts and ETFs: Tax the IRS’s guidance on the overall
Masto, D-Nev., and Michael F. Bennet, compliance tax treatment of cryptoassets such
D-Colo., dated March 25, asked Rettig The increasing adoption of as bitcoin. Despite the apparent
to provide a midyear increase but did not cryptoassets as investments has been similarities to “real currency,” the IRS
specify when it should take effect. met with less than universal awareness established in Notice 2014-21 that for
The second, dated May 13, was of how to treat and properly report federal tax purposes, virtual currency
signed by 18 Democratic members of these new financial products from a is treated as property. Therefore,
the U.S. House of Representatives. The federal income tax perspective. While taxpayers and tax advisers must
principal signers were Reps. Ruben tax practitioners are becoming familiar evaluate cryptoasset transactions under
Gallego, D-Ariz., and Sharice L. Davids, with activities such as buying and Sec. 1001, which generally governs the
D-Kan. The letter cited steep increases selling cryptoassets, as well as less treatment of gains and losses on the
in gasoline prices since the beginning of common enterprises like mining and sale or other disposition of property.
2022 as justifying an increase retroactive staking, the unique characteristics Since cryptoassets are treated as
to March 1. of this new asset class present a host capital assets of similar character to
Neither congressional letter of additional issues unique to digital stocks, bonds, and other investment
recommended how much the rate should asset transactions. property, cryptoasset transactions are
increase, but they compared current One investment vehicle for often subject to preferential long-term
gasoline prices to those in December cryptoassets, a virtual currency grantor capital gains rates. Recently, there has
2021, when the IRS issued the 2022 rate trust, currently represents a minority been a huge push by investment firms
in Notice 2022-3. Then, the nationwide of the various types of investments to introduce financial products that
retail average price was $3.40 per gallon, making use of cryptoassets. As large consist of a “basket” of cryptoasset
Masto and Bennet stated, which also institutions seek to expose their holdings wherein the investor is
is reflected in a graph on the website clients to cryptoassets, however, a removed from direct control of any
of the U.S. Energy Information greater number of similar offerings, underlying cryptoassets and hence
Administration (EIA). The May letter as well as the possibility of crypto does not need to be aware of or report
by the 18 representatives, citing the EIA, exchange-traded funds (ETFs), may transactions in any accompanying
said the nationwide average in March eventually force more stakeholders and capital holdings. However, cryptoasset
2022 was $4.30 per gallon. their associated advisers to become ETFs and investment trusts either
The average in May 2022 was $4.545 familiar with these products. This item have emerged or appear emergent as
per gallon according to the EIA, an begins by defining virtual currency current and future vehicles that, while
increase of $1.145 from the $3.40 in grantor trusts and describing their they may distance investors from
December, or an increase of 33.7%. similarities to ETFs for tax purposes. direct control of these virtual assets,

10 September 2022 The Tax Adviser