Swapper, found online at Swapper.io, lets you park your funds tax free using a blockchain-based intermediary. Find out how it works in our review.
What Is Swapper?
Swapper describes itself as a “like-kind exchange” based on blockchain technology. Using Swapper, you can safely park your funds tax-free, using Swapper as a qualified intermediary for legally deferring capital tax gains on your cryptocurrency investments.
The website is currently accepting early bird registrations for its ITO. The platform was announced in September 2017.
The goal of Swapper is to protect you and your gains. To do that, Swapper provides a service known as a “Qualified Intermediary”. Because of its legal status as a Qualified Intermediary, digital currency investors can defer paying capital gains taxes on their profits – specifically by using the 1031 “Like-Kind” exchange.
Is Swapper just one giant tax loophole? Is this a legitimate service? Let’s take a closer look at how it works.
How Does Swapper Work?
Swapper is an automated blockchain-based service for performing 1031 tax-deferred exchanges of cryptocurrencies. This defers the immediate tax liability created when exchanging one asset to another like-kind asset.
Services like this already exist in the world today. However, Swapper is bringing it to the blockchain.
If you haven’t heard of a 1031 exchange before, then you’re not alone. It was a non-issue to most people until a few years ago. As cryptocurrencies have become more popular, however, 1031 exchanges have started to be used more frequently – especially since the IRS officially considers cryptocurrencies as “property” and not a “currency”. After the IRS announced that decision, cryptocurrencies were categorized in the same class as real estate – not money – which many people viewed as a good thing.
Because cryptocurrencies are classified as property, it gives you two unique advantages, including:
If you want to use cryptocurrencies as money, then you don’t need someone to tell you what you can and cannot use as an exchange of value.
This opens the 1031 loophope, which is a very popular tool used by major banks and small-scale real estate investors, who take the gains from property and reinvest 100% back into a new like-kind investment (like another house).
That’s where the power of the 1031 loophole (and yes, it is a loophole) come into play: if you’ve made gains in the cryptocurrency market and want to “cash in” those gains, then you can do so without paying taxes – as long as you’re exchanging your gains for a “like-kind” asset. You could spend it on another house.
If you don’t take advantage of the 1031 loophole, then the seller of the property (that’s you, selling your bitcoins) will owe capital gains tax at the time of the sale.
That’s where Swapper delivers value: it provides an easy way for you to swap value from your bitcoin to other investments – like real estate and other property. Let’s say you want to sell bitcoin at $8,000.
If you sold bitcoin today, you’d be subject to a capital gains tax of 35% (assuming you’re a top income earner). If you do a 1031 swap, you “defer” your taxes with Swapper as your qualified intermediary. You sell your bitcoin to Swapper for $8,000, with a full $8,000 credited to your account on Swapper.
Ultimately, the IRS created 1031 exchanging to encourage reinvestments by people, and as a tool to help expand the economy on a micro and macro level. Any US citizen can file a form 1031 after an eligible taxable event.
Right now, Swapper is catered mostly to US citizens (obviously, these are the only people who can take advantage of the 1031 loophole). In the future, however, Swapper might add other countries as they introduce their own crypto-centric legislation.
In any case, Swapper generates a record of transactions on the blockchain, making it easier for investors to track, prepare, and file all necessarily paperwork. Swapper also uses “asset neutral smart contracts” to record these transactions.
That means Swapper can be used for far more than just cryptocurrencies. It can also be used for real estate, business assets, aircraft, artwork, intellectual property, and more.
Swapper advertises all of the following features:
Deferred Tax Payment:
Swapper is a like-kind exchange that allows you to “park” your crypto investments for up to 6 months with zero tax liability. If you expect the price of bitcoin to drop, then you might park your bitcoin on Swapper and sell high, getting the money deposited into your account.
Then, up to 6 months later, you can repurchase bitcoin at a lower price. You have no tax burden, because Swapper is a Qualified Intermediary. But you now have 2 bitcoin instead of 1 because you bought high and sold low.
Like Kind Exchange:
Swapper offers a strategic timing option that allows users to ride out volatile market conditions.
Asset-Neutral Smart Contracts:
Swapper lets you quickly and safely move your crypto and other investments into fiat. These “asset neutral smart contracts” can be used for cryptocurrencies, real estate, business assets, aircraft, artwork, intellectual property, and more.
6 Months With No Liability:
Swapper lets you park your crypto assets for up to 6 months to defer tax liability.
Bypass Withdrawal Limits:
Many exchanges and crypto withdrawal methods have limits. Swapper helps you avoid that withdrawal limit.
Swapper holds your funds in fiat in an FDIC-insured escrow account managed by Bank of America.
All transactions are meticulously recorded in the Swapper blockchain, giving tax authorities (like the IRS) a clear record of the process.
How To Use Swapper
Here’s the basic procedure you might use for a 1031 exchange with Swapper:
You decide to sell your digital currency to the buyer
Prior to the sale, you execute a smart contract with Swapper as the qualified intermediary
During the sale, the exchange funds are sent to Swapper and kept in escrow, with the opening transaction and first entry recorded to the Swapper blockchain
Within 45 days of the transfer of property, you complete a smart contract on Swapper called the Identification of Replacement Property. This is offered in multiple-choice format to users, where users can choose their property from a pre-selected list, or choose “Other”
On or before the 180th day from the start of the swap, you execute the Re-acquisition of Asset smart contract with Swapper, choosing which asset is to be purchased
At the closing of the asset to be purchased, Swapper sends the funds to complete the exchange
The final entry and full transaction is recorded in the immutable Swapper blockchain in a private hash for the user
How Do SWAP Tokens Work?
Swapper uses a native token called SWAP as a means for carrying out exchanges on the platform. There’s a fixed supply of 100,000,000 SWAP tokens. The tokens are ERC20 tokens built on the Ethereum blockchain.
SWAP tokens are pegged at a rate of $1 USD. As a token holder, you can purchase services directly from Swapper.
Who’s Behind Swapper?
Swapper is led by Michael Kuhn (Co-Founder), Matthew Yavorick (Co-Founder), and Marty Yavorick. Kuhn has decades of accounting, finance, and data management experience, while Matthew Yavorick has 18+ years of project and construction management experience in the high tech industry.
Marty Yavorick, meanwhile, is a lawyer who discovered bitcoin in 2013 and dedicated his professional life to investing, trading, and learning about bitcoin.
The Swapper Token Sale
The Swapper token sale will be used to fund development on the platform. There’s a total supply of 100 million SWAP tokens. The sale has a hard cap of $37,750,000.
Phase 1 of the token sale will consist of 1 million SWAP tokens valued at $0.25 USD, while phase 2 will consist of 75 million SWAP tokens valued at $0.50 USD.
You can buy tokens using ETH, BTC, and USD via bank transfer.
Swapper will keep 24 million SWAP tokens (the remaining amount of the total supply) for future development purposes and team members. Any unsold tokens will be placed in a reserve and locked for one year.
Dates for the token sale have not yet been announced.
Swapper is the first blockchain-based qualified intermediary for fast, easy, and accurate execution of 1031 tax deferred exchanges. Services like this exist today. However, Swapper is transferring the service to the blockchain. You can use Swapper to transfer any assets – from cryptocurrency to real estate – and defer taxes for up to 6 months.
To learn more about Swapper and how it works, visit online today at Swapper.io.