Mr$.$ Steve Washington is a casual Bitcoin investor. On August $15,2015,$ he purchased three Bitcoins for

investment purposes when the price of one Bitcoin was $$263\mathrm{.}85.$ On November $25,2017,$ when Bitcoins

were priced at $$8,795\mathrm{.}50,$ he purchased $$500$ worth of goods for $0\mathrm{.}0568472$ Bitcoins at Overstock.com.

He incurred a transaction fee of $$8.$ He purchased an additional item for $$140$ from Overstock.com using

Bitcoins on December $2,2017,$ when Bitcoins were priced at $$10,912\mathrm{.}73$ and again incurred an $$8$

transaction fee. Mr$.$ Washington is a supporter of education and donated one Bitcoin to his son$$s school $($a

qualified charitable organization under IRC $501($c$)(3))$ on December $22,2017,$ when Bitcoins were

priced at $$13,664\mathrm{.}97.$ Realizing he had not contributed to his IRA during the year, Mr$.$ Washington would

like to contribute one Bitcoin to his IRA before year$-$end.

Assignment $1.$ Use your knowledge of the tax law to identify the tax issues faced by the taxpayer related

to his Bitcoin activities.

$2.$ Prepare a technical research memo that summarizes your findings. The memo should include an

analysis and conclusion about the proper tax treatment of each of the identified issues. Include primary

authorities to support the suggested conclusion as well as any authorities that are contrary to this position.

Note that Bitcoin is a new technological development that does not have specific primary authority. You

will need to relate existing primary authority to a new setting. Include any tax$-$planning strategies that the

taxpayer should be aware of in the future. You will need to use a tax research database to facilitate your

research in addition to Notice $2014-21$ from the Internal Revenue Service $(2014).$