Crypto Backers Wary of Possible Tax Loophole Closure

Legislation and proposed regulations on cryptocurrency have the potential to answer some open questions about the taxation of digital assets, though not all of the possible changes may be welcomed by industry. A bill from Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) touches on a variety of crypto tax issues. It would provide a narrow definition of broker for tax reporting, require the marking of crypto assets to market for year-end accounting purposes, and closea tax loophole that may upset some in the industry. The Senate Finance Committee also asked for more information on those crypto taxation issues earlier this fall. On this episode of Talking Tax, Lisa Zarlenga, the head of Steptoe & Johnson LLPs tax policy practice and a former tax legislative counsel at the Treasury Department, spoke to Bloomberg Tax about that legislation and new proposed regulations on tax reporting rules for crypto brokers. Closing a tax loophole that allows investors to claim losses by quickly selling and repurchasing their digital assets, for example, may be difficult to implement as some investors would trigger the rule unintentionally, she said. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.