An official for the U.S. Internal Revenue Service (IRS) has clarified that ‘like-kind’ tax exemptions do not apply to crypto exchanges or trades made before the 2017 tax law’s enactment.
According to a report by Bloomberg Tax on Nov. 13, taxpayers will not be able to defer taxes on exchanges of cryptocurrency, even those occurring before 2018. While the current tax law states that investors cannot use like-kind exchanges for crypto trades following the law’s enactment in 2017, it was unclear how the regulation applied to trades made prior to the overhaul.
Like-kind exchanges are a way for taxpayers to defer paying taxes on the gain of a sale, such as cryptoassets, by re-investing the proceeds into a similar property.
Suzanne Sinno, an attorney in the IRS Office of the Associate Chief Counsel (Income Tax and Accounting), says that like-kind exchanges have never applied to cryptocurrency, including pre-2018 trades. Sinno made her comments at the American Institute of CPAs conference held in Washington Nov. 13.
The IRS is also considering how to tax air drops following an update to the IRS guidance that says individuals will have to pay income tax on coins obtained following a “hard fork.” However, IRS attorney Christopher Wrobel says the ruling does not apply to freely distributed coins, such as those involved in air drops and other promotional giveaways.
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