By Kevin Drawbaugh and Patrick Temple-West

WASHINGTON Tue Mar 25, 2014 7:03pm EDT

Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, September 17, 2013. REUTERS/Jim Urquhart

Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, September 17, 2013.

Credit: Reuters/Jim Urquhart

(Reuters) – Wading into a murky tax question for the digital age, the U.S. Internal Revenue Service said on Tuesday that bitcoins and other virtual currencies are to be treated, for tax purposes, as property and not as currency.

“General tax principles that apply to property transactions apply to transactions using virtual currency,” the IRS said in a statement, meaning that bitcoins would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the circumstance.

Bitcoin, the best-known virtual currency, started circulating in 2009. Its present market value is around $8 billion, with up to 80,000 transactions occurring daily, according to accounting firm PricewaterhouseCoopers LLP.

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