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Mini data sheet on tax implications for cryptocurrency trading in the United States
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<blockquote data-quote="Plus Oultre" data-source="post: 1108111" data-attributes="member: 11351"><p><strong>RE: Mi data sheet on tax implications for cryptocurrency trading in the United States</strong></p><p></p><p>I wouldn't hurry in treating two different cryptocurrencies as like-kind for the purpose of a 1031 exchange ..... section 1031 is very restrictive in this sense .... </p><p>First of all you have to qualify the property as being held for business or investment purposes. So if you are constantly exchanging the IRS will take the position that you are not holding for those purposes but rather you are trading. But even if you buy and hold for investment purposes you only cleared hurdle one. The next step will be to qualify the two cryptocurrencies as like-kind; which, in my opinion, will not be a very strong position.</p><p></p><p>Also, as an examples let's illustrate the way the IRS treats the exchange of different property: </p><p>1) metals, you can exchange gold that is valued for its metal content for other gold that is valued for its metal content. You can not exchange gold valued for its metal content for silver valued for its metal content.</p><p>2) livestock, you can exchange two livestock held for investment or breeding of the same sex .. but you can't exchange livestock of different sex.</p><p></p><p>See the pattern? in the examples above you can see the intent of section 1031 which is to replace business property or personal property held for investment for the like. They have the same nature and specific purpose. Even though I didn't find any ruling, memos, opinions directly related to the exchange of different crytocurrencies, I am confident the IRS will not allow their like kind exchange. I am sure we will see it soon play out with a real example because someone is going to try it. But unless you have the resources to challenge they IRS when they disallow your exchange, I wouldn't try it. My opinion.</p></blockquote><p></p>
[QUOTE="Plus Oultre, post: 1108111, member: 11351"] [b]RE: Mi data sheet on tax implications for cryptocurrency trading in the United States[/b] I wouldn't hurry in treating two different cryptocurrencies as like-kind for the purpose of a 1031 exchange ..... section 1031 is very restrictive in this sense .... First of all you have to qualify the property as being held for business or investment purposes. So if you are constantly exchanging the IRS will take the position that you are not holding for those purposes but rather you are trading. But even if you buy and hold for investment purposes you only cleared hurdle one. The next step will be to qualify the two cryptocurrencies as like-kind; which, in my opinion, will not be a very strong position. Also, as an examples let's illustrate the way the IRS treats the exchange of different property: 1) metals, you can exchange gold that is valued for its metal content for other gold that is valued for its metal content. You can not exchange gold valued for its metal content for silver valued for its metal content. 2) livestock, you can exchange two livestock held for investment or breeding of the same sex .. but you can't exchange livestock of different sex. See the pattern? in the examples above you can see the intent of section 1031 which is to replace business property or personal property held for investment for the like. They have the same nature and specific purpose. Even though I didn't find any ruling, memos, opinions directly related to the exchange of different crytocurrencies, I am confident the IRS will not allow their like kind exchange. I am sure we will see it soon play out with a real example because someone is going to try it. But unless you have the resources to challenge they IRS when they disallow your exchange, I wouldn't try it. My opinion. [/QUOTE]
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