• Clarify and provide a single definition of virtual currency and digital assets. A single definition will provide certainty and simplification to taxpayers.
• Review and consider the administrative burden the look-through analysis will impose on many taxpayers, particularly if the estimate of one trillion NFTs is accurate.
• Consider the administrative burden and look-through analysis would impose on NFTs that represent more than one associated right or asset such as bifurcating the valuation of each associated right or asset the NFT represents.
• Clarify whether the legislative intent of the collectible tax rate applies to NFTs.

“We appreciate that it is challenging for the IRS to issue complete and timely guidance in the digital asset area,” says the letter. “While existing guidance in the [Internal Revenue] Code, regulation, revenue rulings and court opinions is helpful, sometimes the unique nature of the digital assets and transactions involving digital assets do not clearly fit within the existing guidance, thus leaving taxpayers and practitioners with uncertainty for reporting purposes.”

The letter continues: “Further guidance is needed for taxpayers to correctly calculate and report their transactions involving digital assets and NFTs. In this letter, we offer our recommendations for further guidance regarding the treatment of NFTs. We note though that there are additional tax questions related to NFTs, including whether they are ever a virtual currency or digital asset.”