Internal Revenue Service issued a notice today, describing how existing general tax principles apply to transactions using virtual currency. The notice provides that virtual currencies, including Bitcoin, that have an equivalent value in real currency, or that act as a substitute for real currency, are treated as property for federal tax purposes, and not as currency that could generate foreign currency gain or loss. General tax principles applicable to property transactions therefore apply to transactions using virtual currency. The notice also provides that, when a taxpayer successfully "mines" virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income, and could be subject to self-employment tax if the mining constitutes a trade or business and is not undertaken by the taxpayer as an employee. The notice further provides that a person who settles payments made in virtual currency on behalf of a substantial number of unrelated merchants could be a "third party settlement organization," required to report its settlement transactions on an IRS Form 1099-K.