- July 29, 2019
- Posted by: James Hall
- Category: Posts
A new bill introduced by Ted Budd (R-NC) would establish a five-year sunset clause that reinstates a Section 1031 “like-kind” tax-exemption taken away in 2017 with the Trump tax reforms.
In 2014, the IRS put out guidance establishing that cryptocurrency is to be regarded as property. Their notice 2014-21 states, “for Federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.
Digital asset traders took advantage of a Section 1031 “like-kind” exemption on exchanges of property. The 2017 Trump tax law, however, replaced the term “property” with “real-property.” This eliminated the ability for traders of cryptos to take advantage of this tax exemption.
The Virtual Value Tax Fairness Act or HR 3963 re-establishes this tax-exemption under a five year sunset clause. The intention is that during this time comprehensive legislation can be crafted to update the tax laws for cryptos.
“The five-year sunset provision in the ViVa Act will allow Congress and the industry to come together and work on fair, standardized nomenclature and create a fair and thoughtful long-term tax treatment for cryptos, while under the pressure of a ticking clock so the can is not simply kicked down the road.”
Spanos continued, “Like-Kind treatment is admittedly not the ideal long-term way to tax all token to token transactions, but it makes sense in the short term as the industry matures.”
We will track this bill and provide updates on its progression.