Can I 1031 Cryptocurrency

Yes particularly given the wild differences in how taxpayers treatedand reportedtheir crypto trades. This means that most crypto to crypto transactions are not allowed 1031 treatment and the rest are going to be an uphill battle.

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Narrowing 1031 exchanges to real property.

Can i 1031 cryptocurrency. However many people have asked can I use a 1031 exchange for foreign real estate holdings First lets look at what a 1031 exchange is A 1031 like-kind exchange is a part of the US. The Tax Cuts and Jobs Act Tax Reform added one word. The conclusion Ive drawn is that most exchanges of one cryptocurrency for another do not qualify as 1031 exchanges and its more likely than not that the IRS will rule that two different cryptocurrencies are not eligible for like-kind treatment.

Under this new law trades of digital currencies do not qualify for 1031 like-kind exchanges. July 20 2021 John Litecoin 0. In a latest Chief Council Advisory the IRS discovered that sure cryptocurrencies didnt qualify as like-kind exchanges beneath part 1031 previous to the Tax Cuts Jobs Act of 2017.

1031 exchange is restricted to Real. Both reasonable basis and substantial authority require an in depth analysis of the law which is best performed by a tax attorney. The new tax bill that was recently signed into law and became effective on January 1 2018 restricts like kind exchanges to real property.

1031 is deferred tax treatment for certain exchanges of certain like-kind property. Since no guidance on this subject currently exists 1031 exchanges of differing types of cryptocurrency while not outright prohibited is not guaranteed to be a tax-free exchange. In either case taxpayers electing to treat cryptocurrency as like-kind property under Section 1031 should seek out the professional advice before filing.

We can safely reason that BTC to ETH is not like-kind as Bitcoin and Ether have very different purposes. A 1031 like-kind exchange allows you to swap property with someone else. On June 18 2021 the IRS issued IRS Legal Memo 202124008 in which it concludes that swaps of certain cryptocurrencies cannot qualify as tax-deferred like-kind exchanges under Section 1031 of the Code.

Can I apply a 1031 like-kind exchange to my cryptocurrency trades. Theres also the possibility that the. If you were trading crypto currencies in 2017 and you paid taxes on short-term gains recognized from the trading of those coins you can benefit from Section 1031.

The recent IRS reveals are interesting but to. To date the IRS has classified cryptocurrency as property and has not excluded it specifically within section 1031 the intuitive answer would. If the IRS decides to reject the use of Section 1031 for crypto-to-crypto trades affected taxpayers would be on the hook for additional taxes and interest.

That being said 1031 exchanges are still valid for real estate. But because issuance of crypto coins may be treated as an issuance of securities under federal. In a recent Chief Council Advisory the IRS found that certain cryptocurrencies did not qualify as like-kind exchanges under section 1031 prior to the Tax Cuts Jobs Act of 2017.

The IRSs ruling whereas restricted to coin exchanges involving Bitcoin Ether or Litecoin offers perception on the IRSs present pondering on the topic. The conservative approach would be to not claim section 1031 on. IRS concludes Section 1031 tax-deferred like-kind exchange treatment is not available for cryptocurrency trades.

While you can try to make the argument to the IRS that the 1031 rules should apply at least pre-2018 if you were audited you are looking at a steep uphill battle. There is no authority treating cryptocurrencies as securities for purposes of Section 1031. IRC 1031b and c dont apply on cryptocurrency exchanges because only cryptocurrencies are exchanged and no other property.

IRC 1031f regarding related persons is not applicable because on cryptocurrency exchanges the parties are anonymous to each other because they are matched up by an exchange. The IRSs ruling while limited to coin exchanges involving Bitcoin Ether or Litecoin provides insight on the IRSs current thinking on the subject. Tax code that allows for investment property real estate or otherwise to be exchanged for similar investment property.

All items of personal property including bitcoin and other cryptocurrencies are excluded from 1031 exchange tax deferral. According to LuSundra who is also known as the Home Biz Tax Lady cryptocurrency does not qualify based on the addition of a single word. However selling crypto for cash does not constitute a trade and the gains from that transaction cannot be deferred.

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