The IRS believes that virtual currency gains have been widely under reported, perhaps because virtual currency traders believe the transactions are anonymous. However, Congress has given the IRS broad authority to obtain and examine all information that may be necessary to enforcing US tax law. The summons must qualify certain criteria and be issued in good faith.
In this case, the IRS served Coinbase a so-called 'John Doe' summons seeking information about US persons using convertible virtual currency. The Federal District Court held that the summons was a legitimate attempt to investigate US persons who may have failed to pay taxes on virtual currency transactions, and that the summons was sufficiently related to that purpose.