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Matthew Hicks Speaks to Tax Notes: IRS Casting a Wide Net With Bitcoin Summons

February 23, 2017, Tax Notes

The John Doe summons the IRS served last year on bitcoin exchanger Coinbase Inc. seeking records and account holder identities casts a wide net, one practitioner said.

Matthew C. Hicks of Caplin & Drysdale, Chtd. said the description of the class in the November 30 summons -- each user whose records show any U.S. connection -- is one of the broadest he has ever encountered and is roughly analogous to what the IRS might seek in a summons on the use of cash, provided that cash were completely traceable.

Hicks, who spoke at a tax audits and litigation luncheon in Washington sponsored by the District of Columbia Bar Taxation Section, said that the comparison is a helpful analogy. He noted that bitcoin shares some properties of cash, including concerns about use in money laundering and tax evasion, but can be traced because it is dependent upon computerized transactions.

"People use cash for anonymity and for convenience; that doesn't necessarily mean they are doing something illegal," he said. "This could reach all sorts of transactions and private behavior that we'd rather not have our neighbor or the government knowing [about]."

. . .

Hicks said that the next development [in the Coinbase case] should come before [the hearing rescheduled for March 23]. Meland said that Coinbase would be the named respondent in a petition to enforce the summons. 

. . .

An audience member asked if the individual customer would have the opportunity to intervene in the summons enforcement proceeding. Meland said, "It's not an easy answer."

Hicks agreed, saying, "I thought about that too, and I think there's a good argument that he can't, [but that] there's an interesting argument that he can." He noted that counsel for both potential intervenors did not object to the continuance.

For the full article, please visit Tax Noteswebsite (subscription required).

Excerpt taken from the article “IRS Casting a Wide Net With Bitcoin Summons, Practitioner Says” by Nathan J. Richman for Tax Notes.

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