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'It's going to be a nightmare': Some bitcoin investors are in for a rocky tax season

•, By Brian Fung

But over the Thanksgiving holiday, as the price of bitcoin blew past $8,000 in a months-long rally, the 54-year-old construction manager decided to take the plunge. Like many Americans, he'd read enough about bitcoin on the Internet to feel confident buying a stake in the digital currency and several similar ventures.

McAuliffe's investment paid off almost immediately: Within a month, the price of bitcoin had more than doubled to over $19,000. Encouraged, McAuliffe bought some more. Now, he figures he executes at least one trade a day and, on paper, has made about $7,000.

"I've had some dramatic wins and some dramatic losses," he said in an interview.

But McAuliffe is also looking ahead to what could be a big headache: Doing his taxes when he sells. Although McAuliffe doesn't intend to exchange his virtual currency back into dollars anytime soon, other investors have. And many tax professionals have noticed an uptick in questions this year.

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