IRS Says Like-Kind Tax Exemption Does Not Apply to Crypto Transactions, Nor Did It Before 2018
An IRS official has said that taxpayers can’t defer taxes on cryptocurrency exchanges, not even for pre-2018 transactions.
Things have been clear up until now: taxpayers can’t make like-kind exchanges when it comes to cryptocurrency trades that took place in 2018, as a result of the previous year’s tax overhaul. Like-kind exchanges are allowing taxpayers to be late paying their taxes on a gain made from a sale if they reinvest the proceeds in similar property.
Like-Kind Exchange Never Applicable to Cryptocurrency
Tax practitioners have discussed a lot about if like-kind exchanges should be made available for cryptocurrency transactions that happened before 2018. Suzanne Sinno, who is an attorney for the IRS Office of the Associate Chief Counsel (Income Tax and Accounting), said at the Washington’s American Institute of CPAs conference that the agency believes like-kind exchanges to not be applicable in the cryptocurrency space.
The IRS Is After People Who Don’t Report Their Transactions
The cryptocurrency world is experiencing an increase in regulation enforcement from the IRS. Sinno’s declarations raised some voices, having people saying that what’s going on is unfair. The IRS mentioned that its focus is on those who don’t report their transactions, not on people who did and made some mistakes in the process.
IRS Didn’t Yet Decide to Make Airdrops Taxable
The IRS also brought clarifications on its latest guidance that says people need to pay taxes for the income they make after receiving new coins from a transaction, the moment in which the cryptocurrency splits. The distribution of new coins to multiple users is known as an “airdrop” and it also describes the situation in which a firm gives crypto holders coins for free, in order to market a new offer or to increase awareness to new potential customers.
Christopher Wrobel, another attorney for the IRS Office of the Associate Chief Counsel (Income Tax and Accounting), said the taxation rule doesn’t apply when the firms are giving free promotional coins and that the IRS didn’t yet decide if airdrops should be taxable.