With the cryptocurrency industry skyrocketing, be aware of the upcoming regulation around currency exchanges.
Some of you may know that the IRS has issued guidance holding that Bitcoin and similar digital currencies will not be treated as currency for tax purposes. Instead Bitcoin and similar cryptocurrencies should be considered property.
As property, Bitcoin, Ethereum, DogeCoin, and other cryptocurrencies are subject to capital gains taxes and related record-keeping requirements. Since Bitcoin is treated as property and capital gains taxes apply, a 1031 exchange may produce favorable tax benefits.
With the recent changes in U.S. Tax Law, the tax benefits won't apply. Darn it!
According to Elmer Howard from DandSBookkeeping, "1031 Exchanges for cryptocurrency is disallowed. Republicans have stated that the 1031 Exchange will only be allowed for real estate."
Close call but no cigar!