The IRS and Treasury issued preliminary guidance on Tuesday, March 21, that leans toward treating nonfungible tokens (NFTs) as a collectible for tax purposes.
The IRS defines an NFT as “a unique digital identifier that is recorded using distributed ledger technology and may be used to certify authenticity and ownership of an associated right or asset.”
Until the IRS issues more NFT guidance, the agency intends to treat an NFT as a collectible by using a look-through analysis.
Under the analysis, the IRS treats an NFT as a collectible if the NFT’s associated right or asset falls under the definition of collectible in the tax code.
Collectibles included in section 408(m)(2) include works of art, antiques, metals, gems, stamps, coins and alcoholic beverages.
In Notice 2023-27, the IRS says it will accept comments on the tax treatment of NFTs as collectibles under the tax law through Monday, June 19.