exchanges completed on or after January 1, 2018, the Inside Income Code presently forbids the utilize of Area 1031(a) for cryptocurrency exchanges, and requires a citizen to recognize assessable pick up or misfortune at the time that any cryptocurrency is changed over into another cryptocurrency. Area 13303 of P.L. 115-97 (the charge act marked into law on December 22, 2017) changes Segment 1031(a) to state as takes after: “No pick up or misfortune should be recognized on the trade of genuine property held for beneficial utilize in a exchange or commerce or for venture in case such genuine property is traded exclusively for genuine property of like kind which is to be held either for profitable utilize in a exchange or trade or for investment.”

For exchanges completed on or earlier to December 31, 2017, the IRS has not issued any direction on whether diverse cryptocurrencies are “property of like kind” that would qualify for non-recognition of pick up beneath Segment 1031(a). By and large talking, trades between diverse cryptocurrencies are as a rule done by either (i) a synchronous swap of one cryptocurrency for another, or (ii) a conceded trade, in which one cryptocurrency is sold for cash, taken after by the buy for cash, of a diverse cryptocurrency.

For exchanges completed on or earlier to December 31, 2017, Area 1031(a)(1) of the Inner Income Code states the taking after: “No pick up or misfortune might be recognized on the trade of property held for profitable utilize in a exchange or commerce or for speculation on the off chance that such property is traded exclusively for property of like kind which is to be held either for beneficial utilize in a exchange or commerce or for investment.” In 26 C.F.R. 1.1031(a)-2(b), “like kind” is characterized as takes after: “As utilized in segment 1031(a), the words like kind have reference to the nature or character of the property and not to its review or quality. One kind or lesson of property may not, beneath that segment, be traded for property of a distinctive kind or class.” It ought to be famous that, in arrange to endeavor to utilize the assess treatment of Segment 1031(a) for exchanges done on or earlier to December 31, 2017, (i) each exchange must comply with certain prerequisites set forward in IRS controls (such as the utilize, in certain occasions, of a “qualified intermediary”), and (ii) the citizen must record a Frame 8824 with the IRS.