Big crypto tax news spilled out of a recent CPA conference: the IRS doesn’t think like-kind standards ever applied to cryptocurrencies. Let’s jump in.
Background: Crypto Like-Kind Exchanges
Like-kind exchanges allow taxpayers to defer capital gains taxes if said gains are reinvested into a similar property. For example: Let’s say an art collector named “Jane” sells a painting in January for $1 million. In December, she purchases another painting for $900,000. When tax time comes, Jane doesn’t have to declare the full $1 million. Instead, she can report $100,000 since she reinvested $900,000 into another work of art.
Prior to the Tax Cuts and Jobs Act, many people fairly assumed that like-kind principles applied to cryptocurrency transactions. But an IRS lawyer busted that belief at a recent conference.
The Shocking Pronouncement: Like-Kind Principles Don’t Apply to Crypto
Suzanne Sinno, an IRS attorney, told attendees at a CPA conference that the IRS doesn’t believe that like-kind exchange perks apply to cryptocurrency and never have — before or after the TCJA.
The news comes at a time when the cryptocurrency community is leery of the IRS, and people are grumbling.
But token investors who’ve made good faith efforts to report crypto gains need not worry. IRS representatives at the conference made it clear that they’re much more interested in parties who’ve failed to report any crypto gains as opposed to folks who simply made mistakes.
Additionally, another IRS attorney, Christopher Wrobel, addressed whether coins received in promotional “airdrops” — an issue addressed in the IRS’ recent crypto revenue ruling — carried a tax burden. He said the agency was still considering the issue, which means token holders aren’t necessarily taxed on that point for the time being.
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