The Internal Legal Memorandum (ILM) is basically an internal legal advice document for the IRS's use. It is not a binding document for courts. So, the IRS may or may not accept it as a position taken on the tax return.
One important item of that memo is that the investment must have been made with a for-profit motive in mind. As opposed to buying crypto so that you can pay for pizza with it, for example.
Thus, if you go that route, make sure that you have substantiation to show the IRS your intentions behind the acquisition of the crypto.
Another option is to treat the loss as a worthless investment (if it was an investment) and take a capital loss on your tax return. The deduction will be limited to up to $3000 a year (the remainder carried forward).
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