With interest in cryptocurrencies like Bitcoin and Ethereum at an all-time high, now would be a good time to look at the tax implications on the eve of President Trump signing the Tax Cuts and Jobs Act into law.
Until now, there has been an exemption for “like kind exchanges” that created no tax obligation for converting one type of “like” asset into another.
In simple terms, if you bought an equivalent amount of Ethereum or Litecoin using your Bitcoin holding, it would not trigger a tax obligation. With the changes included in the new tax reform bill, that would no longer be the case.
According to the new wording proposed by the Tax Cuts and Jobs Act, the “like kind” rule would only apply to real estate holdings, which automatically precludes other asset types like securities from using the loophole to avoid taxes.
And it’s not just cryptocurrencies that will be affected by the changes. Any property transaction not involving “real property” will be subject to taxes once the bill is signed into law.
In the next few days President Trump will put his signature on the bill, thereby creating a massive headache not only for cryptocurrency investors, but the entire system including Bitcoin exchanges, brokerage firms and the IRS.
+++ + +++