NFTs as collectibles: IRS issues guidance and seeks comments

By Martha Waggoner

The IRS in Notice 2023-27 announced it intends to issue guidance on the treatment of nonfungible tokens (NFTs) as collectibles. The Service also described how, until that guidance is issued, it will determine whether an NFT is a collectible and asked for comments generally on the treatment of NFTs as collectibles under Sec. 408(m) and to specific questions listed in the notice

In the notice, the IRS said that, pending the issuance of the intended guidance, it will use a lookthrough analysis when determining if an NFT should be treated as a collectible; i.e., it will analyze whether an NFT's associated right or asset falls under the definition of a collectible in the Code to make the determination. For example, if a gem is a collectible under Sec. 408(m), then an NFT certifying ownership of a gem also is a collectible.

An NFT is "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," the IRS said in a news release Tuesday.

Blockchain technology and other distributed ledger technology use "independent digital systems to record, share, and synchronize transactions, the details of which are recorded simultaneously on multiple nodes in a network," the IRS said. "A token is an entry of data encoded on a distributed ledger. A distributed ledger can be used to identify ownership of both NFTs and fungible tokens, such as cryptocurrency, as described in Rev. Rul. 2019-24."

Generally, other capital assets have a more advantageous capital gains tax treatment than collectibles, the IRS said. The IRS notice discusses the treatment of a collectible held in an individual retirement account and how the definition of a collectible under Sec. 408(m) is relevant to other Code sections such as Sec. 45D (new markets tax credit) and Sec. 1397C (enterprise zone business defined).

The IRS will accept comments through June 19.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at

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