Paul L. Caron

Saturday, April 30, 2022

Report On Tax Implications Of Cryptocurrency And Other Fungible Digital Assets

New York State Bar Association Tax Section, Report on Cryptocurrency and Other Fungible Assets (Apr. 18, 2022):

Bitcoin (2022)In recent years, the market for digital assets has evolved in dramatic ways, including exponential growth in both the aggregate value of digital assets and the volume of transactions in digital assets as well as the broad adoption of newer digital asset classes like stablecoins and proof-of-stake cryptocurrencies. In this Report, we have focused on the areas we believe are most in need of guidance and where the path to issuing such guidance is reasonably straightforward. The Report addresses the following topics:

  • The general characterization of cryptocurrency for federal income tax purposes as commodities, securities or a type of asset class that is neither commodities nor securities.
  • The application of the commodities trading safe harbors under section 864(b)(2)(B) to cryptocurrency.
  • The application of the straddle rules of section 1092 to fungible digital assets.
  • The application of the mark-to-market provisions of sections 475(e) and 475(f) for commodities dealers and traders to cryptocurrency.
  • The recognition of gain or loss on lending cryptocurrency.
  • The federal income tax characterization of certain U.S.-dollar pegged stablecoins.
  • The federal income tax treatment of “wrapped” cryptocurrency.
  • The federal income tax treatment of staking rewards received in respect of proof-of-stake cryptocurrency.

(Hat Tip: Reuven Avi-Yonah)

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